Proximity and the Management of Innovation

58 Pages Posted: 4 Jun 2020 Last revised: 3 Jan 2022

See all articles by Chloe Glaeser

Chloe Glaeser

University of North Carolina (UNC) at Chapel Hill - Operations Area

Stephen Glaeser

University of North Carolina (UNC) at Chapel Hill - Accounting Area

Eva Labro

Kenan-Flagler Business School University of North Carolina

Date Written: May 19, 2020

Abstract

We study the effect of proximity to corporate headquarters on the productivity of inventors and research and development (R&D) facilities. Distant inventors and R&D facilities are less productive, and plausibly exogenous reductions in the travel time from these inventors or facilities to headquarters increases their productivity and creativity. We hypothesize that these improvements in the management of innovation production occur because proximity improves monitoring, managerial ability to provide direction, relationship building that supports creativity, and information exchange, including advice from headquarters. Consequently, our results suggest that proximity can help managers balance both exploration and exploitation when overseeing innovation. Naturally, these results then beg the question of why firms do not locate all inventors and R&D facilities in close proximity to headquarters. We find that distant inventors and R&D facilities are located in areas with better general economic indicators, and especially more favorable tax rates, than headquarters, suggesting firms balance these benefits against the benefits of proximity when locating innovation production.

Keywords: Proximity, location, innovation, inventors, management, empirical operations, creativity, taxation

JEL Classification: O31, O32, M12

Suggested Citation

Glaeser, Chloe and Glaeser, Stephen and Labro, Eva, Proximity and the Management of Innovation (May 19, 2020). Available at SSRN: https://ssrn.com/abstract=3605432 or http://dx.doi.org/10.2139/ssrn.3605432

Chloe Glaeser (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Operations Area ( email )

300 Kenan Center Drive
Chapel Hill, NC 27599
United States

Stephen Glaeser

University of North Carolina (UNC) at Chapel Hill - Accounting Area ( email )

McColl Building
Chapel Hill, NC 27599
United States

Eva Labro

Kenan-Flagler Business School University of North Carolina ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
(919) 962-5747 (Phone)

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