From centrality to productivity: How firms reconfigure technological search in innovation networks?

TL;DR

This paper investigates how firms' central positions in innovation networks influence their technological search behavior and productivity, revealing that centrality promotes exploration and enhances firm performance.

Contribution

It uncovers the micro-level mechanism linking network centrality to innovation strategies and productivity, using dynamic patent citation networks and empirical analysis.

Findings

Central firms are more likely to explore new technological fields.

Higher centrality correlates with increased technological scope and productivity.

Scientific embeddedness amplifies the effect of centrality on exploration.

Abstract

Firms' positions in innovation networks determine their access to external knowledge, yet how these positions shape technological search behavior and influence productivity remains underexplored. We propose that central network positions systematically reconfigure firms' innovation strategies by promoting exploratory search across emerging technological domains while sustaining broader technological portfolios. This behavioral reorientation allows central firms to diversify their innovation efforts and leverage knowledge spillovers more effectively, translating network advantages into higher productivity. Using panel data on Chinese listed firms and patent-based measures of innovation networks, we construct a dynamic patent citation network to track changes in firms' network centrality and technological search patterns over time. Our findings show that firms with greater centrality are more likely to enter novel technological fields and expand their technological scope, leading to measurable gains in total factor productivity. We further demonstrate that the impact of network centrality on exploratory search is amplified by scientific embeddedness, whereas the productivity returns from exploration depend on technological distance. By connecting structural network positions with behavioral adaptations in technological search, this study uncovers a direct micro-level mechanism through which innovation networks drive firm performance. These results highlight the strategic value of network centrality in shaping not just access to knowledge, but also the direction and efficiency of innovation activities.