How smart is your company?

Grant funds research to measure “Firm IQ” at Olin Business School

“Firms don’t have a good measure of R&D effectiveness or what I call, Firm IQ,” says Anne Marie Knott, associate professor of strategy at Olin Business School, Washington University in St. Louis. Knott’s research focuses on how to measure a firm’s IQ and with a new National Science Foundation grant in hand, she’s closer to figuring out what makes smart firms tick.

Knott has received a grant from the NSF for a study to identify the characteristics of firms with highly productive R&D (high IQ) versus those with less productive R&D (low IQ).

During the pilot phase of the study, Knott and PhD student, Carl Vieregger will conduct in-depth interviews at a high IQ and a low IQ firms each in two industries. Future phases of the study propose expanding interviews to a broader set of industries, followed by a comparison of IQ characteristics in a large-scale quantitative study across the range of firms engaged in R&D.

“The problem is firms don’t know if they are doing a good job with R&D,” explains Knott. “By establishing a scale or way to measure R&D effectiveness, they can figure out how much they should be spending on R&D and how well they are doing with that R&D.”

Knott says most existing studies use patent data to measure R&D effectiveness, but she says less than 50% of firms doing R&D patent their inventions, so the measure isn’t universal. Additionally, patents have a highly variable value. “5% of patents account for 95% of the value of all patents, so, they’re not uniform. Finally, they don’t reliably predict market value.”


Knott’s goal for Firm IQ is to ultimately provide a tool to help firms determine if they have the right stuff to turn research and development investments into profits. Knott predicts that IQ information will provide useful data for firms, similar to TQM, total quality management. “Once you know your IQ,” Knott says, “you can actually start to improve it.”

Smarter, more efficient firms will in turn generate more innovation according to Knott. “Economic growth comes from innovation and R&D is the biggest source of innovation. So if we can get each firm to increase their IQ a little bit that will lead to a permanent increase in economic growth.”

Professor Knott is available for interviews.

Washington University has an on campus studio equipped with free ISDN and VYVX lines for broadcast quality live or recorded interviews.

About Anne Marie Knott
Anne Marie Knott’s first career was in engineering. She worked for Hughes Aircraft and helped build the air-to-ground missiles used in the 1991 Operation Desert Storm when Iraq invaded Kuwait. During her stint at Hughes, Knott pursued an MBA degree at UCLA to advance her career towards management. “I loved my job in the defense industry,” says Knott. “I was working with lots of really smart people. But then peace broke out. What that meant was there was lots of consolidation in the industry and our group was being moved to Tucson.”

Knott pursued a PhD at UCLA’s Anderson School of Management. “I used it as a vehicle to solve some of the problems I saw while I was working,” Knott says. She saw a need for research that could help the government make better acquisition decisions and help firms make better R&D (research and development) decisions in times of war and peace.

Knott has been a professor at Olin Business School since 2005.