Browsing by Subject "Entrepreneurship"

This dissertation considers how families affect economic decisions across two different settings. In Chapters 2 and 3, I use data from Indonesia to understand the role that flexibility plays in job choice for women and how it interacts with children. These chapters take different approaches to the same broad set of questions. In Chapter 2 I ask whether the cost of temporal flexibility varies between wage employment and self-employment, especially for mothers. I find all women are willing to give up a portion of their wage rate to work fewer hours and have more flexible hours. However, the cost to women of fewer hours and more flexible hours varies by whether a woman is self-employed or wage employed and whether she has children. All self-employed women and wage-working mothers are willing to give up more than 10% of their wages for a 10% increase in flexibility but the trade-off is steeper for mothers in wage employment than in self-employment. In Chapter 3, I use qualitative in-depth interviews to better understand the nuances that go into work decisions for both women and men and how these choices affect and are affected by their children. This study echoes the first in that women often discussed the importance of flexibility in their work arrangements, in particular to their choices in self-employment. These findings have implications for policies and programs designed to foster entrepreneurship in developing countries. Chapter 4 asks questions about how parents provide for children- albeit in a very different context. Using panel data from the United States, the paper examines the influence of parental wealth and income on children's college attendance and parental financing decisions, graduation, and quality of college attended, and whether parental financing affects the subsequent indebtedness of parents and children. Higher levels of parents' wealth and income increase the likelihood that children attend college with financial support relative to not attending college, and that parental wealth increases the likelihood that children graduate from college. We show descriptive evidence that parental support for college increases the subsequent level of housing debt that parents hold but does not reduce student debt for children.

This dissertation explores the causes and consequences of real estate price fluctuations. Given the collapse of US house prices during 2007-2009 along with the simultaneous rise in national unemployment an thorough understanding of both the housing market and its relation to the labor market has perhaps never been more important. While this dissertation fits in the real estate finance literature, my broader purpose is to use to new micro-level data to empirically test the relevance of financial and macroeconomic theories. Chapter 2 offers evidence that small firms borrow against real estate holdings to pay employment and this collateral channel is responsible for 8-16% of the total decline in employment between 2007-2009. Chapter 3 develops the locally-weighted repeat sales technique, a new econometric estimation to price any real estate property by comparing the house to all properties on the market. We then apply the method to the US Housing Market and find that traditional aggregate house indices such as Case-Shiller have overestimated the bubble by 10%.. Chapter 4 uses new data on small firm financials to exhibit that home equity is a significant source of initial financing for large startups: specifically, in our preferred specification we find that a 100% increase in real estate price growth is responsible for an 11% increase in home equity financing among all entrepreneurs and a 21% increase for large start-ups.

This dissertation explores the relationship between external shocks local labor markets and entrepreneurship. The first and main essay investigates the effects of a large firm's geographical expansion (anchor firm) on local worker transitions into startup employment through wage effects in industries economically proximate to the anchor firm. Using hand collected data on large firms' site searches matched to administrative Census microdata, I exploit lists of anchor firms' site selection process to employ a difference-in-differences approach to compare workers and employers in winning counties to those in counterfactual counties. Counties are balanced along a number of socio-economic characteristics as well as ex ante industry distribution, firm size distribution, and firm age distribution. The arrival of an anchor firm induces entrepreneurship in industries linked through input-output channels by a magnitude of 120 new establishments that account for over 2,300 jobs. Relative to young firms in counterfactual counties, these new firms grow 12% faster in five-year employment growth and have a 7% lower failure probability. These effects are strongest in the most specialized and knowledge-intensive industries. Attracting an anchor firm to account appears to have limited spillover effects in employment that are mainly driven by reorganization of incumbent firms in input-output industries with occupational similarity of the anchor firm that face rising labor costs.

The second essay provides a blueprint for understanding the dynamics surrounding mass layoffs and business closures. This essay creates a novel data set linking geocoded Business Registration data to public layoff notifications data. This data can be used to understand how local entrepreneurship can reduce unemployment spells and earnings penalties for low wage displaced workers. Workers eventually employed by startups experience faster post-displacement wage growth than those eventually employed by mature firms. In final essay, I provide motivation for research investigating the spatially heterogeneous effects the advancement of certain industries inhibit entrepreneurship in others. I decompose a Bartik employment measure of demand for a region's labor. The decomposition shows that the recovery from the Great Recession was led by capital-intensive industries (e.g., transportation manufacturing and machinery manufacturing) that are typically inversely associated with local entrepreneurship. Interestingly, the inverse association of these industries and entrepreneurship appears to spillover into other industries. These industries include transportation equipment manufacturing and machinery manufacturing. This set of observations motivates this dissertation's research agenda to understand the cross-industry relationships that drive an area's level of entrepreneurship and labor market dynamism.

This dissertation studies three questions in which economic behavior at the firm level plays an important role. Chapter 2 studies how individual owner-managers shape firm conduct in the labor market. I use survey and administrative microdata from the U.S. Census to link firm and worker outcomes to the past local unemployment rate exposure (URE) of owner-managers. Using a difference in differences approach centered on changes in firm ownership, I find that firms acquired by high URE owner-managers increase worker earnings on average while displaying no differential trends in firm employment. These results also hold in worker-level analysis, which reveals that firm-level differences are driven in part by immediate pay increases for older and more educated workers, resulting in greater retention among these cohorts. These results are further validated among firms that do not experience ownership changes. Using an instrumental variables design, I find that URE is associated with greater rent-sharing at the firm level. Together, these results demonstrate that owner-managers have substantial scope to determine pay and hiring policy at their firms.

Chapter 3, coauthored with Mark Curtis, Daniel Garrett, Eric Ohrn, and Juan Carlos Suarez Serrato, studies plant-level responses to a large federal tax incentive, known as bonus depreciation, that lowered the cost of capital investment. Difference-in-differences estimates using confidential Census Data on manufacturing establishments show that tax policies increased both investment and employment, but did not stimulate wage or productivity growth. Using a structural model, we find that the primary effect of the policy was to increase the use of all inputs by lowering costs of production and that capital and production workers are complementary inputs in modern manufacturing. Our results show that tax policies that incentivize capital investment do not lead manufacturing plants to replace workers with machines.

The fourth chapter assesses how state and local taxes influence firm entry decisions in the video gambling industry in Illinois, which comprises almost 7,000 establishments each operating up to five slot machine-like gambling terminals. Using variation in local gambling ordinances and an event-study framework, I estimate that gambling legalization leads on average to a 3.0% increase in local tax revenue and a noisy 1.6% increase in local spending. I then develop and estimate an equilibrium model of entry and exit to explore the effects of counterfactual tax increases. Simulations reveal that uniform increases in the marginal tax rate increase tax revenue while reducing the extent to which gambling establishments select into low-income neighborhoods. Taken together, these results suggest that taxation can effectively offset the regressivity of gambling activity if revenue is effectively targeted to local governments.

The commercialization of scientific discoveries into innovation has traditionally been the purview of large corporations operating central R&D laboratories through much of the past century. The past four decades have seen this model being gradually supplanted by a more decentralized system of universities and VC-backed startups that have displaced large corporations as the conductors of scientific research. This dissertation tries to understand how firms create and exploit scientific knowledge in this changing structure of American innovation. The first study examines how scientific knowledge can expand markets for technology and thereby encourage the entry of new science-based firms into invention. The argument is tested in the context of the U.S. patent market and finds that patents citing scientific articles tend to be traded more often, even after controlling for various proxies of patent quality. The second study explores why some American firms started investing in scientific research in the early twentieth century. The chapter relies on a newly assembled panel dataset of innovating firms consisting of their investments in science, patenting, financials and ownership between 1926 and 1940. The empirical patterns reveal that the beginnings of corporate research in America were driven by companies at the technological frontier attempting to take advantage of opportunities for innovation made possible by scientific advances. This investment was especially pronounced for firms based in scientific fields that were underdeveloped in the United States. The final study asks why startups are more likely to bring scientific advances to market. The existing literature has explained the higher innovative propensity of some startups by their superior scientific capabilities. However, it is also possible that the apparent innovativeness of startups may be a result of firm choice, rather than inherent capability gaps with respect to incumbents. Startups may choose novel products that are riskier but offer higher payoffs because they pay a higher entry cost in the form of investments in new factories, sales and distribution channels. I test this entry cost mechanism in the context of the American laser industry which responded to an exogenous influx of Soviet laser science following the end of the Cold War.

This dissertation investigates three aspects of technological change. In the first essay, I build on prior research that suggests new ventures are often more innovative than established firms. One unexplored reason for this might be that new ventures work on different problems to begin with. I test this idea in the U.S. medical device industry and find evidence that established firms tend to select problems to which they can apply prior investments in complementary capabilities, leaving new ventures to undertake invention in less crowded areas. In the next chapter, I explore how artificial intelligence (AI) is being applied to medical devices, and which occupations are most affected. My analysis supports the notion that AI is different from prior digital technologies in its ability to perform non-routine tasks, but that concerns over its affect on high-skill labor might be misplaced. This provides some of the first systematic evidence of how AI is actually diffusing. Together, these two essays provide new insight into the direction of inventive activity in the medical device industry. Last, I look inside a firm to study how organizational factors influence communication patterns in an innovative financial services firm. This study complements the prior two by seeking to unpack the "black box" of a firm's innovation activities.

This dissertation is comprised of three studies that investigate the implications and determinants of public funding for universities.

The first chapter lays down the foundation for the other two studies. I discuss how state-level policies, as determined by legislators, represent a pivotal component of firms' non-market strategies that have direct implications for the viability of their innovative and entrepreneurial activities. I expand this discussion to identify gaps in extant studies surrounding state-level policies and state legislators.

The second study focuses on the state funding for 420 public universities to estimate the precise return on state investments in higher education as measured by two economic outcomes -- the generation of university patents and formation of business establishments in a given university's local economy from 2002 through 2014. Using an instrumental variable estimation strategy, I predict and find a positive, causal association between state funding and the number of patents granted to public universities. I also observe a similar causal relationship between state funding and the entry of new business establishments near a given campus. This becomes pronounced for small firms in the manufacturing, retail, and service sectors, and even more for small firms in high-technology industries that are known to rely heavily on universities as a source of external inventions - pharmaceutical, medical equipment, and semiconductor.

The third study explores a new determinant of state funding for 420 public universities by leveraging novel, hand-collected data on the educational experiences of state legislators - specifically if and where they received postsecondary education. I predict and find a statistically significant, positive association between the share of legislators who attended their states' public institutions and state funding for their entire public higher-education system. A similar positive relationship is also observed between the share of state legislators who attended particular campuses of the state's public university system and funding for those campuses. This relationship is more pronounced among publicly educated legislators who represent legislative districts close to their alma mater's district, and becomes most consequential when the legislator's district contains his or her alma mater.

This work analyzes the impact of regulation policies in two distinct settings.

Chapter 1 provides an overview of the existing theoretical literature on innovation and entrepreneurship. It summarizes some of the main findings of the effect of various means of protecting intellectual property on the innovation incentives and the level of entrepreneurship activity. A general observation is that much of the existing work compares the extremes of no protection and perfect protection and the resulting prediction is that perfect protection leads to higher innovation incentives. This is puzzling in light of the empirical evidence that shows the opposite trend. Chapter 2 explicitly takes into account the fact that patent protection is imperfect and likely to lie in between the two extremes. In addition, in more than 70% of infringement cases in the U.S., infringement damages are calculated according to the so-called reasonable royalties rule that essentially awards a portion of the imitator's realized revenues to the innovator. I show that incorporating these two facts result in a non-monotonic relationship between the patent strength and R&D investment if one moves from zero protection to perfect protection in a continuous way. The intuition is that when protection is less than perfect, though not zero, equilibrium may involve both imitation and damages. Viewing damages as an alternative source of profits, the innovator may be less aggressive in pursuing R&D as patents become stronger. This result has important welfare implications. Besides the well-known effect of reducing welfare due to less competitive markets, stronger protection can further curtail welfare by decreasing R&D investment.

Chapter 3, coauthored with Professor Huseyin Yildirim, studies situations, in which one buyer sequentially negotiates with multiple suppliers to acquire goods or services that are either complements or substitutes to each other. We find that the buyer weakly prefers private negotiations because it creates strategic uncertainty about the outcomes from earlier negotiations, leading to less aggressive pricing. For substitutes, this strategic uncertainty is more beneficial for short expiries because long ones allow purchasing decisions to be made after all negotiations are over, creating enough competition on their own and leading to Bertrand prices. In contrast to substitutes, for which suppliers are in direct competition, complements create incentives for suppliers to coordinate their prices to extract the additional surplus resulting from the complementarities of their goods. In this case, introducing uncertainty through privacy is more beneficial for the buyer as suppliers' bargaining powers increase vis-á-vis the buyer because it creates greater coordination concerns. This leads to a somewhat surprising result that the buyer could benefit from negotiating with more powerful suppliers. The model enables an evaluation of certain laws and regulations that govern bilateral negotiations. For instance, open record/open meetings laws, setting rules on public access of information, generate efficient outcomes, but in general are harmful to the buyer. Similarly, the FTC's cooling-off rule sets long expiries by giving the buyer three days to cancel a contract, which generates efficient outcomes when goods are substitutes because of suppliers' Bertrand pricing, but reduces efficiency when goods are complements since long expiries make coordination harder to sustain.

This dissertation consists of three separate studies that examine patterns of immigrant incorporation in the United States. The first study tests competing hypotheses derived from conflicting theoretical frameworks−transnational perspective and cross-national framework− to determine whether transnational engagement and incorporation are concurrent processes among Chinese, Indian, and Mexican immigrants. This study measures transnational engagement and incorporation as home and home country asset ownership using multi-panel, nationally representative data from the New Immigrant Survey (NIS) collected in 2003 and 2007. Results support a cross-border framework and indicate that transnational asset ownership decreases among all immigrant groups, while U.S. asset ownership increases. Findings from this study also indicate that due to disadvantaged pre-migration SES and low human capital, Mexican immigrants are less likely than other immigrants to own home country assets during the year after receiving their green card.

The second study examines the doubly disadvantaged position of elderly immigrants in the U.S. wealth distribution by applying the life course perspective to the dominance-differentiation theory of immigrant wealth stratification. I analyze elderly immigrant wealth in respect to U.S.-born seniors and younger immigrant cohorts using two data sets: the Survey of Income and Program Participation (SIPP) and the New Immigrant Survey (NIS). The Survey of Income and Program Participation (2001 to 2005) is a nationally representative survey of U.S. households. The first series of analyses reveals a significant wealth gap between U.S.- and foreign-born seniors which is most pronounced among the wealthiest households in my sample; however, U.S. tenure explains much of this difference. The second series of analyses suggests that elderly immigrants experience greater barriers to incorporation compared to their younger counterparts.

In the third study, I apply a transnational lens to the forms-of-capital and opportunity structure models of entrepreneurship in order to analyze the role of foreign resources in immigrant business start-ups. I propose that home country property use represents financial, social, and class resources that facilitate immigrant entrepreneurship. I test my hypotheses using survey data on Latin American immigrants from the Comparative Immigrant Entrepreneurship Project. Findings from these analyses suggest that home country asset ownership provides financial and social capital that is related to an increased likelihood of immigrant entrepreneurship.

God created . . . and it was good. People of faith are a part of God’s work of creation that from the beginning of time has created and innovated without fail. A mantra of the ecumenical Black Church is that we serve a God who “keeps making a way out of no way!” Out of conditions of scarcity, malice, and hardship, enslaved Africans living in America created possibilities and opportunities for themselves. Fast forward to 2022, and that spirit of innovation still exists within the stories and lived experiences of African Americans across time.

In this work I will suggest that innovation must continue to be an intentional practice of the black church. Given the monumental changes brought about by the global COVID-19 pandemic of 2020, I am compelling leaders to move towards the work of innovation and to illuminate opportunities of innovation within church environments. I would argue that the ecumenical Black Church has led many movements of social impact and connectivity yet our language for describing that kind of work has been too limited. I’m interested in narrating and interpreting the work of the ecumenical Black Church through the lens and discipline of social innovation, traditioned innovation, design thinking, and strategy.

We are at an intersection and inflection point in 2022. Virtual sanctuaries have replaced physical ones. The average parishioner has not walked into a sanctuary in the past two years. How does that change our concept of innovation, outreach and strategy? As a former publicist, current brand strategist, and church planter, I am very interested in the way the ecumenical Black Church is being received in society right now. I’m interested in threading who the ecumenical Black Church has been and who it can be. This is a renaissance moment. Let’s join together and see what we can create. Let’s dream together.

This paper establishes the life-cycle dynamics of Corporate Venture Capital (CVC) to explore the information acquisition role of CVC investment in the process of corporate innovation. I exploit an identification strategy that allows me to isolate exogenous shocks to a firm's ability to innovate. Using this strategy, I first find that the CVC life cycle typically begins following a period of deteriorated corporate innovation and increasingly valuable external information, lending support to the hypothesis that firms conduct CVC investment to acquire information and innovation knowledge from startups. Building on this analysis, I show that CVCs acquire information by investing in companies with similar technological focus but have a different knowledge base. Following CVC investment, parent firms internalize the newly acquired knowledge into internal R&D and external acquisition decisions. Human capital renewal, such as hiring inventors who can integrate new innovation knowledge, is integral in this step. The CVC life cycle lasts about four years, terminating as innovation in the parent firm rebounds. These findings shed new light on discussions about firm boundaries, managing innovation, and corporate information choices.

This dissertation develops new theory and evidence on the antecedents and consequences of innovation for firms, and includes three empirical studies focusing on various facets of the management, organization, and geography of novel innovation.

Chapter 1 examines the role of relationships in mitigating change to firm boundaries for new firms entering the medical device industry, focusing in part on how the timing of novel innovation influences whether firms integrate their sales function. Using a new dataset on more than 1,600 new medical device manufacturers that documents both their full product portfolios and sales governance modes over time, this paper finds evidence that relationships develop and influence sales governance choices only when they cross firm boundaries. Further, launching a novel innovation has a nuanced relationship with integration: early in a firm's life, it increases the likelihood of sales integration, but this relationship diminishes over time. This research offers new insights into the limits of relational governance, and contributes to our understanding of the nuanced impact of novel innovation on firm boundaries.

Chapter 2 examines the “dual role” of local inventive activity in firm innovation. On one hand, a vibrant, local research community provides inputs into internal research and development activities: the seeds of internal invention. On the other, external inventive activity provides inventions which can substitute for internally generated inventions: the fruit. Furthermore, inventive activities also provide fertile ground for imitation. This paper develops a simple model of how geographically proximate inventive activity—or clusters—affect firms' innovation choices. Firm invention capability importantly conditions the value to a firm of local innovation-related inputs. The paper employs a recent survey of product innovation and the “division of innovative labor” among nearly 5,000 US manufacturing firms. Absent a direct measure, invention capability is treated as a latent, unobserved variable, and a latent class multinomial model is used to infer its value. Consistent with the model's predictions, more inventive firms make use of the richer soil whereas less inventive firms pick the fruit. Further, more capable firms make use of higher value external sources in clusters. This research expands our understanding of how location shapes both who innovates and how they innovate, and provides a novel method for identifying latent capability.

Chapter 3 examines how the novelty of a startup's invention conditions its likelihood of venture capital (VC) financing. In it, I argue novelty increases uncertainty about commercial viability, thus requiring startups to search more extensively to find willing VCs to fund them. Two factors lower the cost of search: prior startup experience and a thick VC market. Because these factors make extensive search cheaper, novel startups will disproportionately benefit from experience and cluster location. To test this, I build a hand-collected dataset of 4,700 patenting US medical device startups, and follow them from “birth” (first patent), to VC investment (if any), to eventual success or failure. While novelty has no impact on funding or success on average, firms with novel technologies who also have a lower cost of finding and attracting potential partners are much more successful than those with more incremental technologies. Further, thick markets are less useful for firms pursuing novel technologies if they lack prior startup experience, and experienced founders are not especially advantaged in thin markets. Advancing theories of innovation and entrepreneurship, this study highlights when, where, and for whom novelty pays.

My dissertation comprises three studies on topics in selective migration and economic assimilation of new immigrants. The first study examines the influence of selective migration on Asian Americans’ academic success. Conventional explanations attribute their academic advantage to a distinctive academic culture and their socioeconomic status (SES), but ignore the importance of the relative attainment of parents formed in the pre-immigration context (i.e., the high relative educational attainment of parents compared to their non-immigrant counterparts in sending countries) in explaining Asian Americans’ academic success. Using data from the National Education Longitudinal Study and the Barro-Lee dataset, this chapter shows that Asian parents’ relative attainment predicts their children’s advantage in college enrollment over whites. Part of the advantage from parents’ relative attainment is through youths’ academic culture (e.g., parental educational expectations and youths’ effort, school behaviors, and attitudes). The findings in this chapter suggest the cultural explanation for Asian Americans’ academic advantage could be overstated.

The second study investigates the emigration intentions of Chinese adolescents from a supply-side perspective. Most existing studies employing data in destination countries provide an incomplete image of the selected features of immigrants. Values and norms often attributed to immigrants, such as high educational expectations, may be shaped by experiences during pre-emigration, rather than originating from distinct cultural values or the immigration experience itself. With data from Chinese Education Panel Study, this study finds parents whose children intend to emigrate employ different parenting strategies (via family norms and parental involvement) than children with no intention to emigrate. Adolescents with emigration intentions are also positively selected based on familial income, parental education, and mother’s occupational status, but negatively selected on father’s occupational status. These findings help establish a more comprehensive image of selective migration among Chinese adolescents who potentially emigrate and suggest that distinctive norms and values of emigrants could be shaped by parenting strategies during the early planning stages of emigration.

The third study examines how new immigrants utilize potential resources from religious organizations to help their entrepreneurial businesses in the United States (U.S.). Although a number of qualitative studies have previously identified the resource attainment through ethnic churches among immigrant entrepreneurs, such evidence is limited in quantitative analysis and the role of co-ethnicity is unclear. With the data from the New Immigrant Survey, this study shows that regardless of ethnic backgrounds and religious congregations, immigrant entrepreneurs with limited familial resources have a higher level of church involvement, and higher co-ethnicity in churches also increases church involvement of immigrant entrepreneurs. These findings suggest that immigrant entrepreneurs may actively seek resources in ethnic churches. From a policy perspective, religious organizations that target immigrants in ethnic communities can potentially benefit immigrant entrepreneurs by providing co-ethnic resources and help them overcome initial barriers during economic assimilation.

As a whole, my dissertation concerns about socioeconomic mobility of new immigrants. It contributes to the research on Asian Americans’ academic advantage by integrating the pre-immigration contexts and provides a supply-side explanation on how distinctive cultural elements of potential Chinese emigrations could be selected in the pre-immigration childrearing process. Moreover, it also contributes to the research on immigrant entrepreneurship by providing quantitative evidence that religious organizations could supply resources to start-up businesses of new immigrants and help their economic assimilation in the U.S. context.

In this dissertation, I develop and test a theory linking the legacy motive to entrepreneurship. After examining evidence in support of the desire to make a lasting impact as a source of motivation for the founders of new organizations, I propose that the importance of this motive has been overlooked, due to a lack of conceptual clarity regarding the legacy construct. I argue that examining the relationship between entrepreneurship and the legacy motive contributes greatly to understanding of both phenomena. I develop a theory of entrepreneurial legacies, in which I explain how understanding the connection between the legacy motive and entrepreneurship requires recognizing the variety of lasting impacts different people can choose to pursue. I then examine the implications of the different desired legacies for the entrepreneurs and their organizations, particularly for critical funding decisions at the beginning of the new venture, and for decisions related to succession, when the organization needs to replace the founder. Next, I conducted two studies to examine the effects of the legacy motive on entrepreneurial decision making. In the first study, I tested the relative strength of the legacy motive among firm founders and those who work for others. I developed new measures of the intended benefits and beneficiaries of a legacy, to examine their relationship to each other and related variables using an online sample of engineers. I found that engineers high on the legacy motive are more likely to indicate founding the firm they currently work for, own more of their current employer, and have filed more patents. In the second study, I conducted a qualitative examination of medical startups, examining the processes that led executives in these firms to the current stage of their careers, and the elements of their work lives that they experience as meaningful. Finally, I discuss the implications of the link between the entrepreneurship and the legacy motive, and the different ways in which people define what makes these two constructs meaningful.