When Do Firms Focus on Public Research?: Evidence from US Medical Device Industry

Abstract

Public research including universities and research institutes is an important source of innovation. This paper describes how a performance feedback model explains the conditions under which firms source external knowledge through universities and research institutes. In the U.S. medical device industry, we show that there is an inverted U-shaped relationship between performance below aspirations and knowledge sourcing from public research. Furthermore, we find that firms respond to historical aspirations more sensitively than social aspirations, and slack resources tend to attenuate the relationship between performance below historical aspirations and knowledge sourcing from public research.