Essays on the Role of Metrics in Innovation

Abstract

This dissertation consists of three essays studying the role of metrics in the process of innovation. Scientific and technical metrics are trusted as objective and consistent arbiters of knowledge, and as a result, are typically taken as given without much question. Yet at the same time, these metrics are chosen at a given point in time under imperfect information. The motivation of this work is to understand how such metrics influence the ideas production process, and ultimately, who benefits from innovative effort. In the first essay, I define and delineate the role of metrics in innovation from other forms of quantification in organizations. I synthesize prior work to develop a typology of mechanisms that metrics can involve, highlighting how metrics are used at different junctures in the innovation process. The second essay explores the impact of introducing a new metric on the rate and direction of innovation. I study the setting of US automotive safety, finding that the introduction of the side impact dummy as a metric reduced overall fatalities but also led to disproportionate benefits for occupants similar to the metric itself. Moreover, firms responded heterogeneously, suggesting that metrics can profoundly affect the innovation trajectories of firms. In the third essay, I analyze whether it is possible to move firms away from a metric that has become a key focusing device for R&D within an industry. I use a policy shock to estimate the effects of the “removal” of watts as a metric within the domestic vacuum cleaner industry. I find that rather than investing in new metrics, firms reduce their R&D in the focal area and shift efforts to adjacent, unregulated product areas.