Events

Mr. Jino Lu
Ph.D. Candidate
Marshall School of Business
University of Southern California

Strategy and innovation scholars have long emphasized the crucial role of demand in driving
technological progress within a domain. However, relatively less is known about how changes in
demand conditions within a domain impact the technological progress and reallocation of
innovation resources in other domains. In this study, I argue that an increase in demand for
innovation within a domain can have negative implications for the innovation progress of firms
in adjacent domains, because it intensifies competition for knowledge workers, a critical resource
for innovation. Empirically, I exploit an unexpected environmental policy shock that led to an
exogenous increase in demand for electric vehicle (EV) technologies. I find that, following an
increase in innovation activities within the EV domain, firms in adjacent technological domains
not only experienced a decline in EV innovations but also suffered a more significant decline
(twice as much) in their own core technological domains and in their ability to explore new
technological domains. This negative effect is stronger for firms in other growing (rather than
declining) technological domains (e.g., renewable energy domains, including photovoltaic
technologies), and for firms in a related technological space but farther from the EV domain in
the product market. Further analyses suggest that this occurred because firms in adjacent
technological domains were more likely to lose inventors to firms in the EV domain. These
findings, which highlight that market and technological changes in seemingly unrelated areas can
impact firms’ resources and capabilities through competition for knowledge workers, have
implications for managers and policymakers.