Legacy Anchoring in Reconfigured Inventor Teams and Subsequent New Domain Innovation Performance in Diversifying Public Firms

Abstract

Innovation expansion into unfamiliar technological areas rarely depends on idea generation alone. Firms must decide who should staff the first projects in a new domain, how much responsibility should be given to newly recruited inventors, and whether experienced internal personnel should remain central once the firm moves outside its established knowledge base. Those staffing choices can shape not only the technical novelty of the resulting work but also its likelihood of becoming a commercially meaningful addition to the product portfolio. This paper examines whether new domain innovation performs better when new entrants are paired with well-connected internal inventors who can translate unfamiliar knowledge into the firm’s existing routines and architectures. The analysis uses a panel of 214 publicly listed U.S. firms from 2011 to 2024 and identifies 1,184 firm-domain entry spells together with 4,936 patent teams attached to those entries. A legacy anchoring index is developed from inventor network centrality, prior within-firm patent histories, and the composition of each new-domain team. The evidence indicates that domain-entry patents created by mixed teams containing both entrants and internally central legacy inventors exhibit higher recombinant novelty, receive more forward citations, and are more likely to be followed by a product launch within twenty-four months than patents produced by entrant-only or incumbent-only teams. The pattern is not exaggerated. Relative to entrant-only teams, anchored mixed teams generate 6.3\% more three-year citation-weighted impact and raise launch conversion probability by 5.8 percentage points. They also retain entrant inventors longer. The results remain stable under firm fixed effects, domain-entry matching, inverse probability weighting, and alternative definitions of new domains and inventor centrality