Knowledge Flows Across Firm Boundaries: Strategic Implications of Openness

Abstract

This dissertation examines the strategic implications of opening firm boundaries. The first chapter examines how opening country borders and allowing firms to hire migrant inventors can foster innovations that are different from those of local inventors. The H-1B visa cap increase between 1999-2003 provides an exogenous increase in the ability of firms to hire migrants. Firms affected by this shock can hire more Chinese/Indian inventors and file more herbal patents. Such knowledge is subsequently recombined by local inventors. The second chapter examines how opening a company’s software intellectual property affects product market performance. I identify causal effects using community driven reverse-engineering events that exogenously open sourced parts of a company’s software. I find that open sourcing corporate software can lead to complement innovations that benefit product market sales. Furthermore, I find strategic implications of considering customer heterogeneity. Complement innovations attract a subset of technologically “savvy” users who inform and influence others’ purchase decisions. Thus, opening intellectual property may be more valuable in markets with greater levels of information imperfections. The third chapter examines innovations and collaborations between firms and other contributors in the Linux kernel, a large open source software project. I compare the source code structure before and after the emergence of the Android operating system and document changes in contributions and follow-on innovation. I find evidence consistent with a crowding out of non-corporate efforts from increased corporate contributions, specifically for general purpose files. Additionally, I find that corporate created files lead to less follow-on innovation and have more self-contributions.