Innovation Workers and Firm Performance - The Impact of Individual-Level Knowledge Diversity and Experience

Abstract: A large body of literature has emerged with economists and managers seeking to understand how firms shall utilize their resources to ensure competitive advantage and satisfying performance. Scholars have been attempting to identify which resources are most valuable, and have argued for the vital role played by knowledge in producing innovation and enabling well-performing firms. This stance has been born through the theories of knowledge-based view and has grown to be acknowledged by academia and industry alike. However, the theory has been criticized for inadequately understanding the role of the individuals inhabiting the firms. This research seeks to quantitatively understand how variations in individual-level knowledge may impact the market value of firms. Forming an understanding regarding the depth and breadth of inventors' experience through analyzing the number of companies, industries, and technologies they have previously worked in. By collecting information derived from a vast amount of patents, firms receives an accumulated score based on all employed inventors' experiences and further used to understand its impact. Finally, the study employs several regression models on panel data to identify the relationship between individual-level knowledge and firm performance. The results show that individual-level company- and technology diversity have a negative effect on market value, whereas industry diversity has a positive effect. Furthermore, the quality and quantity of the inventor's patent experience have a signifcant positive effect on market value. These findings lead to the conclusion that caution should be taken when considering the individual-level functional diversity amongst innovation workers, while their experience and its quality contribute to the performance of the firm.