• Gains from Patent Protection: Innovation, Market Power and Cost Savings in India  (with Joel Stiebale)

This paper uses the implementation of a TRIPS compliant patent regime in India to study the effect of stronger patent protection on innovation and market power. Exploiting cross-industry variation in the reliance on patents as an appropriation mechanism, we find that the reform led to an increase in patent applications and higher investment in research and development for firms more exposed to the reform. We also estimate an increase in average firm-product level markups post reform which can be mainly attributed to lower marginal costs, not higher prices. Our results indicate that an increase in process innovations post-reform and output expansion contribute to these cost savings.

• Is acquisition-FDI during an economic crisis detrimental for domestic innovation? (with Maria-Garcia Vega and Richard Kneller)

We study how acquisition-FDI during economic crises affects R&D investments of target firms as compared to acquisitions made during periods of economic growth. Using a panel of Spanish firms, we find that foreign multinationals cherry-pick the best domestic firms, irrespective of timing of acquisition. Using matching and difference-in-difference regressions, we find that firms acquired during crises experience smaller declines in R&D than those acquired during periods of growth.  Our results are consistent with the opportunity cost theory of R&D over the business cycle, as we also find that crisis-acquired firms prioritize new product creation over achieving economies of scale.

• R&D and Firm Resilience During Bad Times

Can being innovative help firms to shield themselves from the disruptive effects of a recession? This paper finds that in industries hit severely by the Great Recession, firms with prior investment in R&D outperformed non-innovative firms during the recession. The resilience of innovative firms is explained by their ability to change their product base through product innovation. Innovative firms do not seem to engage in process innovation or lower marginal costs and prices to adapt to a negative demand shock. The findings are not attenuated by alternative explanations of resilience such as better access to capital, pre-existing product and market scope of innovative firms, or differences in labour adjustment costs. The paper, thus, provides evidence for how investment in R&D today makes firms capable of swiftly developing new products to cope with a dramatically changed external environment.

• Go wide or go deep - Margins of Export Growth (with Katharina Erhardt)

This paper seeks to understand how exporters grow. Using transaction-level customs data from Switzerland, we find that new transactions, or new seller-buyer-product combinations account for roughly 60% of export transactions for firms of all size classes. These new transactions are classified into two margins: going wide (introducing new products) and going deep (reaching new buyers for old products). We find that the dominant margin of export expansion varies with the life-cycle stage of a firm, small firms rely relatively more on going wide whereas large firms rely relatively more on going deep. We explain this observation in a model where each growth margin incurs an opportunity cost. Notably, going wide is not scalable, and requires the same amount of resources regardless of firm size, as seen in the data. We confirm model predictions regarding the impact of market size on the margins of export growth by exploiting the Swiss exchange rate shock in 2015.