Published papers
1. Intellectual Property Rights and Debt Financing, Review of Financial Studies (2023) (link)
I examine how the investment and financing of innovation are affected by the contractual allocation of intellectual property rights using a Federal Circuit ruling that increased firms' property rights to employee patents. I find that treatment firms' total debt-to-assets ratio and R\&D spending increase by 18\% and 9\%, respectively, as the residual control over patents increases firms' incentives to innovate. These effects are more pronounced when ex-ante holdup exposure is high. Furthermore, I find a positive marginal effect of asset complementarity as it helps limit the decline in employee incentives. Consistently, I also show that firms' ex-post asset complementarity improves.
Working papers
1. Patent Hunters, with Lauren Cohen, Umit Gurun, and Katie Moon (SSRN)
Analyzing over 47 million citing patent-pairs granted by the USPTO between 1976 and 2020, we find regular citation patterns showing that specific patents rise to prominence only after considerable time has passed. Among these late-blooming influential patents, we show that there are key agents (patent hunters) who consistently identify and develop them. Although initially overlooked, these late-blooming patents have significantly more influence on average than early-recognized patents and are associated with significantly more new product launches. Patent hunters, as early detectors and adopters of these late-blooming patents, also amass significant positive value. Their adoption of these overlooked patents is associated with a 6.7% rise in sales growth, a 1.9% increase in Tobin's Q, and a 4.9% increase in new product offerings. To establish causality, we implement an instrumental variable approach exploiting inventor mobility following neighboring firm bankruptcies. This quasi-random variation in local patent-hunting capacity confirms that these benefits are causally due to patent hunting rather than other firm characteristics. Consistent with incentive-compatibility and realized cost dynamics, patents hunted: are closer to the core technology of the hunters, are more peripheral to the writers, and are in less competitive spaces. Further, patent hunting appears to be have a persistent, individual inventor-level component.
Conferences: MFA, the University of Kentucky Finance Conference, Asian Bureau of Finance and Economic Research Conference (ABFER), SFS Cavalcade, Global Entrepreneurship and Innovation Research Conference (GEIRC), Finance, Organizations, and Markets (FOM) conference, AFA, Bocconi-CEPR Finance Workshop, NBER Summer Institute Innovation meeting programs, and AEA (scheduled)
2. Industry Diversity in Startups: The Role of Local Entrepreneurial Funding, with S. Katie Moon (SSRN) (Under revision for resubmission at JFQA)
We examine the novel association between local startup industry composition and angel financing. Using Crunchbase data, we find that angel investors contribute to local startup industry diversity by funding startups dissimilar to incumbents. Angel investors attain industry diversity, particularly by financing startups in emerging industries and engaging with local angel investors from diverse backgrounds. Our findings are driven by angel investors' unique portfolio preference for geographic proximity to funded firms and industry diversity, while venture capitalists typically lean toward industry specialization. Angel investors' investment behavior is consistent with reinforcement learning, where exploratory investment strategies are optimal for less experienced investors.
Conferences: FMA, Colorado Finance Summit, CICF, EFA, and HEC-McGill Winter Finance Workshop programs
3. Patent Litigation and Innovation Competition, with Jongsub Lee and Seungjoon Oh
Using novel inter-firm patent litigation data, we show a significant interplay between intellectual property rights' boundaries and product market dynamics. Instrumenting the probability of patent litigation with the passage of China's National Intellectual Property Strategy, we find that patent litigation reduces defendant firms' innovation activity and fosters a more exploitative innovation strategy that leverages past experience and expertise. These effects strengthen with product market overlap between litigants. We also find that patent litigation intensifies product market competition among close rivals but results in a dispersed firm distribution within the industry, inducing an industry structure where the Schumpeterian effect of competition is more likely.
Conferences: AEA (poster session), AFA (poster session), Young Scholars Finance Consortium, EFA, AIEA-NBER, Financial Management Association Asia-Pacific (Corporate Finance Best Paper), Midwest Finance Association, CAFM, SFS Cavalcade Asia-Pacific, Colorado Finance Summit, and KAFA-KCMI.
4. Described Patents and Knowledge Diffusion between Firms, with S. Katie Moon and Guanqun Zhou
Based on the in-text described patents, we propose a new measure that captures firms’ reliance on, as well as their intentions to acquire, key knowledge from other firms. Our measure of described patents is superior in embodying the true technology-based knowledge flows, as evidenced by citing firms’ subsequent hiring of inventors. The widely used front-page patent citations are a noisier measure of knowledge flow due to selection biases introduced by patent lawyers and litigation liabilities. We consistently find that inventors who receive more in-text citations, particularly those described in a positive tone, are more likely to be hired by the citing firm. However, this prediction is significantly weaker using front-page citations. Furthermore, we find that trade secret protection through the Inevitable Disclosure Doctrine (IDD) affects the movement of inventors cited in the patent texts but not those cited on the front page.
Conferences: FMA Asia-Pacific (scheduled)