Are differences in inventor productivity due to differences in inventors’ skills or differences in the capabilities of the firms they work for? We analyze a 37-year panel that tracks the patenting of U.S. inventors and find strong evidence for serial correlation in inventors’ productivity. We apply an econometric technique developed by Abowd, Kramarz, and Margolis (1999) to decompose the contributions of inventors’ human capital and firm capabilities for productivity. Our estimates suggest human capital is 4-5 times more important than firm capabilities for explaining the variance in inventor productivity. High human capital inventors work for firms that have (i) other high human capital inventors, (ii) superior financial performance, and (iii) weak firm-specific invention capabilities. On the margins, managers should emphasize selecting talent rather than training workers to enhance innovation performance.

Human Capital, Capabilities, Innovation, Matching, Competitive Advantage
Technological Change; Research and Development (R&D): General (jel O30), Innovation and Invention: Processes and Incentives (jel O31), Management of Technological Innovation and R&D (jel O32), Human Capital; Skills; Occupational Choice; Labor Productivity (jel J24)
Erasmus School of Economics

Bhaskarabhatla, A, Hegde, D, & Peeters, T.L.P.R. (2017). Human Capital, Firm Capabilities, and Innovation. Retrieved from