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Sara Moreira (Northwestern University)

Title: “Patents to Products: Product Innovation and Firm Dynamics”

We study the relationship between patents and actual product innovation in the market, and how this relationship varies with firms’ market share. We use textual analysis to create a new data set that links patents to products of firms in the consumer goods sector. We find that patent filings are positively associated with subsequent product innovation by firms, but at least half of product innovation and growth comes from firms that never patent. We also find that market leaders use patents differently from followers. Market leaders have lower product innovation rates, though they rely on patents more. Patents of market leaders relate to higher future sales above and beyond their effect on product innovation, and these patents are associated with declining product introduction on the part of competitors, which is consistent with the notion that market leaders use their patents to limit competition. We then use a model to analyze the firms’ patenting and product innovation decisions. We show that the private value of a patent is particularly high for large firms as patents protect large market shares of existing products.

Presenter: Sara Moreira (Northwestern University)

Coauthors: David Argente (Pennsylvania State University), Salome Baslandze (Federal Reserve Bank of Atlanta and CEPR) and Douglas Hanley (University of Pittsburgh)

Discussant: Laurent Fresard (Universita della Svizzera italiana)

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Petra Moser (New York University)

Title: “Women in Science: Lesson from the Baby Boom”

How do children affect women in science? We investigate this question using rich biographical data, linked with patents and publications, for 83,000 American scientists in 1956 at the height of the baby boom. Our analyses reveal a unique life-cycle pattern of productivity for mothers. While other scientists peak in their mid-thirties, mothers become more productive after age 35 and maintain high productivity in their 40s and 50s. Event studies show that the output of mothers increases after 15 years of marriage, while other scientists peak in the first 10 years. Differences in the timing of productivity have important implications for tenure and participation. Just 27% of mothers who are academic scientists get tenure, compared with 48% of fathers and 46% of women without children. Mothers face comparable tenure rates to other assistant professors for the first six years but fall behind afterwards, suggesting that they face higher standards of early productivity. Mothers who survive in science are extremely positively selected: Compared with other married women, mothers patent (publish) 2.5 (1.4) times more before the median age at marriage. Compared with men, female scientists are more educated, half as likely to marry, onethird as likely to have children, but half as likely to survive in science. Employment records indicate that a generation of baby boom mothers was lost to science.

Presenter: Petra Moser (New York University)

Coauthors: Scott Daewon Kim (University of Pennsylvania)

Discussant: Pierre Azoulay (Massachusetts Institute of Technology)

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Raghu Rajan (University of Chicago, Booth)

Title: “Kill Zone”

Venture capitalists suggest that incumbent internet platforms create a kill zone around themselves, where any competing entrant is acquired quickly. Consequently, financing new startups becomes unprofitable. We construct a simple model that rationalizes the existence of a kill zone. The price at which an acquisition is done depends on the number of customers the entrant platform can attract if it remains independent, which in turn depends on the number of apps that have adapted to the platform. The prospect of a quick acquisition by the incumbent platform, however, reduces the app designers’ benefits from adaptation, making it harder for a technological superior entrant to acquire customers. This reduces the stand-alone price of the new entrant, decreasing the price at which they will be acquired, and thus reducing the incentives of VCs to finance their entry. We discuss the policy implications of this model.

Presenter: Raghu Rajan (University of Chicago)

Coauthors: Sai Krishna Kamepalli (Columbia University) and Luigi Zingales (University of Chicago)

Discussant: Florian Ederer (Yale University)

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Adair Morse (Berkeley, Haas)

Title: “Small Business Survival Capabilities and Policy Effectiveness”

Using unique City of Oakland data during COVID-19, we document that small business survival capabilities vary by firm size as a function of revenue resiliency, labor flexibility, and committed costs. Nonemployer businesses rely on low cost structures to survive 73% declines in own-store foot traffic. Microbusinesses (1-to-5 employees) depend on 14% greater revenue resiliency. Enterprises (6-to-50 employees) have twice-as-much labor flexibility, but face 11%-to-22% higher residual closure risk from committed costs. Finally, inconsistent with the spirit of ChettyFriedman-Hendren-Sterner (2020) and Granja-Makridis-Yannelis-Zwick (2020), PPP application success increased medium-run survival probability by 20.5%, but only for microbusinesses, arguing for size-targeting of policies.

Presenter: Adair Morse (University of California, Berkeley)

Coauthors: Robert P. Bartlett III (University of California at Berkeley)

Discussant: Christopher T. Stanton (Harvard Business School)

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Jillian Grennan (Duke)

Title: “AI and High-Skilled Work: Evidence from Analysts”

Policymakers fear artificial intelligence (AI) will disrupt labor markets, especially for high-skilled workers. We investigate this concern using novel, task-specific data for security analysts. Exploiting variation in AI’s power across stocks, we show analysts with portfolios that are more exposed to AI are more likely to reallocate efforts to soft skills, shift coverage towards low AI stocks, and even leave the profession. Analyst departures disproportionately occur among highly accurate analysts, leaving for non-research jobs. Reallocating efforts toward tasks that rely on social skills improve consensus forecasts. However, increased exposure to AI reduces the novelty in analysts’ research which reduces compensation.

Presenter: Jillian Grennan (Duke University)

Coauthors: Roni Michaely (The University of Hong Kong)

Discussant: Elisabeth Kempf (Harvard Business School)

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Simcha Barkai (London Business School)

Title: “Value without Employment”

Young firms’ contribution to aggregate employment has been underwhelming. However, a similar trend is not apparent in their contribution to aggregate sales or aggregate stock market capitalization. We study the implications of the arrival of “low marginal – high average” revenue-product-of-labor firms in a stylized model of dynamic firm heterogeneity, and show that the model can account for a large number of facts related to the decline in “business dynamism”. We study the long-term implications of the decline in business dynamism on the economy by providing analytical results that connect the decline in dynamism to the eventual decline of consumption.

Presenter: Simcha Barkai (London Business School)

Coauthors: Stavros Panageas (University of California, Los Angeles)

Discussant: Ryan Decker (Federal Reserve Board) and Simone Lenzu (New York University)

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Lauren Lanahan (University of Oregon)

Title: “Research Subsidy Spillovers, Two Ways”

In this paper, we quantify the magnitude of R&D spillovers created by grants to small firms from the US Department of Energy. Our empirical strategy leverages variation due to state-specific matching policies, and we develop a new approach to measuring both geographic and technological spillovers that does not rely on an observable paper trail. Our estimates suggest that for every patent produced by grant recipients, three more are produced by others who benefit from spillovers. Sixty percent of these spillovers occur within the US, and many of them occur in technological areas substantially different from those targeted by the grants.

Presenter: Lauren Lanahan (University of Oregon)

Coauthors: Kyle Myers (Harvard Business School)

Discussant: Adrien Matray (Princeton University) and Sharon Belenzon (Duke University)

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Tania Babina (Columbia University)

Title: “Crisis Innovation”

We examine innovation following the Great Depression using data on a century’s worth of U.S. patents and a difference-in-differences design that exploits regional variation in the crisis severity. Harder-hit areas experienced large and persistent declines in independent patenting, mostly reflecting the disruption in access to finance during the crisis. This decline was larger for young and inexperienced inventors and lower-quality patents. In contrast, innovation by large firms increased, especially among young and inexperienced inventors. Overall, the Great Depression contributed to the decline in technological entrepreneurship and accelerated the shift of innovation into larger firms.

Presenter: Tania Babina (Columbia University)

Coauthors: Asaf Bernstein (University of Colorado at Boulder) and Filippo Mezzanotti (Kellogg School of Management)

Xavier Javarel (LSE)

Title: “Labor and Product Market Effects of Automation”

We use comprehensive micro data in the French manufacturing sector between 1994 and 2015 to document the effects of automation technologies on employment, wages, prices and profits. Causal effects are estimated with event studies and a shift-share IV design leveraging predetermined supply linkages and productivity shocks across foreign suppliers of industrial equipment. At all levels of analysis – plant, firm, and industry – the estimated impact of automation on employment is positive, even for unskilled industrial workers. We also find that automation leads to higher profits, lower consumer prices, and higher sales. The estimated elasticity of employment to automation is 0.28, compared with elasticities of 0.78 for profits, -0.05 for prices, and 0.37 for sales. Consistent with the importance of business-stealing across countries, the industry-level employment response to automation is positive and significant only in industries that face international competition. These estimates can be accounted for in a simple monopolistic competition model: firms that automate more increase their profits but pass through some of the productivity gains to consumers, inducing higher scale and higher employment. The results indicate that automation can increase labor demand and can generate productivity gains that are broadly shared across workers, consumers and firm owners. In a globalized world, attempts to curb domestic automation in order to protect domestic employment may be self-defeating due to foreign competition.

Presenter: Xavier Javarel (The London School of Economics and Political Science)

Coauthors: Philippe Aghion (College de France and London School of Economics and Political Science, Fellow; CEPR; NBER), Celine Antonin (Sciences Po), and Simon Bunel (Banque de France)

Discussant: Anders Humlum (University of Chicago) and Ajay Agrawal (University of Toronto)

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Luke Taylor (Wharton )

Title: “Do VCs Stifle Competition?”

How does common ownership affect innovation? We study this question using project-level data on pharmaceutical startups and their venture capital (VC) investors. We find that common ownership leads VCs to hold back projects, withhold funding, and redirect innovation at lagging startups. Effects are stronger where R&D costs are larger, consistent with common owners aiming to cut duplicate costs. Effects are also stronger where technological similarity is greater and preexisting competition is lower, consistent with common owners seeking market power for their surviving projects. Overall, common VC ownership appears to generate social benefits, via improved innovation efficiency, but also social costs.

Presenter: Luke Taylor (The Wharton School of the University of Pennsylvania)

Coauthors: Xuelin Li (University of South Carolina) and Tong Liu (Massachusetts Institute of Technology)

Discussant: Martin C. Schmalz (University of Oxford) and Jillian Grennan (Duke University)

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