Do Peer Firms Influence Innovation?

Michael Machokoto, Daniel Gyimah, Collins Ntim

Research output: Working paper

Abstract

Using a large sample of 5,838 US firms over the period 1966-2016 (i.e., a total of 77,444 firm-year observations), we examine whether peer firms influence corporate innovation. We find robust and significant positive peer influence on R&D, with the average firm increasing R&D by 15% for a one standard deviation increase in peers’ R&D. Consistent with the need to keep ahead or abreast of rivals, we find that peer influence on R&D increases with product market competition. We further find significant leader-follower interactions with firms mimicking those perceived or likely to have superior information. Our findings show that peer influence is a critical determinant of corporate innovation, in addition to other factors considered in the literature.
Original languageEnglish
Number of pages42
Publication statusPublished - 8 Oct 2019

Keywords

  • innovation
  • peer effects
  • product market competition
  • heterogeneity effects

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