Bread Upon the Waters: Corporate Science and the Benefits from Follow-On Public Research

Abstract: Why do firms produce scientific research and make it available to the public, including their rivals? Prior literature has emphasized the tension between imitation risks from disclosure and scientists' preferences for publication. This study examines an additional managerial consideration: the value of follow-on research conducted by external scientists building upon firms' publications. Using data on U.S. public firms' scientific publications from 1990 to 2012, and a novel instrumental variable based on quasi-random journal issue assignment, I find that accumulation of follow-on research is associated with increased subsequent scientific investments, improved patenting outcomes, and greater employee retention by the originating firms. Benefits are more pronounced for firms with complementary assets and those operating in emerging research fields. Beyond serving as direct input into innovation, follow-on research provides external validation of internal research programs, helping managers allocate resources under conditions of scientific uncertainty. These findings demonstrate that firms benefit when their scientific disclosures inspire follow-on research by the broader scientific community.