Small and Seasoned - The Capacity of Firms to Build Upon their Inventive Breakthroughs

Breakthrough inventions are a key driver of growth in many industries. However, the inventing firm does not always benefit from their discovery. Building upon the knowledge-based view of the firm, we investigate which firms are more likely to benefit from their own inventive breakthroughs. Utilizing machine learning on 5.5 million USPTO patent abstracts, we identify 1,644 breakthrough inventions on which we conduct our analysis. We find that experienced firms tend to benefit more from their breakthrough inventions than younger firms, while smaller firms benefit more from their breakthrough inventions than larger firms. This implies the growth accumulated by older firms may inhibit its capacity to benefit from its experience.