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Working Paper
Ideas and Firm Dynamics When It Takes Two to Tango
Teams of inventors now produce over 80 percent of U.S. patents, up from just 45 percent in 1976. Over the same period, inventor employment has become increasingly concentrated in large firms, rising six times more than overall employment concentration. To explain these trends, we develop a new model of endogenous team formation within firms and embed it in a general equilibrium model of the inventor labor market. Teams increase firms’ returns to scale by increasing the likelihood of productive matches between inventors. The value of these matches rises over time, possibly driven by ...