Providing Contract Research Services and Firms’ Own Product Innovation Performance

Extant literature has largely assumed that firms providing research services to other firms as an inventor-for-hire will do so at the expense of developing their own product innovations. Given this assumption, it is surprising that many firms provide research services to other firms without compromising their own flow of product innovations. In this study, we provide a systematic logic that connects the inventor-for-hire services that firms provide to others with the firms’ own product innovation performance. We hypothesize that opportunistic gains from providing contract research eventually enable firms to increase their product innovation performance. Furthermore, we suggest that this increase will be stronger for technology leaders and will be weaker for firms with a strong engagement in basic research. We test our hypotheses on a panel of 1,006 firms over 2005 to 2013 and find support for our hypotheses.