Abstract: This paper investigates how start-up innovation choices are affected by incumbent firm interactions. In particular, incumbent firms have an impact on start-up exit strategies as they can affect their expectations of getting acquired, of success, or of going bankrupt. Using the asymmetric effect of the 2008 financial crisis on firm access to financing between new entrants and incumbents, I infer a likelihood of getting bought out for entrants. I then estimate how an increase in the expectation of getting acquired affects a new firm's innovation choices with respect to the existing firms. I construct a novel measure of innovation proximity and show that new firms innovate “closer” to their potential acquirers.
Abstract: Firm R&D decisions are likely to have lasting consequences. Here I will document patterns of firm technological position over its life cycle. Using patent data, I build a measure to compare the similarity between an innovative firm's technological contents over time with its technological position when it enters. I find that new entrants are likely to continue patenting in areas similar to their initial invention for multiple years – they exhibit inertia. I then describe how the degree of inertia is affected by initial conditions. I also explore the firm size distribution and technological sector concentration and discuss how the innovation strategies may be different depending on the firm size and degree of concentration in the sector.
Abstract: Does regulatory leadership lead to more innovation? Here we study this question through the case of vehicle emission regulations. There have been multiple rounds of increasingly stringent vehicle emission regulations that require firms to innovate in order to continue selling in those markets. Through the use of patent data, we identify the related technologies and firms and measure the quality of the innovation. We then use the staggered implementation of different levels of regulation to determine leader and laggard countries. The findings show that there are decreasing returns to late regulation implementation. Additionally, we provide evidence that firms with home countries that are regulatory leaders increase their innovation globally significantly.
Abstract: Competition has traditionally functioned through prices. I suggest that e-commerce however has changed this mechanism. Firms capture more demand by being higher ranked in search algorithms. Since search algorithms are kept as trade secrets and subject to change at any time, this puts a high degree of uncertainty into the competition mechanism. Furthermore, price is only one of many inputs into the algorithm. Since another major input into the search algorithm is the search term. I suggest that this pushes new firms to develop products in more niche areas to differentiate themselves through the search term.