College of Behavioral & Social Sciences
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The collections in this community comprise faculty research works, as well as graduate theses and dissertations..
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Item Essays on Corporate Venture Capital, Firm Dynamics, and Aggregate Growth(2022) Liu, Yi; Haltiwanger, John; Stevens, Luminita; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation studies the impact of corporate venture capital (CVC) on firm dynamics, innovation, and aggregate economic growth. In Chapter 1, I examine whether and how CVC enables funded young firms to rapidly grow, relative to the effect of traditional venture capital (TVC). I formalize the hypothesis that CVC can improve young firm outcomes through demand and/or technology spillovers using a simple model of VC financing and young firm innovation. To test the hypothesis, I assemble a micro-level dataset that links each U.S. VC-funded firm to its funder(s) and subsequent patenting and exit outcomes. To address endogenous investment relationships and to separately identify the causal effects of CVC and TVC in the presence of CVC-TVC syndication, I employ a shift-share research design that predicts both forms of investment at the industry level using the interaction of the initial market shares of different funders and several instruments for funder-specific supply shifts. My estimates reveal that the effect of CVC is as large as the effect of TVC. Moreover, the effect of CVC is found to be stronger when the funded firm is upstream with respect to the CVC funder in the Input-Output matrix and downstream in the patent citation matrix, lending support to the hypothesized demand and technology channels of CVC. Chapter 2 investigates the effect of CVC on one form of strategic payoffs to funding firms: corporate innovation. I construct and analyze a micro-level dataset that links CVC investments to U.S. publicly traded firms and their patenting activities. I track the funding firms before and after starting CVC, in comparison to a group of control firms defined by firm size, age, industry, and prior growth. I find that CVC leads to an increase in patenting rate at the funding firms. Importantly, much of the effect is driven by smaller-sized funding firms, informing the potential relationship between CVC and internal innovation across the firm size distribution. Chapter 3 explores the implications of CVC for aggregate economic outcomes. I develop a growth model featuring CVC and endogenous firm innovation that is consistent with a set of facts on U.S. CVC, including (i) the selection of large and highly innovative firms into making CVC investment and (ii) positive treatment effects associated with CVC on both the funded and funding firms, measured by innovation outcomes. In equilibrium, firms engaged in CVC benefit from positive treatment that makes them innovate more, whereas other firms reduce innovation as they face more intense competition. These forces in turn affect firm selection and the incentives for new entrepreneurship. Quantitative analysis suggests that a higher level of CVC activity leads to an overall increase in aggregate growth, a fall in entry, and a fattening of the firm size distribution at both tails.Item Essays on Firm Growth, Firm Innovation, and International Trade(2020) Jo, Karam; Haltiwanger, John C; Saffie, Felipe; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation studies the effect of competition on firms' decisions for heterogeneous innovation, and its implication for the recent decline in business dynamism in the U.S. in the context of increasing competitive pressure by foreign firms due to globalization. In Chapter 1, I theoretically investigate the effect of competition on firm innovation by developing a discrete-time endogenous growth model where multi-product firms do two types of innovation subject to friction in technology spillovers. Firms improve their existing products through internal innovation while getting into product markets outside of firms' scope through external innovation. Novel friction I consider is that it takes time to learn others' technology during external innovation, which I denote as an imperfect technology spillover. In contrast to existing models, this friction allows incumbent firms to defend themselves from competitors by building technological barriers through internal innovation. I calibrate the model and run counterfactual exercises of increasing competition, where competition is from either outside of the economy, such as foreign exporters, or domestic firm entry. I find that regardless of the source of competition, domestic incumbent firms i) increase their internal innovation for products they have a technological advantage while decreasing it for products with no technological advantage, and ii) decrease their external innovation. This shift of innovation composition lowers firms' investment in overall innovation in the U.S., where firms are creative in the sense that they do a lot of external innovation. However, increasing competition increases firms' investment in overall innovation in an economy where firms do less external innovation. In an economy with high external innovation costs, firms put very little resource for external innovation even before increasing competition, which implies that there is little room for adjustment. Thus, although external innovation is decreased after an increase in competition, this small reduction is more than offset by increased internal innovation for defensive reasons. These findings highlight the importance of examining the composition of innovation as opposed to overall innovation, and sheds light on the reason for the differential effect of the same competition shock, such as Chinese import competition, on firms' overall innovation across different countries identified by recent studies. In Chapter 2, I empirically test the model predictions derived in Chapter 1, and by building on these findings, I argue that the decline in high-growth firm activity and startup rates in the U.S. is a result of multi-product firms' optimal innovation decisions in response to increasing competitive pressure by foreign firms due to globalization. The three predictions I derive using a simplified three-period version of my model are i) increasing competition makes innovative firms increase their investment in internal innovation for defensive reasons, ii) if innovation intensity is high in the economy, firms do less external innovation, and iii) increasing expected profit makes firms invest more in internal innovation. By using firm-level data from the U.S. Census Bureau integrated with firm-level patent data from the USPTO, I find regression results consistent with the model's predictions. Then, I extend the baseline closed economy model developed in Chapter 1 and build a two-country endogenous growth model to show that increasing competitive pressure by foreign firms contributes to the recent decline in high-growth firm activities and startup rates in the U.S. by inducing innovation-intensive and thus fast-growing firms to invest more in internal innovation for defensive reasons. And because innovative incumbents in each product market are now good at protecting their markets with heightened technological barriers, all types of firms find it difficult to enter others' markets through external innovation. Thus, the startup rate falls, and all firms reduce their investment in external innovation. This shift in innovation cuts the employment growth of innovation-intensive firms, as external innovation makes firms grow faster than internal innovation by requiring firms to hire a new set of workers to produce new products.Item ESSAYS IN ENERGY, ENVIRONMENT AND TECHNOLOGICAL CHANGE(2016) Zhou, Yichen; Cropper, Maureen L; Sweeting, Andrew T; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation studies technological change in the context of energy and environmental economics. Technology plays a key role in reducing greenhouse gas emissions from the transportation sector. Chapter 1 estimates a structural model of the car industry that allows for endogenous product characteristics to investigate how gasoline taxes, R&D subsidies and competition affect fuel efficiency and vehicle prices in the medium-run, both through car-makers' decisions to adopt technologies and through their investments in knowledge capital. I use technology adoption and automotive patents data for 1986-2006 to estimate this model. I show that 92% of fuel efficiency improvements between 1986 and 2006 were driven by technology adoption, while the role of knowledge capital is largely to reduce the marginal production costs of fuel-efficient cars. A counterfactual predicts that an additional $1/gallon gasoline tax in 2006 would have increased the technology adoption rate, and raised average fuel efficiency by 0.47 miles/gallon, twice the annual fuel efficiency improvement in 2003-2006. An R&D subsidy that would reduce the marginal cost of knowledge capital by 25% in 2006 would have raised investment in knowledge capital. This subsidy would have raised fuel efficiency only by 0.06 miles/gallon in 2006, but would have increased variable profits by $2.3 billion over all firms that year. Passenger vehicle fuel economy standards in the United States will require substantial improvements in new vehicle fuel economy over the next decade. Economic theory suggests that vehicle manufacturers adopt greater fuel-saving technologies for vehicles with larger market size. Chapter 2 documents a strong connection between market size, measured by sales, and technology adoption. Using variation consumer demographics and purchasing pattern to account for the endogeneity of market size, we find that a 10 percent increase in market size raises vehicle fuel efficiency by 0.3 percent, as compared to a mean improvement of 1.4 percent per year over 1997-2013. Historically, fuel price and demographic-driven market size changes have had large effects on technology adoption. Furthermore, fuel taxes would induce firms to adopt fuel-saving technologies on their most efficient cars, thereby polarizing the fuel efficiency distribution of the new vehicle fleet.Item Innovation as Group Process: Hierarchy, Status, and the Dilemma of Participative Leadership(2010) Huey, Wesley Scott; Lucas, Jeffrey W.; Sociology; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Organizations that are characterized by vertical authority structures, where decisions are made and implemented through a clear chain-of-command, are commonly seen as less responsive, less innovative, and less dynamic than organizations that have authority distributed more horizontally. This study takes aim at this presumption by miniaturizing authority structures to the level of the group, where group process theory can be marshaled to predict, measure, and assess outcomes for group innovation in an experimental setting. Using status theory, I propose that hierarchical groups will be more rather than less innovative than egalitarian groups. I conduct an experimental test by manipulating hierarchy in groups instructed to complete a common task, with outcomes mapped to innovative performance. Findings show that hierarchical groups are actually no more, and no less, innovative than egalitarian groups. Irrespective of authority structure, innovation appears to be most likely in groups in which a clear leader emerges who makes others in the group feel like her equal during group interaction. Other findings are presented to explain the apparent no-effect of authority structure on innovation. I will show that status processes advantage each type of group differently with respect to innovation. Hierarchical groups are advantaged by the presence of a clear leader; egalitarian groups are advantaged by the participative interaction that comes naturally to status peers. But the two conditions must occur together to maximize the likelihood for innovation, and this poses a problem for groups who seek to innovate, because status dynamics that promote one of the conditions undercut the status dynamics that promote the other. In egalitarian groups, when authority seekers try to take charge and lead, participative interaction is endangered because members resent the status move. In hierarchical groups, when higher ranking members act participatively, group leadership is contested because others feel empowered to take charge. Each group type therefore faces a dilemma of participative leadership, and because the dilemma is reversed across group types, the net effect of authority structure on innovation is no apparent effect. Implications of the findings for theory and practice are discussed.Item Biomedical Innovation and the Politics of Scientific Knowledge: A case study of Gardasil(2008) Clark, Aleia Yvonne; Mamo, Laura; Sociology; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Vaccine development represents a special case where historically, public health priorities are central. Trends of privatization have increased the role played by pharmaceutical and biotech companies in developing new biomedical technologies. As the innovative science behind new medical technologies moves into pharmaceutical laboratories and biotech companies, the "logics of action" that pattern knowledge production shift. This project explores how different logics of action based on commercial investment and public good shaped the development of Gardasil, a new vaccine to prevent cervical cancer. The study found that both the logics of public good and commercial profit significantly shaped the final product. The study also found that variations in the definition of public good allowed for the settlement of tensions between good and profit. The findings have implications for the future of vaccine development, as well as for the analysis of biomedical innovation in our contemporary political economy.Item Location Choice, Product Choice, and the Human Resource Practices of Firms(2007-05-10) Freedman, Matthew L.; Haltiwanger, John C; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This thesis is comprised of three chapters. The first investigates the implications of industrial clustering for labor mobility and earnings dynamics. Motivated by a theoretical model in which geographically clustered firms compete for workers, I exploit establishment-level variation in agglomeration to explore the impact of clustering in the software publishing industry on labor market outcomes. The results show that clustering makes it easier for workers to job hop among establishments within the sector. Further, workers in clusters have relatively steep earnings-tenure profiles, accepting lower wages early in their careers in exchange for stronger earnings growth and higher wages later. These findings underscore the importance of geography in understanding labor market dynamics within industries. While the first chapter reveals striking relationships between the human resource practices and location decisions of high-technology establishments, the second chapter (joint with F. Andersson, J. Haltiwanger, J. Lane, and K. Shaw) draws key connections between the hiring and compensation policies of innovative firms and the nature of their product markets. We show that software firms that operate in product markets with highly skewed returns to innovation pay a premium to attract talented workers. Yet these same firms also reward loyalty; that is, highly skilled workers faithful to their employers enjoy higher earnings in firms with a greater variance in potential payoffs from innovation. These results not only contribute to our knowledge of firm human resource practices and product market strategies, but also shed light on patterns of income inequality within and between industries. Building on this final idea, the last chapter (joint with F. Andersson, E. Davis, J. Lane, B. McCall, and L. Sandusky) examines the contribution of worker and firm reallocation to within-industry changes in earnings inequality. We find that the entry and exit of firms and the sorting of workers and firms based on worker skills are key determinants of changes in industry earnings distributions over time. However, the importance of these and other factors in driving observed dynamics in earnings inequality varies across sectors, with aggregate shifts often disguising fundamental differences in the underlying forces effecting change.