Robert H. Smith School of Business
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Item THE ROLE OF SCIENTISTS AND ENGINEERS IN INVENTIONS AND THEIR ALLOCATION: EVIDENCE FROM JAPAN’S INDUSTRIALIZATION(2024) Yamaguchi, Shotaro; Braguinsky, Serguey; Agarwal, Rajshree; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)My dissertation seeks to address the role of university-educated scientists and engineers (S&Es) during industrialization, with a particular focus on the sorting of S&Es into invention activities and their allocation process both within and across firms. To achieve this, I delve deeply into the historical context of Japan's industrialization from the late 19th to the early 20th century, a period marked by the simultaneous emergence of multiple heavy manufacturing industries, a higher education system in science and engineering, and the rise of extensively diversified conglomerates known as zaibatsu. Using a manually constructed individual career database encompassing nearly all Japanese university graduates in science and engineering from the cohorts of 1877 to 1920 as an empirical basis, I conduct three independent yet interconnected studies in this dissertation. In Chapter 1, I investigate the factors influencing the sorting of university-educated scientists and engineers (S&Es) into inventors by matching them with archival patent records. I find a strong positive correlation between academic excellence and the likelihood of becoming an inventor as well as invention productivity. These highly skilled individuals significantly contributed to inventions in fields associated with emerging heavy manufacturing industries. I also underscore a strong complementarity between their academic skills and post-graduation job experience, which synergistically facilitated the generation of inventions. In Chapter 2, I delve deeply into the (re-)allocation process of educated plant managers and engineers across establishments within a leading cotton-spinning firm, in conjunction with investment in physical capital. Through detailed analysis of plant-level data on human capital appointments, transfers, and capital investments, I illuminate the endogenous process of internal human capital (re-)allocations in alignment with evolving strategic priorities. Notably, the shift from cost leadership to product differentiation, driven by high-end spinning machines, engendered a three-way complementarity between managerial human capital, engineering human capital, and advanced technologies. In Chapter 3, I examine how S&E university graduates are allocated both externally (moves across different independent firms) and internally (moves across affiliated firms within diversified firms or conglomerates) and their implication for innovation. I demonstrate that internal mobility enhances individual invention performance, whereas external mobility diminishes it. However, these performance differences are primarily attributed to the selection of different quality of human capital. Additional analysis suggests that high-quality human capital tends to enter growing industries through internal mobility and be often placed in managerial positions that grant them to access complementary resources. Overall, my dissertation studies contribute to the literature on strategic human capital, corporate strategy, and economic emergence. I assert that the insights derived from the unique historical context of Japan’s industrialization can not only be applied to current emerging economies but also to new industries in developed countries wherein the supply of specialized talent is scarce and mega firms play a pivotal role in driving innovation.Item ESSAYS ON INNOVATION, HUMAN CAPITAL, AND SMALL BUSINESSES(2023) Xue, Jing; Maksimovic, Vojislav; Yang, Liu; Business and Management: Finance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation comprises three essays that explore how human and social capital influence innovation and promote firm dynamism, particularly for small businesses. It studies how firms' uptake of projects is shaped by the local environments, such as superstar firms, talent clusters, and local social capital. In the first essay, I study the labor channel underlying the agglomeration of innovation activity. It identifies the reallocation of human capital as a key channel of agglomeration spillovers for innovative firms. To measure agglomeration spillovers, I study how R&D labs in different local labor markets respond differently to scientific breakthroughs, which create large and unexpected shocks to innovation productivity in certain technology categories. I document four main findings. i), following scientific breakthroughs, affected labs in thicker local labor markets (i.e., commuting zones with more inventors innovating in a certain field) produce more patents and higher-quality patents, consistent with positive agglomeration spillovers. ii), the increase in patenting is mostly attributed to new hires rather than incumbent inventors. iii), the thick labor market effect is concentrated in states and industries where there is lower enforceability of non-compete agreements and labor is more mobile. iv), using textual analysis to identify lab-level exposure to scientific breakthroughs, I find that inventors are reallocated to labs that are more favorably affected by shocks, which helps labs in thicker labor markets to more easily bring in inventors working in the same niche fields and having a diverse knowledge base. Taken together, these results point to labor mobility as a key force in explaining why innovative firms cluster and suggest that the clustering of firms in thick labor markets can foster corporate innovation by facilitating the productivity-enhancing reallocation of human capital following scientific breakthroughs. In the second essay, I identify the entry effects of top innovative firms on incumbent innovation. I exploit the inter-temporal variation in patenting activities of local inventors in chosen commuting zones that attracted the firm headquarters and in runner-up commuting zones that were finalists of location choice. Treated and control groups have similar trends prior to the entry, while the local inventors in the chosen zones apply 6.7% more patents, gain 16.8% more top patents, and receive 11.6% more citations. Entry effects are stronger among local inventors who are technologically or socially closer to the entering firm, after controlling for innovation incentives and labor mobility. Social closeness, isolated from technological proximity, consistently explains the innovation gains, which suggests knowledge diffusion is the important channel for local innovation productivity spillovers. In the third essay, we investigate why small businesses exploit business opportunities better in some areas than others. In a sample of 1.2 million consumer-facing establishments, social capital predicts the uptake of risk-free loans controlling for close-by bank branches, income, and education. One standard deviation increase in the social capital metric accounts for 20 percent of the variation in uptake across zip codes, surpassing the impact of a bank branch within 1000 yards. Strong social capital benefits large, low-growth stores in less-dynamic areas, whereas bank branches benefit small, high-growth stores in more-dynamic areas. Virtual connections have the greatest effect on uptake in already advantaged locations.Item Essays on Entrepreneurship: The Role of Complexity of Innovation and Efficient Hierarchies(2023) Ding, Yuheng; Braguinsky, Serguey; Agarwal, Rajshree; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Entrepreneurial activities have been on the decline across a broad range of sectors in the U.S. during the past few decades. This decline (sometimes also called “declining business dynamism”) is reflected in the decreasing rate of new firm entry, the share of young firms (usually defined as those five years of age or less) in the total number of firms and/or the share of employment at young firms in total employment, and so on (e.g., Decker et al. 2014; Akcigit and Ates, 2021). All of the above have exhibited a secular decline, not just in the U.S. but in other advanced economies as well. The underlying causes of these trends, however, are not yet clear with a broad array of explanations suggested in the literature (Akcigit and Ates, 2019; 2021; Decker et al., 2016; Hopenhayn et al., 2018; Karahan et al., 2019; Andrews et al., 2016). There also appears to be a lot of heterogeneity in how strongly the decline in entrepreneurial activities (business dynamism) is pronounced in various industries and sectors of the economy. In particular, the evidence in Haltiwanger et al. (2014) suggests that high-tech industries could be affected more than other sectors of the economy. High-tech sectors have been the driving force of growth in recent decades, so uncovering the reasons for declining business dynamism in those sectors is a task of first-order importance. In the first chapter, I employ the restricted-use data on the science and engineering workforce in the U.S. to investigate whether the increasing burden of knowledge is a growing concern for science-based entrepreneurship. Results show that since 1997, the rate of startup formation has precipitously declined for firms operated by U.S. Ph.D. recipients in science and engineering. The decline in startup formation is accompanied by an earnings decline, increasing work complexity in R&D, and more administrative work for science-based founders. With limited access to efficient knowledge hierarchies, founders of science-based startups must shoulder the burden of knowledge by doing more tasks by themselves. Workers at established firms, on the other hand, could better mitigate the burden of knowledge by narrowing the span of control and increasing the depth of hierarchy. Moreover, less experienced founders were hit harder than more experienced founders as the increasing burden of knowledge led to increasing returns to labor experience. While in the first chapter I use individual-level work data, in the second chapter I utilize firm-level data from the U.S. Census Bureau to develop the analysis further. I adopt the abductive approach and leverage matched employee-employer Census data between 2000-2014 to investigate how a growing burden of knowledge (measured as knowledge interdependence) in the most innovative firms affects potential entrepreneurs’ decisions to start their own business ventures. I show that higher knowledge interdependence in incumbent firms is negatively associated with employee entrepreneurship, and the negative effect is pronounced even stronger among the highest-performing employees. Moreover, higher knowledge interdependence has a positive selection effect on the quality of “spinouts”, and this effect is significantly stronger if the startup is formed by individuals ranked highest in the human capital distribution. These results suggest that knowledge interdependence does not merely raise the barrier for entry into entrepreneurship by imposing higher costs of knowledge transfer. It also changes the functioning of the internal labor market inside the firms. In the third chapter, I further investigate the mechanism underlying the relationship between knowledge interdependence and employee entrepreneurship. I propose a formal theoretical framework that reconciles all empirical findings. The theory suggests firms that rely on higher knowledge interdependence should share “rent” with their employees by paying wage premia if the profit from higher knowledge interdependence is high enough. As a result, within-firm earning dispersion would always be larger in firms relying on higher knowledge interdependence. I find supporting evidence in the data for this alternative explanation. Overall, these findings have important implications for declining entrepreneurial activity, rising income inequality, and technological change in the U.S. economy. While the conventional wisdom might view the declining entrepreneurial activity in the U.S. as the demise of economic growth, it is possible that as innovation becomes more complex, large established firms start to substitute the role of start-ups in pushing forward the technological frontier and driving economic growth as the efficient knowledge hierarchy could better deal with complex knowledge needed in the production process (Garicano, 2000; Garicano and Rossi-Hansberg, 2004). If this is the case, the declining business dynamism might just be a reflection of technological change and efficient (re)allocation of resources but not necessarily detrimental to technological advancement and economic growth. Whether this is true remains an avenue for future research.Item Innovation Strategies for Digital Assets & Wealth Management(2021-12) Shorter, Charles; Taylor, James; Jones, Jessica; Sanford, Kevin; Kobloth, Nicholas; Dastidar, ProtitiThe University of Maryland ALP team serves as an independent research body to the Wealth ecosystem to explore Innovation Strategies for Digital Assets & Wealth Management. During the consult the team conducted a comprehensive case study to identify key data points for solution development which would support the incorporation of Cryptocurrencies into ‘traditional' financial advisory segments. The research is built in conjunction with industry leader Envestnet which specializes in the B2B FinTech, Wealth & Financial Advisory segments for independent advisors and high net worth individuals. The authors presents the essentials of the Wealth Management industry from the perspective of Registered Independent Advisor (RIA) firms that provide financial advice and planning for clients.Item Enemies at the Gate? Essays on New Entry Threats in the U.S. Information Technology Industry(2017) Pan, Yang; Gopal, Anandasivam; Business and Management: Decision & Information Technologies; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)The Information Technology industry is characterized by constant technological changes, fast clock speed, and hypercompetitive markets. A significant part of this fast-moving dynamic is fed by the high rate of new entry in the form of entrepreneurial ventures. In recent decade, digital platforms accelerate these threats from startups by providing financial and marketing resources. While these developments have led to a significant increase in new entry threats faced by incumbent firms, there is little empirical research that has addressed the consequences of these threats on incumbents. This dissertation aims to fill this gap in the literature. In the first essay, I develop and validate an innovative measure of new entry threat. Then, I show that in the presence of new entry threat, firms tend to reduce their investments in innovation systematically. Further, firms that have a diversified product or technology portfolio, operate in industries with strong network effects, or face high levels of technological cumulativeness invest relatively more in R&D when facing greater new entry threats. The second essay focuses on the impact of new entry threat on the operational performance of firms in the IT industry, and studies how features of the incumbents’ board may help moderate the effects of new entry threat. I provide strong empirical evidence for the theoretical predication of the negative relationship between new entry threats and firm performance. I also show that facing high NET, firms with more independent directors are better able to withstand these threats. In the third essay, I examine the influence of new entry threats on the incumbent’s information disclosure in the IT industry. I find evidence consistent with theoretical prediction that high new entry threats faced by the firm indeed leads to a decrease in the incumbent’s information disclosure. Interestingly, I also find the effect is less pronounced in highly concentrated sub-industries, where actual entry barriers are higher, and more pronounced in the software and services sectors, where proprietary information is more vulnerable. Overall, the three essays contribute to the literature by first creating and validating a measure of new entry threats and linking this measure to specific firm-related strategic decisions within the IT industry.Item Interorganizational Innovation: The Role of Suppliers in Enhancing Buyer Innovation(2016) Elking, Isaac; Grimm, Curtis M; Business and Management: Logistics, Business & Public Policy; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation explores the effect of innovative knowledge transfer across supply chain partners. My research seeks to understand the manner by which a firm is able to benefit from the innovative capabilities of its supply chain partners and utilize the external knowledge they hold to increase its own levels of innovation. Specifically, I make use of patent data as a proxy for firm-level innovation and develop both independent and dependent variables from the data contained within the patent filings. I further examine the means by which key dyadic and portfolio supply chain relationship characteristics moderate the relationship between supplier innovation and buyer innovation. I investigate factors such as the degree of transactional reciprocity between the buyer and supplier, the similarity of the firms’ knowledge bases, and specific chain characteristics (e.g., geographic propinquity) to provide greater understanding of the means by which the transfer of innovative knowledge across firms in a supply chain can be enhanced or inhibited. This dissertation spans three essays to provide insights into the role that supply chain relationships play in affecting a focal firm’s level of innovation. While innovation has been at the core of a wide body of research, very little empirical work exists that considers the role of vertical buyer-supplier relationships on a firm’s ability to develop new and novel innovations. I begin by considering the fundamental unit of analysis within a supply chain, the buyer-supplier dyad. After developing initial insights based on the interactions between singular buyers and suppliers, essay two extends the analysis to consider the full spectrum of a buyer’s supply base by aggregating the individual buyer-supplier dyad level data into firm-supply network level data. Through this broader level of analysis, I am able to examine how the relational characteristics between a buyer firm and its supply base affect its ability to leverage the full portfolio of its suppliers’ innovative knowledge. Finally, in essay three I further extend the analysis to explore the means by which a buyer firm can use its suppliers to enhance its ability to access distant knowledge held by other organizations that the buyer is only connected to indirectly through its suppliers.Item The Transformational Role of IT in Entrepreneurship: Crowdfunding and the Democratization of Access to Capital and Investment Opportunity(2014) Kim, Keongtae; Hann, Il-Horn; Viswanathan, Siva; Business and Management: Decision & Information Technologies; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)My dissertation examines the strategic impacts of IT-enabled platforms on entrepreneurial and innovation activities. Specifically, I explore the behaviors of both investors and entrepreneurs in online crowdfunding markets that have the potential to democratize access to capital and investment opportunities. In my first essay, I examine the role of experts in a crowdfunding market. While conventional wisdom considers a crowdfunding market as a mechanism to democratize decision making and reduce reliance on experts, I find that experts still play a pivotal role in these markets. In particular, I find that the early investments by experts serve as credible signals of quality for the crowd, and have a significant impact on the crowd's investment decisions. In my second essay, I analyze whether crowdfunding democratizes access to capital for entrepreneurs. I find that difficult access to credit from traditional sources induces entrepreneurs to rely more on crowdfunding as a viable alternative, while this effect varies across project types and across areas. In each essay, I analyze micro-level data from online crowdfunding markets with a variety of econometric methods. The results have important theoretical and practical implications for questions ranging from the design of online crowdfunding markets to competition between online and offline channels for funding and regional dynamics of crowdfunding.Item THE EFFECTS OF INFOMEDIARIES, NONMARKET STRATEGIES AND CORPORATE POLITICAL ACTION ON INNOVATION ADOPTION(2012) Benjamin, Scott; Reger, Rhonda K; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Strategic management research has recently become interested in the role of strategies that effect social stakeholders, such as the media, and how they affect the adoption of technological innovation. This dissertation consists of two essays that investigate how these stakeholders affect technological innovation adoption and how firms can increase the likelihood of having their products adopted by influencing these stakeholders. The first essay takes a fine-grained approach at investigating how the content of media coverage influences the adoption of wind projects in the United States wind energy industry. By focusing on certain characteristics of media coverage, I develop a theoretical framework that examines how coverage facilitates perception formation of an innovation in the market. Using content analysis, I examine certain characteristics of media coverage including media attention, positivity of tenor, issue diversity, economic & aesthetic issues and complexity of messaging, and hypothesize about the impact these characteristics have on how quickly stakeholders coalesce around a unified vision of a new technology. The second essay builds on the first essay by exploring how firms employ strategies in both social and political markets in an attempt to influence different segments of the general environment. I argue theoretically that general environmental segments, such as sociocultural and political markets, that were typically thought of as exogenous to the firm may be impacted by the firm. By introducing media specific concepts from the organizational literature and political strategies from the public policy domain to strategic management, this study investigates how firms can achieve more rapid technological innovation adoption by strategically using 1) social exchange mechanisms with the media for the facilitation of perception formation in the market and 2) corporate political activity to influence policy makers for the creation of beneficial legislation. I study both of these phenomena using a comprehensive sample of U.S. based wind projects that have either been proposed or are commercially operational between 2000 and 2009. The findings from both of these essays advance strategic management research by connecting themes from organizational research, mass communications and public policy research to help explain perception formation and technological innovation adoption in the market.