Why location matters for innovation

A significant marker of a leading business school is the creation of new knowledge. Goizueta faculty, using rigorous methodologies, focus on researching important problems that affect the practice of business. The following is a sampler of recently created new knowledge.

L.G. Thomas, professor of organization and management, and coauthor Kira Fabrizio (BU) investigate the often neglected role of local demand in fostering innovation, in this case within the global pharmaceutical industry. Focusing on new molecule innovations, the authors find that, rather than innovating for a global market, pharmaceutical firms systematically respond to home country demand patterns, relying on a localized, tacit knowledge that is most readily accessible through a national system of institutions, culture, and complementary industries.

“We find strong and consistent evidence that innovation responds to local demand, and either ignores or avoids foreign
demand,” the researchers write. Offering an expanded understanding of the strategic role of demand knowledge in innovation, they demonstrate the importance of considering access to knowledge of local demand characteristics when making location choices, with implications for the decentralization of decision making for maximizing innovation success. Strategic Management Journal (January 2012).

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