How Patient is Venture Capital? (Job Market Paper)
Venture capital is a major source of finance for innovation in the U.S. economy, but how successful has it been in financing long-term innovation? I evaluate the allocation of venture capital to technologies using a new technology-level measure of the expected time between investment and innovation. Using natural language processing, I assign innovation funding between 1980-2022 from the following sources to technologies: venture capital firms, public companies, two federal programs that target commercialization of innovation, and the top four federal agencies most important for government funding of innovation. Venture capital is disproportionately allocated to technologies with short lags between investment and innovation; this allocation resembles that by public companies and is shorter-term relative to the distribution of commercial value and scientific opportunities across technologies, as inferred from other sources of innovation funding. I show that the desire to raise follow-on funds earlier (``fundraising pressure’’) leads venture capital fund managers to invest in short-term innovation.
Presentations: 20th Olin Finance Conference (poster session), NBER Productivity Seminar.
The Market Impact of Fed Communications: The Role of the Press Conference
(with Kunal Sangani, forthcoming at the International Journal of Central Banking)
We document a shift in the market impact of the press conference given by the Federal Reserve Chair at the close of FOMC meetings. Using intraday trading data, we find that market volatility is more than three times higher during press conferences given by current Chair Jerome Powell than during press conferences by predecessors Janet Yellen and Ben Bernanke. Press conferences since the start of Covid-19 are largely responsible for the heightened market volatility during Chair Powell’s conferences. During this period, we find that the market tends to move in the opposite direction during the press conferences compared to its movement following the FOMC statement publication. In contrast, press conferences by Chairs Bernanke and Yellen tended to reinforce the market’s initial reaction to the information released in the FOMC statement. Text analysis of the Q&A portions of Powell’s press conferences suggests that his choice of language correlates with these market movements. We find that Fed communications during the recent period have been less effective in reducing forward-looking interest rate uncertainty.
Media Coverage: Wall Street Journal, Bloomberg, Investopedia, others.
Whose Bridge to Opportunity? Explaining Impact Variation of Sectoral Training
(with Kadeem Noray).
We investigate heterogeneity in the impact of Year Up, one of the most successful job training programs ever evaluated in an OECD country. We employ a machine learning approach called causal forests to detect systematic variation in Year Up’s effect on earnings across subgroups. We find sizable variation: those in the bottom quintile receive only one third of the gains of the top quintile. Relative to the top quintile, the bottom is substantially more likely to be female, black, and poor, but does not differ meaningfully on measures of cognitive skills. We complement our analysis of heterogeneity by investigating the mechanisms behind Year Up’s success: we find strong evidence that variation in the impact is explaining by the initial job placement rather than improvements in non-cognitive skills or career knowledge. Finally, we demonstrate that the experimental control group’s earnings trajectory is nearly identical to that of a naively matched comparison group in the Census, which suggests that our results are not driven by sample selection caused by Year Up’s unique screening process.
Chinese Innovation Measurement
(with Josh Lerner, Amit Seru, and Dimitris Papanikolaou)
We construct a new dataset of primary Chinese patents using techniques that have been developed over the last 40 years to analyze U.S. patents. This dataset distinguishes patents filed by the Chinese government, Venture Capital-backed firms, and other types of assignees. We calculate patent-level measures of quality using the full text of patents based on the method introduced in Kelly, Papanikolaou, Seru, and Taddy (2021).
Anticipating Sputnik Moments
(with Josh Lerner, Amit Seru, and Dimitris Papanikolaou) Draft coming soon.
We study the evolution of Chinese innovation in critical technologies over the period 1985–2023, using a newly assembled, comprehensive database of Chinese patent publications. First, we document a sharp increase in both the quantity and quality of Chinese innovation in technologies designated as critical by the U.S. Department of Defense: China is approaching or surpassing the U.S. frontier in several key areas. Second, we examine the contribution of cross-border inventor mobility to this convergence, finding a substantial role of inventors with U.S. experience. We identify the U.S. institutions most associated with these flows. Finally, we assess the potential impact of recent U.S. policy efforts to restrict China’s access to American innovation. While U.S. government efforts to select firms working on critical technologies through the Entity List appear well targeted, the impact on the firms' subsequent innovation seems minimal, in part due to inventor mobility. We also explore how patent data can be used to more precisely identify critical technologies and the firms advancing them.
Other works in progress
The Response of Innovation to Uncertainty in Inputs: The Case of Battery Technology
(with Maxim Alekseev and Adrian Kulesza)
Productivity of NIH Funding
(with Gabe Chodorow-Reich)