My research explores drivers of organizational innovation and technological change. I am interested in how different types of environmental pressures affect technological heterogeneity through firm innovative effort and knowledge flows within as well as across industry boundaries. In my dissertation, I examine how firms direct their innovation activity in the wake of industry and regulatory shocks and the extent to which inter-firm relationships drive innovation even in presence of formal intellectual property protection. I examine understudied measures of innovation and technological heterogeneity, such as trade secrets, technology productivity and technology differentiation. I leverage novel databases in the contexts of conventional oil and gas drilling, hydraulic fracturing and wind energy.
In the paper entitled “Solutions Looking for Problems: Idle Capacity, Resource Repurposing and the Technological Landscape”, I explore why similar technologies may be used in distinct product markets. Prior literature posits that technologies used in one setting often invade other application domains, but a puzzle in the innovation literature remains: what drives such events? I argue that negative industry shocks create idle resources, setting up incentives for resource repurposing (exaptation) from the original industry into other industries that are related in terms of resources but not necessarily product market. Firms facing idle resources have lower opportunity costs to repurpose resources and introduce seemingly novel capabilities in resource-related industries. In turn, the repurposing of existing resources in other industries enables firms to technologically differentiate from competitors. As a result, we may observe similar technologies used in seemingly distinct markets related at the resource level. Finally, lower redeployment costs strengthen the relationship between industry downturns and technology differentiation in resource-related industries. I exploit a precipitous oil price drop in 2014 to study the effect of idle capacity on the redeployment of resources from the oil and gas industry to the wind power industry. I find evidence consistent with the argument that following a downturn, firms were likely to repurpose such resources as large-scale maritime equipment from the oil and gas to the wind industry, driving an influx of novel “solutions”. The study contributes to the literature on technological change by highlighting the role of industry conditions on the innovative activity in resource-related industries.
In the second essay (link to paper), “Keeping invention confidential: the role of strengthened appropriability in the use of trade secrets” (with Colleen Cunningham), we investigate use of a prevalent but rarely studied form of intellectual property protection: trade secrets. Building on existing survey evidence of firm-level, cross-sectional use of secrecy, we explore the effect of stronger legal trade secret protection on the use of trade secrets, and the rate and nature of secret innovation. Our setting is the US oil and gas hydraulic fracturing (fracking) industry, from 2013 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 trade secret use across states with varying levels of pre-DTSA trade secret protection. We find substantial increases in the use of trade secrets, the generation of new trade secrets, recombination across sources, and the breadth and complexity of secret invention. Our results provide rare systematic empirical evidence on actual trade secret use and documents how stronger formal appropriability shapes secret innovation.
“Do innovation possibilities decline with technological age?” (with Sendil Ethiraj), is motivated by the observation that innovation appears to have become more difficult over time, as evidenced by larger R&D teams and a lower patent to R&D expenditure ratio. Distance from the innovation possibility frontier is potentially a crucial determinant of feasible technological change, yet little consensus has been reached about its impact on firm behavior. One reason could be that the underlying theoretical models differ in their assumptions about the world. In the industrial organization literature, for example, the predominant assumption is that technologies rely on a set of resources, which, when exhausted, foreclose the possibility of further technological improvement (the resource space view). An alternative convention prevalent in evolutionary economics and behavioral theory of the firm is that technologies evolve by addressing and solving problems that arise in the environment (the problem space view). Differentiating between the two conventions may enable theoretical consensus, delineating empirical tests that allow to tease out competing theories. We describe and test the predictions arising from these two conventions—resource space and problem space view—on around 100,000 oil wells drilled in the U.S. in 2010-2017. We exploit an exogenous shock to the incentives to innovate across technologies and document mechanisms driving the results. The findings are consistent with the problem space view, suggesting that technology age may render lower innovation possibilities as firms solve available problems in the environment.
Additional projects and future research directions
I am also developing a line of work examining value creation and innovation in multisided market settings. In a paper entitled “Platform Complementors: Downstream vs. Upstream Orientation and Product Performance”, I examine the drivers of product performance in a platform setting. I explore the role of complementor-platform orientation and complementor-customer orientation as drivers of value creation in digital settings. A platform owner may be conceptualized as a supplier of market access to a complementor firm in a vertical relationship. A longer experience of trading on a platform may entail a level of established knowledge flows and relational capital. Indeed, prior literature argues that experience on a platform increases value creation; however, platform owners make unilateral decisions to maximize the ecosystem rather than a specific complementor’s value creation. I argue that firms trading on multisided markets such as digital platforms with a high number complementors have significant influence on product performance not through upstream but rather through downstream orientation. A downstream orientation with a focus on product customization for specific customers provides fast performance feedback and is more conducive to higher performance. I base this study in the mobile apps setting. In contrast to the prior literature, I find that a longer experience of trading on a platform (upstream orientation) has a negligible effect on product performance; instead product customization (downstream orientation) such as app translation and cultural proximity to customers has a large and significant effect on product performance. I conduct a battery of tests to uncover the mechanisms, studying the effect of launching multiple products on a platform and following “spray and pray” strategies. I exploit the fact that the same app is available in multiple markets simultaneously, thus holding the quality of the product constant. The (negligible) effect for upstream orientation does not vary across the ten countries in the sample, but the effect varies significantly for downstream orientation, suggesting that there is a high level of heterogeneity across different markets. This study contributes to the literatures on inter-firm relationships and multisided markets, highlighting the departure from established theory in digital platform settings.
To advance my research agenda, I plan to explore questions in the field of organizational innovation. First, I have secured funding through the Wheeler Institute to study how firms respond to environmental volatility. This project follows from my job market paper, attempting to build a deeper understanding of why and when firms may choose between the strategies of retrenching, innovating or exapting. I seek to understand how stranded assets and institutional pressures may affect firm willingness to focus on new industries after industry shocks. Building on the databases I have created and new text analyses, I plan to study the drivers of firm strategy shifts following environmental shocks. Second, I am interested in delving deeper into my observation that industries repurposing resources in new settings are likely to work with supply chain companies from their initial industry. This insight highlights an important mechanism of how knowledge flows across industries—namely, by repurposing existing relationships. I am also interested in studying the complementarities between different types of innovation, particularly the relationship between patents and trade secrets. I plan to explore the extent to which these types of intellectual property may complement or substitute for each other, provided that trade secrets may be less necessary when patent protection is high but also reflect tacit knowledge about the use of a technology. Finally, I am interested in further detailing how horizontal interactions with competitors may affect innovation and competitive patterns in firm behavior on multisided markets.