Research

Working papers

Where do toxic innovations come from? A study of competition and innovation in the US shale oil and gas industry, Job Market Paper

I study the effect of competition on the nature of innovation, particularly innovations that generate negative environmental externalities. I argue that competitive pressures drive firms to undertake innovations that have the potential to enhance yields but also pose significant risks to the environment. I examine the effect of competition on the toxicity of innovations in the design of chemical cocktails (exploratory formulae) used in the production of shale oil and gas in the US between 2011 and 2016. Utilizing the negative oil price shock of 2014 as an instrument to competition for firms in the industry, I show that competition is positively associated with using exploratory formulae that have toxic chemicals, especially by poorly performing firms. In exploring the origins of such toxic innovations, I show that poor-performing firms act as conduits for experimentation with toxic chemicals by suppliers under the conditions of high competition. In discussing the productivity implications, I show that the productivity gains from using toxic exploratory formulae are positive but short-term. I highlight how changes in competitive intensities can impact the nature of innovation generated by firms which can be detrimental to environmental health.

Echoes of Opportunity: The impact of labor market protection in distant talent search in the recorded music industry (with Olenka Kacperczyk & Sungyong Chang)


This paper investigates the influence of labor market protection on distant talent search decisions by firms within the US recorded music industry. Drawing from search theory, we examine the interplay of supply-side and demand-side dynamics affected by unemployment insurance benefits. Analyzing state-level variations in unemployment insurance benefits, we find that generous unemployment insurance benefits prompt music labels to hire a higher proportion of new artists. Simultaneously, incumbent artist retention decreases as labels prioritize new artist hiring. These effects are distinct from pre-existing trends, highlighting the causal link between labor market protection changes and talent search outcomes. We also find that strengthened labor market protection assists music labels in creating more popular music. We contribute to the literature on search by extending distant search theory to the labor context, revealing labor market protection's role in shaping talent search and hiring strategies. We also contribute to the debate on labor market stratification and highlight the mechanisms that explain the persistent disadvantage that novices face in entering an industry.


Looking outside and looking inside, contracts and capabilities for innovation and catch-up: evidence from an emerging industry (with Snehal Awate, Ram Mudambi & Subodha Kumar)


This study investigates the influence of outsourcing strategies on the innovation performance of Original Equipment Manufacturers (OEMs) in the emerging wind turbine industry. It examines how outsourcing decisions evolve over time in a context characterized by uncertainty and knowledge dependencies. By analyzing comprehensive data from 1987 to 2017, the study tracks the development of outsourcing strategies in the industry. A two-stage self-selection model is used to account for the endogenous nature of outsourcing decisions and mitigate self-selection bias. Our findings indicate that outsourcing strategies significantly impact the innovation performance of OEMs in the wind turbine industry. Contrary to traditional transaction cost economics, which emphasizes alignment between transaction attributes and governance choices, this study highlights the importance of hazard mitigation strategies in uncertain emerging industries. Outsourcing can be an effective approach for accessing external knowledge and resources, leading to improved innovation outcomes even in uncertain contexts. Additionally, the study reveals that the effects of outsourcing strategies vary depending on firm capabilities. Industry leaders and laggards demonstrate distinct outsourcing preferences to leverage their resources and capabilities effectively. These strategic choices contribute to the competitive advantage of leaders and create opportunities for laggards to catch up. Overall, this empirical study enhances understanding of outsourcing decisions, their impact on innovation performance, and the interplay between firm capabilities and outsourcing strategies in emerging industries.

The rewards and risks of political connections: A study of the US hydraulic fracking industry, 2012-2018 

In this study, I analyze how political connections shape a firm’s search behavior and aid firms in taking environmentally risky activities. I argue that political connections enable firms to engage in environmentally riskier but productivity-enhancing operations, but such firms also become more vulnerable to litigations. I present the trade-offs that politically connected firms face. I examine the usage of toxic chemicals that enhance the productivity of shale oil and gas wells by firms in the US oil and gas hydraulic fracking industry between 2012 and 2018, in states which require the disclosure of fracking chemicals by firms. I find that politically connected firms are more likely to pursue environmentally risky operations compared to non-connected firms but are also more likely to face litigations. I highlight the trade-off that firms face between engaging in environmentally riskier operations to enhance productivity and increased vulnerability to costly litigations. 

 

Work in progress

While extant research highlights the conditions which aid new entrants to conduct distant search, in this study, we explore the conditions under which incumbent firms conduct distant search. We set our study in the US oil and gas industry to analyze the search strategies of firms to explore when and what kind of firms are motivated to drill wildcat wells which are characterized by high-risk and high return (Wildcat wells refer to drilling operations conducted in regions devoid of any existing records or knowledge of previous oil and gas wells). We build and leverage a novel dataset that identifies wildcat wells in this industry and explore firm-level heterogeneity to understand the drivers of wildcat search in this industry.