Motivated by challenges faced by firms entering an unknown market, we study a strategic investment problem in a duopoly setting. The favorableness of the market is unknown to both firms, but firms have prior information about it. A leader invests first by choosing its investment size. Then, in a continuous-time Bayesian setting, a competitive follower dynamically learns about whether the market is favorable or not by observing the leader’s earnings, and chooses its investment size and timing. In this setting, we characterize equilibrium strategies of firms.
The selection of novel ideas is vital to the development of truly innovative products. Firms often turn to idea crowdsourcing challenges, in which both ideators and the seeker firms participate in the idea selection process. Yet prior research cautions that ideators and seeker firms may not select novel ideas. To address the links between idea novelty and selection, this study proposes a bi-faceted notion of idea novelty and probes the role of task structure.
Does the availability of health insurance for young adults affect entrepreneurial behavior? This paper proposes that policy effects may go beyond the binary, and shape choices around entrepreneurial form, such as incorporation. I use the adoption of 38 dependent coverage mandates in 31 states, passed from 1986 to 2013, and the adoption of a federal mandate in 2010 to analyze the relationship between non-employer provided insurance and entrepreneurial activity.
We investigate tax planning by privately-held corporations. Privately-held firms are commonly believed to face lower costs of tax planning relative to publicly-held firms, and thus are believed to engage in greater tax planning.
Why do young firms pay less? Using confidential microdata from the US Census Bureau, we find lower earnings among workers at young firms. However, we argue that such measurement is likely subject to worker and firm selection. Exploiting the two-sided panel nature of the data to control for relevant dimensions of worker and firm heterogeneity, we uncover a positive and significant young-firm pay premium. Furthermore, we show that worker selection at firm birth is related to future firm dynamics, including survival and growth. We tie our empirical findings to a simple model of pay, employment, and dynamics of young firms.
This article investigates patent citations made to published patent applications. Although citations to patent publications are conceptually indistinguishable from citations to granted patents, they are omitted from all standard measures. We find that publication citations are a large and growing portion of patent citations, and that they differ statistically from citations to granted patents on several important dimensions. We conclude that omitting publication citations is likely to generate biased measures, and that standard measures of patent citations should be corrected. We release our computer code and corrections for future use.
We investigate the extent to which loan officers generate individual effects on the design and performance of syndicated loan deals. We construct a novel database containing the identities of 6,821 loan officers involved in structuring syndicated loan deals. This data allow us to exploit movement of loan officers across banks to disentangle loan officer effects from bank fixed effects and estimate loan officers’ influence on both lending terms and loan performance. We find that loan officers have a significant influence on loan terms and loan performance that is incremental to bank and borrower characteristics.
We examine how product market competition affects the disclosure of innovation. Theory posits that product market competition can cause firms to increase their disclosure of innovation to deter competitors. Consistent with this reasoning, we find that patent applicants in more competitive industries voluntarily accelerate their patent disclosures, which are credibly disclosed via the United States Patent and Trademark Office.
In the run up to the financial crisis, the essential functions financial intermediaries played seemed to become less important. Commercial and industrial loans, as well as residential mortgages, the quintessential banking products, were securitized and sold.
We study how an improvement in contracting institutions due to the 1999 U.S.-China bilateral agreement affects U.S. firms’ innovation. We show that U.S. firms operating in China decrease their process innovations—innovations that improve firms’ own production methods—following the agreement.
Mergers and acquisitions (M&As) are an important mechanism through which new technology is adopted by firms. We document patterns of labor reallocation and wage changes following M&As, consistent with the adoption of technology. Specifically, we show target establishments invest more in technology, become less routine task intensive, employ a greater share of high technology workers, and pay more unequal wages.
Kenan Institute Executive Director and Institute for Private Capital Research Director Greg Brown gets the last word in this Bloomberg Businessweek article on the ubiquity of private equity.
Kenan-Flagler Business School professor and UNC Tax Center Research Director Jeff Hoopes comments on the intricacies of interpreting the president’s tax records if the push to release them ever comes to shove. Hoopes was quoted in this NPR article, which has been posted by more than 50 media outlets so far.
We find striking differences across economic states in how monthly and quarterly stock returns are related to changes in inflation expectations.
Marketers create social media, in the form of firm-generated content (FGC), to ignite interest in new products such as movies; in turn, there is a clear need to understand whether and how FGC influences demand. With a descriptive study, the authors investigate two potential mechanisms by which FGC may drive box office revenues.
Access challenges associated with high-cost pharmaceuticals have jump started discussion of solutions ranging from state-based boards reviewing drug price increases to harnessing Medicare’s purchasing power for “price negotiation” to old-fashioned price-setting.
We study dynamic decision-making under uncertainty when, at each period, a decision-maker implements a solution to a combinatorial optimization problem. The objective coefficient vectors of said problem, which are unobserved prior to implementation, vary from period to period.