Research

Publications

"Mapping U.S.-China Technology Decoupling, Innovation, and Firm Performance" (with Wei Jiang and Danqing Mei). Management Science, forthcoming

Best Paper Award at China International Conference in Finance (CICF), VoxChina


"Financing Ventures" (with Jeremy Greenwood and Juan M. Sanchez). International Economic Review, 2022, 63 (3), 1021–1053.

Working Papers

(joint with Zhu Wang)

R&R, Journal of Financial Economics

On the Programs: International Industrial Organization Conference, Economics of Payments XI Conference, China International Conference in Macroeconomics, Annual Conference in Digital Economics 

Abstract: Paying with mobile phones is a latest innovation transforming people’s payment behavior around the world. However, advanced economies like the U.S. are found lagging behind in mobile payment adoption. We construct a dynamic model with sequential payment innovations to explain this puzzle, which uncovers how advanced economies’ past success in adopting card payment drags their feet in the mobile payment race. Our calibrated model matches the cross-country adoption patterns of card and mobile payments, and also explains why advanced and developing countries favor different mobile payment solutions. Based on the model, we conduct quantitative exercises for welfare and policy analyses. 

(joint with Xuan Tian and Chunrui Liu)

R&R, Management Science

On the Programs: NBER Chinese Economy Working Group Meeting, AFA, NFA, China International Conference in Finance, China Financial Research Conference

Abstract: Exploiting staggered establishments of patent exchanges in China, we examine how patent trading affects firm innovation and specialization. We find that patent trading and in-house innovation are complements for patent sellers, whereas they are substitutes for the buyers. Our findings demonstrate that the market for technology induces (i) specialization between patent buyers and sellers, (ii) specialization between patent licensors and licensees, and (iii) specialization based on a firm’s R&D efficiency. All these three patterns of specialization indicate that a firm’s response to an emerging market for technology hinges on its comparative advantages. Firms with a comparative advantage in creating innovation redirect their resources from advertising to patenting activities, whereas firms with a comparative advantage in commercializing innovation switch their effort from patenting to advertising activities. Moreover, enhanced patent trading contributes to improved firm performance and increasing market concentration. Our findings suggest patent trading promotes comparative-advantage-based specialization and enhances firm performance. 

(joint with Xuan Tian, Chunrui Liu and Kexin Wang)

R&R, Management Science

On the Programs: NBER Summer Institute Entrepreneurship Meeting, WFA, China International Conference in Finance

Abstract: Exploiting the staggered introductions and lifting of COVID-19 lockdowns across different regions in China, we study how lockdowns affect the investment decisions of venture capital (VC) investors. China provides a unique setting that allows us to examine VC investment decisions after the pandemic is under control and lockdowns are lifted. Contrary to the conventional wisdom that VCs tend to invest in local ventures during lockdowns, we find that they invest in remote ventures during lockdowns and such effects persist even after lockdowns are lifted. Such lockdown effects are stronger when there is better internet infrastructure, when the level of information asymmetry between VCs and entrepreneurs is lower, when VCs are more experienced, and when ventures are in the early stages of development. The lockdown effects can be explained by the advancement of remote communication technology as a response to the social distancing requirements. As VCs invest in remote ventures, the regional inequality of entrepreneurial access to VC financing has been reduced. Our findings uncover how VC investors adapt to the pandemic and such changes can have long-lasting effects in the post-pandemic era. 

(joint with Salomé Baslandze and Felipe Saffie)

Abstract: In the last two decades, the world has witnessed the rise of Chinese innovation. China, once a manufacturing hub for the West, has become a major player in the development of many new technologies. We assess how foreign knowledge spillovers spurred this transformation. To this end, we assemble a rich micro-level data set of firm patenting and accounting information. The aggregate data show that over time Chinese firms have gained leadership over foreign firms in China both in terms of production and patenting. Nevertheless, the aggregate trends mask rich industry heterogeneity pointing to the limits of cross-firm knowledge spillovers. While foreign firms have lost market leadership in low-tech (simple) industries, they have maintained strong leadership in high-tech (complex) industries. Exploring foreign knowledge spillovers using patent citations data, we show that only firms in low-tech (simple) industries eventually decrease their reliance on foreign knowledge for innovation. Our findings suggest that imitation is a path to indigenous innovation only in low-tech (simple) industries and point to the need of industry-specific policies. 

Abstract: Stronger intellectual property rights (IPRs) induce specialization and contribute to economic growth. In the United States, a sweeping pro-patent legal reform in 1982 fostered specialization and enhanced firm performance. Around the world, countries experience faster economic growth when their innovating sectors are characterized by a higher level of specialization. An endogenous growth model with endogenous firm boundaries is developed to disentangle the relationship between legal institutions, business scope of the firms, and economic growth. Firm boundaries are identified by the number of intermediate inputs produced in-house. The production technology of every intermediate input is embodied in a patent. To perform R&D, a firm needs both the intermediate inputs based on its own patents and the inputs associated with others' patents. Each firm has two options to access to the inputs based on others' patents: it can buy their products or infringe on their patents by imitating their products. An infringer has to pay a legal settlement if it is sued and loses the lawsuit. To fend off infringement, a firm can expand its business scope and produce more intermediate inputs in-house. With stronger IPRs, the infringing problem becomes less severe, and the firm has weaker incentives to expand its business scope. Hence, stronger IPRs can induce specialization by deterring infringement.  The model is matched with stylized facts of firm boundaries and patent litigation. The counterfactual analysis characterizes the optimal strength of IPRs and evaluates the actual patent law enforcement. The pro-patent legal reform in 1982 was welfare-enhancing, but it was too extreme.