ESSAYS IN INNOVATION AND ENTREPRENEURSHIP

Abstract

My dissertation focuses on the topics of innovation and entrepreneurship. In Chapter 1, I study how banks affect their borrowing firms’ green innovation when they reduce credit to firms with high carbon emissions. Using banks’ commitments to carbon neutrality as credit shocks to the borrowing firms, I first show that high-emission firms file fewer green patents following their relationship banks’ commitments to carbon neutrality. At the same time, other borrowing firms that receive increased lending from these committed banks see an increase in green patent filings. Second, I present evidence suggesting that financial constraints and inventor mobility are important mechanisms driving these effects. Third, I find that the value of newly filed green patents by firms in high-emission industries declines post-commitment, whereas there appears to be no discernible impact on the value of green patents filed by other firms. Finally, I develop a novel measure that gauges a patent’s relevance to mitigating climate change impact using text algorithms and show that banks’ commitments lead to lower relevance of green patents filed by high-emission firms. Altogether, the paper highlights an unintended consequence of bank divestment: a decrease in the production of high-quality green patents.Chapter 2 is joint work with Sven Oskarsson and Rafael Ahlskog. This chapter investigates the effects of parental income volatility on individuals’ entrepreneurial decisions in Sweden. Our results indicate that individuals who experience higher uninsurable parental income volatility during adolescence are more likely to become entrepreneurs. Specifically, a one-standard-deviation increase in parental income volatility is associated with an increase in the probability of becoming an entrepreneur by around 45% relative to the mean. Second, we find that firms started by individuals with higher parental income instability have a lower survival rate. Finally, we present evidence in line with higher risk tolerance being an important mechanism driving our findings. We do not find support for alternative mechanisms, including human capital accumulation and financial resources.