Research
Refereed publications
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On "Innovation and Institutional Ownership (with David Wehrheim)
Journal of Corporate Finance, 2024, Vol. 86, 102569, Special Issue on Statistically Non-significant Results in Financial Economics, (Download paper)
Abstract: In their article "Innovation and Institutional Ownership," Aghion, van Reenen, and Zingales (2013) find that the rise in institutional stock ownership in the U.S. during the 1990s led to an increase in corporate innovation, as measured by patent and patent citation counts. Their article concludes that "contrary to the view that institutional ownership induces a short-term focus in managers, we find that their presence boosts innovation" (p. 302). Subsequent research has generally accepted this finding at face value. However, we uncover several critical issues with their data. Addressing these issues renders the results economically and statistically insignificant and, in some instances, even suggests a negative relationship between institutional ownership and U.S. innovation.
Research versus Development, External Knowledge and Firm Innovation (with Cindy Lopes-Bento)
Journal of Product Innovation Management, 2024, Vol. 41(4), pp. 768-792. (Download paper)
Abstract: While the positive influence of external knowledge on firm innovation is widely recognized, our understanding of the interplay between the quest for external knowledge and internally conducted research and development (R&D) remains incomplete. Previous research has identified certain conditions that shape the synergy between internal and external knowledge, such as the institutional origin of the external knowledge and the overall scale of the firm's internal R&D activities. In this study, we focus on an important but not yet considered dimension and analyze whether the returns from external knowledge sourcing are contingent upon a firm's internal involvement in basic or applied research as opposed to development. We argue that engaging in research, while supporting a firm's absorptive capacity, leads overall to lower benefits from seeking external knowledge because of knowledge crowding out and spillover effects. We test our predictions using a representative panel dataset from Spain (Panel de Innovación Tecnológica [PITEC]) and show that the benefits of external knowledge decrease for higher shares of internal research investment. This substitution effect is particularly pronounced in settings where sector-level appropriability is limited and in nonhigh-tech sectors. We contribute to the innovation literature by underscoring the important role of the nature of internal R&D efforts in shaping firms' capacity to benefit from external knowledge sources.
Asymmetric Information and R&D Disclosure: Evidence from Scientific Publications (with Stefano Baruffaldi and David Wehrheim).
Management Science, 2024, 70(2), pp. 1052-1069 (Download paper) (Online Appendix)
Featured by "The FinReg Blog" (Duke Financial Economics Center): Blog Post
Abstract: We examine how asymmetric information in financial markets affects voluntary R&D disclosure, considering scientific publications as a disclosure channel. Difference-in-differences regressions around brokerage house mergers and closures indicate a quick and sustained increase in scientific publications from treated firms relative to the number of publications from control firms. The treatment effects are concentrated among firms with a large increase in information asymmetry and decline in investor demand, firms with greater financing constraints, and firms with low proprietary costs. We do not find evidence of changes in financial disclosure, nor do we find changes in patenting. Results from ordinary least squares regressions show that scientific publications by firms are positively associated with investor attention toward those firms. We complement these results with qualitative evidence from conference calls. Our results highlight the limitations and trade-offs that R&D firms face in their financial market disclosure policies.
Losing talent by partnering up? The impact of R&D collaboration on employee mobility (with Ali Mohammadi).
Research Policy, 2022, 51(7), 104551. Download paper
Abridged version published in Best Paper Proceedings of the Academy of Management 2018 (Chicago). Download AOM Best Paper Proceedings version
Finalist for best paper prize of the TIM Division (AOM 2018, Chicago)
Abstract: Firms frequently enter collaborations with other organizations for the purpose of innovating. In this paper, we argue that engaging in R&D collaboration can have the unintended consequence of increasing the mobility of highly skilled personnel. We investigate our research question using a representative dataset that combines information from the Swedish Community Innovation Survey (CIS) with employer–employee registry data. Our econometric analysis shows that R&D collaborations by firms are associated with higher levels of outgoing mobility among skilled employees, particularly among those with technical (“STEM”) education and master’s or doctoral degrees. We also find support for the interpretation that R&D collaboration augments employees’ general human capital, subsequently increasing their outside employment options. We discuss important implications for firm collaboration strategies.
"Patents and knowledge diffusion: The effect of Early Disclosure" (with Stefano Baruffaldi)
Research Policy, 2020, 49(4) , 103927. Download paper
Abstract: We study how the timing of information disclosure affects the diffusion of codified technical information. On November 29, 2000, the American Inventors Protection Act (AIPA) reduced the default publication time of patents at the United States Patent and Trademark Office (USPTO) to 18 months. We analyze the effects of this change by means of a regression discontinuity design with time as an assignment variable and a complementary difference-in-differences analysis. Our study shows that information flows from patents measured by forward citations, increased. Interestingly, the degree of localization within geographic boundaries remained unchanged and technological localization even increased moderately. Moreover, the effect of early disclosure on citations from patents filed by patent attorney service firms is particularly strong. These results imply that knowledge diffusion stemming from speedier disclosure of technical information is confined to the existing attention scope and absorptive capacity of specific inventors and organizations.
“Knowledge Spillovers in the supply chain – Evidence from the High-Tech sectors” (with Olov Isaksson & Ralf Seifert)
Research Policy, 2016, 45 (3), 699-706. Download paper
Abstract: In addition to internal R&D, external knowledge is widely considered as an essential lever for innovative performance. This paper analyzes knowledge spillovers in supply chain networks. Specifically, we investigate how supplier innovation is impacted by buyer innovation. Financial accounting data is combined with supply chain relationship data and patent data for U.S. firms in high tech industries. Our econometric analysis shows that buyer innovation has a positive and significant impact on supplier innovation. We find that the duration of the buyer–supplier relationship positively moderates this effect, but that the technological proximity between the two firms does not have a significant effect on spillovers.
“Corporate Science, Innovation and Firm Value” (with Michele Cincera)
Management Science, 2016, 62 (7), 1970-1981. Download paper
Abstract: Many firms actively disclose research findings in scientific peer-reviewed journals. The literature highlights several potential benefits of such scientific boundary-spanning activities, including privileged access to academic information networks. However, scientific disclosure may lead to unintended knowledge spillovers. It remains unclear whether active engagement in science leads to higher returns. This paper investigates the impact of scientific activities on the firm’s market value, using accounting data for U.S. firms and matched patent and scientific publication data. We find evidence for the positive impact of scientific publications on a firm’s market value beyond the effects of research and development, patent stocks, and patent quality, and also document heterogeneity with respect to this impact between different industrial sectors.
“How do firms develop capabilities for scientific disclosure?” (with Stéphane Lhuillery)
Research Policy, 2015, 44 (7), 1283-1295. Download paper
Abstract: Many profit-oriented companies publish research outcomes in scientific literature. However, very few studies have focused on the capabilities that enable firms to engage in scientific disclosure with consequent potential benefits for the firm. We propose that specific investments are required in order to engage in scientific disclosure activities, since the disclosure process requires distinctive capabilities. This paper empirically analyses the relationship between the composition of industrial research labs’ personnel, basic research and scientific disclosure capabilities. Our econometric analysis provides evidence that scientific disclosure requires specific human resource allocations, which supports the view that scientific disclosure is not just a by-product of standard R&D activities.
“What makes companies pursue an Open Science strategy?” (with Julio Raffo)
Research Policy, 2013, 42 (9), 1513-1543. Download paper
Abstract: Whereas recent scholarly research has provided many insights about universities engaging in commercial activities, there is still little empirical evidence regarding the opposite phenomenon of companies disseminating scientific knowledge. Our paper aims to fill this gap and explores the motivations of firms that disclose research outcomes in a scientific format. Besides considering a dimension internal to the firm, we focus particularly on knowledge sourcing from academic institutions and the appropriability regime. We conduct an econometric analysis with firm-level data from the fourth edition of the French innovation survey (CIS) and matched scientific publications for a sample of 2512 R&D performing firms from all manufacturing sectors. This analysis provides evidence that firms are more likely to adopt academic principles if they need to access scientific knowledge that is considered important for their innovation development, whereas the mere existence of collaborative links with academic institutions is not a strong determinant. Furthermore, the results suggest that the inclination of firms to publish is sensitive to the level of knowledge spillovers in a sector and the effectiveness of legal appropriation instruments.
Working Papers
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Scientific signposts and firm technology search (with Anupama Phene)
Working paper available upon request
Abstract: Firms in high-technology sectors continuously search for the most promising external technological inputs, but the abundance of emerging opportunities and the uncertainty related to their expected performance make it challenging to choose the right technologies ex ante. In this paper, we propose that firms use scientific disclosures by their industry peers as a cognitive search heuristic to reduce the information screening burden and develop informed expectations regarding future technology performance. Our analysis of a sample of publicly listed U.S. firms in the biopharmaceutical sector shows that a firm allocates attention to its industry peer’s disclosures in prestigious scientific journals and leverages them by building more strongly on the peer’s recent, science-based technologies in its own follow-on innovation. However, the effect of industry peer scientific disclosure is weaker the greater the firm’s experience in screening for external technologies and when there are greater overlaps with the peer in technological expertise and product market offerings, indicating that the use of scientific disclosure as cognitive search heuristic is confined to settings where experiential search opportunities are limited.
Institutional Ownership and the Nature of Corporate Innovation (with Sampsa Samila and David Wehrheim)
Abstract: This paper analyzes whether institutional ownership affects the rate and nature of corporate innovation. We explicitly consider the heterogeneity of firm innovation by differentiating upstream scientific research from downstream development using novel scientific publication and patent indicators. Our analysis shows that greater presence of institutional owners has a negative impact on scientific research, whereas there is no effect on downstream development. Consistent with a short-term orientation of institutional owners, we further show that scientific research is associated with lower short-term operating performance but higher long-term firm value. These findings support the view that capital markets in general, and institutional owners in particular, can induce myopic firm behavior.