The Role of Firms' Innovative Scale in Inventor Productivity: Evidence from Germany

Do firms with large innovative output simply employ more inventors, or are their innovators more productive? To address this question, I analyse German administrative employer-employee data linked with European Patent Office records. First, I examine early-career patent output. Inventors beginning their careers at firms in the 75th-95th percentile of innovative scale, measured by total annual patent filings, are 40% more productive than those starting at non-patenting firms. Productivity differentials rise to 60% and 90% for those starting at firms in the 95th and 99th percentiles, respectively. Moreover, inventors who, for their first patent, move from smaller- to larger-scale innovative firms achieve similar productivity to those starting and staying at large-scale firms. Using geographic constraints of German apprentices, which result in quasi-random variation in the access to large-scale innovative firms, I show that better access to such firms results in 20% higher early-career patent output. Finally, I show that the positive relationship between firm innovation scale and individual productivity extends to seasoned inventors, with those moving to larger-scale firms creating more subsequent patents than those joining smaller-scale firms. I provide suggestive evidence that these results are linked to superior co-worker and capital-labour complementarities at large-scale firms.