Research

Large firms develop technologies through both in-house research and development (R&D) and external acquisitions of small successful startups. The availability of potential acquisition targets is determined by past venture capital (VC) investment in startups. This paper develops a theory which connects corporate innovation with VC investment through corporate takeover activities of startups. We explore the mechanism where corporate decision makers use the level of VC investment to predict the acquisition opportunities in the near future, and make in-house R&D decisions accordingly. We show that increase in VC investment deters corporate internal R&D, and the deterring effect is stronger for low-profit technologies. A strategic venture capitalist has more incentives to invest if corporate R&D can be more easily deterred, since it increases the demand to acquire their startups. The theory thus predicts high VC investment in technologies with lower profit than those firms invest in. The finding aligns with the empirical correlation between corporate R&D and VC investment across sectors.

We study the unemployment and wage fluctuations that arise from the strategic interactions of firms in a Shapley-Shubik dynamic oligopolistic market game. We propose a novel wage determination process from market game bidding, as an alternative to the Nash bargaining process commonly used in related literature. Preliminary findings show that the aggregate output and unemployment rate are less responsive to productivity shocks under our oligopolistic setting, which provides insights to research on the Great Moderation period (mid-1980s) where the reduced volatility of business cycles is observed.

We analyze the implications of quasi-hyperbolic discounting preference for endogenous economic fluctuations such as endogenous deterministic cycles and local sunspot equilibria in a three-period overlapping generations (OLG) economy with pure exchange. We provide a sufficient condition for the existence of two-period endogenous cycles and a necessary and sufficient condition for the existence of a local sunspot equilibrium characterized by local indeterminacy. Through numerical characterization, we show that introducing the present bias into preferences shrinks the set of two-period cycles but enlarges the set of locally indeterminate equilibria. Moreover, the locally indeterminate equilibria exist with a modest size of time discount factor, unlike in a standard two-period OLG model with exponential discounting preferences. We also find that two-period cycles arise under a skewed endowment profile toward the young, whereas a local sunspot equilibrium exists under a hump-shaped endowment profile. This result breaks down the conventional finding in a two-period OLG economy with a single commodity where the set of economies for two endogenous economic fluctuations coincide.

This paper uses machine learning tools to analyze press releases announcing company mergers and acquisitions. I find that acquisitions can be clustered into different groups based on their text similarities. The result of this paper shows that existing tools on document clustering can work on structurally highly similar documents, and benefit economic researchers in understanding mergers and acquisitions.

Financial statements provide aggregated information about a company's business activities and financial position. While some information is inevitably lost in the aggregation process, some can be uncovered, or inferred, through analysis and computation. By exploiting the double-entry bookkeeping structure, we combine different pieces of accounting records to recreate the underlying flows among the key accounts of a company, represented as a directed, multi-edge, weighted graph. The method can be applied in a scalable way on a relational database of companies and their financial statements. The generated graph representation is comparable across firms, and is used as an input for mining and knowledge discovery as well as for standard economic research and analysis.