Network embeddedness indicates the innovation potential of firms

TL;DR

This paper introduces a new measure called coreness, derived from weighted k-core decomposition, to quantify firms' embeddedness in R&D networks and predict their innovation output over time.

Contribution

It proposes and validates a novel measure of network embeddedness, coreness, and demonstrates its effectiveness in predicting firms' future patenting activity.

Findings

Coreness explains firms' R&D output.

Higher coreness predicts increased future patenting.

The measure is validated on 14,000 firms over 25 years.

Abstract

Firms' innovation potential depends on their position in the R&D network. But details on this relation remain unclear because measures to quantify network embeddedness have been controversially discussed. We propose and validate a new measure, coreness, obtained from the weighted k-core decomposition of the R&D network. Using data on R&D alliances, we analyse the change of coreness for 14,000 firms over 25 years and patenting activity. A regression analysis demonstrates that coreness explains firms' R&D output by predicting future patenting.