Research

Keeping invention confidential (with Colleen Cunningham, 2nd R&R at Management Science) 

This study investigates use of a prevalent but rarely studied form of intellectual property protection: secrecy. Building on existing survey evidence of firm-level, cross-sectional use of secrecy, we document the effect of stronger trade secret legal protections on the use of secrets and related inventive activity. Our setting is the US oil and gas hydraulic fracturing (fracking) industry, from 2014 to 2018, in states where firms are required to disclose fracking ingredients to regulators barring substantiated claims of trade secrets. We examine how the enactment of the federal 2016 Defend Trade Secrets Act (DTSA) affects well-level secrecy use across states with varying levels of pre-DTSA secrecy protection. We find substantial increases in the use of secret ingredients and new secret use, indicating increased inventive activity. Furthermore, we find wells with secret ingredients are more productive. Supplementary tests provide additional evidence that we are capturing policy effects and address alternative explanations. Our results provide rare empirical evidence on actual secrecy use and contribute to our understanding of how appropriability shapes inventive activity.

Competitive pressures, resource redeployment, and technological change (solo, 2nd R&R at the Strategic Management Journal)

Redeploying firms seek to compensate for lost revenues in their original industry and may exhibit more aggressive behavior than rivals in the recipient industry. Following an industry downturn, diversified firms reduced expenditure in the original industry, especially on costly projects, and increased investment relative to rivals in the recipient industry, but only when the new projects were supported by existing complementary assets. The study is set in the oil and gas (O&G) and wind power industries, where following the 2014 oil price crash wind power-diversified O&G firms reduced expenditure in the O&G industry, particularly on costly (offshore) projects. In turn, they increased investment in the wind power industry, enhancing wind energy production relative to rivals, but only when the windfarms were collocated with offshore O&G.  

Myopic Expansions on Platforms (with Ahmadreza Mostajabi and Keyvan Vakili, R&R at Administrative Science Quarterly)

The literature on multisided platforms focuses primarily on their ability to resolve market frictions and facilitate matchmaking. However, the downside of resolving these frictions has largely been overlooked. We argue that extensive resolution of market frictions such as frictionless market entry can cause participants to overlook the heterogeneous nature of different markets and engage in myopic market expansions, leading to customer dissatisfaction, lower performance, and innovation rate. We test our arguments in the context of Apple's App Store. We find that app developers' large-scale market expansion negatively affects their ratings, downloads, financial performance, and innovation rate in the long run, despite a short-term growth in their customer base. We contribute to the literature by highlighting the negative side of frictionless market entry on platforms.

Markets for trade secrets (with Rohin Vrajesh and Colleen Cunningham) 

Prior literature in strategic management has largely focused on codified forms of IP such as patents. However, firms cite trade secrets as the more common and effective manner to protect their intellectual assets. This study highlights trade secrets are property rights and documents their use in markets for technology. Using transaction agreement data involving publicly traded US firms for which we obtain royalty payments, we find that 31% of transactions in the sample include a trade secret. When transacted along with patents, trade secret deals have longer payment schedules and demand a higher premium relative to patent-based transactions alone. The evidence suggests that markets for trade secrets are common and highly valuable.

Rush to patent and product market performance: evidence from patent-product linked data and the America Invents Act (with Rohin Vrajesh and Keyvan Vakili) 

We study the link between intangible resources and their application in the product market. The resource-based view in strategic management posits that rarer and more difficult to imitate resources enable superior performance, but embedding such resources in commercialized products may be difficult due to the leap in technological application they require. We find that more incremental, less novel intangible resources (patents) are more likely to be embedded in products. We also show that an exogenous change in the disclosure environment, shifting incentives from “first to invent” to “first inventor to file” is associated with a reduction in the scope of patents, consistent with the interpretation that firms “rush to the patent office”: following this environmental change, products contain less novel patents, on average. Thus, this paper provides rare evidence on the actual commercial use of patents in products and how patent and environmental characteristics translate into product market innovation.