Browsing by Subject "Innovation"

In light of a reduction in corporate scientific research in recent decades, my dissertation examines the mechanisms that drive corporate investment in scientific research. More specifically, I explore the relationship between scientific research and its use in invention, how it is organized within the firm, and its aggregated effect on firm-level outcomes, within large firms in the U.S.. To answer my research questions, I construct a novel dataset that traces above 4,000 U.S. publicly traded firms’ investment in science and invention for 35 years (1980-2015). The second chapter of the dissertation provides an overview of the dataset and presents its advantages over previous data. The third chapter of the dissertation examines how the production of scientific research by U.S. corporations is related to its use in invention by the focal firm and to spillovers captured by rivals’ inventions. The fourth chapter further looks at the heterogeneity in firms’ investment in science by examining how the within-firm organization of scientific discovery and invention conditions research output. The findings from chapter three and chapter four suggest that as spillovers of science to rivals increase, and the greater the connectedness between research and invention practices within the firm, the less likely firms are to invest in internal scientific research.

How can firms gain competitive advantage from available technologies is a key question in strategy. In my dissertation, I develop new theory and provide evidence to show that a firm’s focus in selective technological areas may play a central role of creating competitive advantage in industries with rapid product turnover. Firms commit limited resources when selecting which technologies to develop, affecting the composition of their product portfolios and allowing some firms to subsequently capture greater value relative to others. I examine how firm attention to technologies within an industry affect their ability to swiftly incorporate them into products (essay 1); establish a theoretical foundation for firm-to-firm matching in the market for alliances (essay 2); develop an econometric methodology based on the insights from a firm-to-firm matching market (essay 3); and investigate how common technological interests attract partners in the market for interfirm collaboration (essay 4). Across four essays, I find that competitive advantage varies with the firm’s technological composition, its current focal area of technological development, and the collection of potential alliance partners. These findings contribute to understanding conditions under which a firm captures value from the component technologies scattered across its industry, and the key tradeoffs associated with allocating its technological focus.

My dissertation explores the interactions between the various agents in the pharmaceutical industry and how they are affected by changes in health care policy. In my work, I examine innovation and competition among new brand drugs and the value of prescription drug insurance after patent expiration.

The second chapter of my dissertation empirically assesses the trade-off between patent breadth and patent length, a topic that has attracted significant theoretical but little empirical attention. I estimate a model of pharmaceutical demand and supply that incorporates insurance and advertising for the antidepressant market. Using these estimates, I consider the potential welfare effects of giving some of the most important product innovations broader but shorter patents, which increases the market power that these innovators have in the short-run but also allows for more rapid entry by generics. My results indicate that in this setting broader patents could increase total welfare by more than 9%, mostly through savings in insurer expenditures. These results are robust to endogenizing the entry of other branded drugs.

In the third chapter, which stems from research done jointly with Peter Arcidiacono, Paul Ellickson, and David Ridley, I use data from the pharmaceutical industry to estimate demand and supply for prescription drugs across both insured and uninsured consumers, allowing for consumer preferences organized into discrete types. I account for an important characteristic of health care markets: the price paid by insured consumers (copayment) is typically much smaller than the price received by the manufacturer. This analysis highlights how generic-drug availability differentially affects insured and uninsured consumers. In particular, generic entry disproportionately benefits insured consumers, at least in the first year to two years.

The fourth chapter in my dissertation extends the analysis in Chapter 2 to allow for a more generalized framework. In Chapter 2, the first pharmaceutical product innovation that enters a therapeutic class is assumed to be high-value while those innovations that follow are assumed to provide relatively little, if any, added therapeutic value beyond the first. Using the same data and demand model estimates, I consider the potential welfare effects of allowing these later to be considered high-value products and providing them with greater patent breadth and shorter patent length. My results indicate that in this setting, the modified patent policy could still increase total welfare by more than 8%, mostly through savings in insurer expenditures. These results are also robust to endogenizing the entry of other branded products.

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.

Within the current cultural milieu of eclectic pluralism the Western Church currently finds itself in, innovation must be a central focus within all aspects of ministry in the Christian Church. With the focus that the local church must put on innovation, one aspect that will continually be an important factor is how the Church understands, interprets, and utilizes failure. The challenge for the local church is to rethink its notion of failure which will allow for creativity, new life, and ultimately, transformational innovation. By establishing a proper framework and definition of failure, the Church will be able to embrace good failure and the benefits it can offer. Calling the Church to embrace failure is also a call to embrace innovation and Design Thinking. Good failure is not fully beneficial without these two essential and creative tools. For every church struggling to muster the confidence to dive into creative exploration and experimentation or the minister who wrestles with sustaining a culture open to change and new ideas, applying the principles of innovation and Design Thinking aid immensely on one’s journey towards success. This path towards success will not be simple. At times, the path will be consumed with failure and disruption. Still, good failure must be embraced in order to foster adaptive learning, growth, and mastery. By adopting an innovative culture and leaning into good failure, the Church embraces culture that generates change, pursues excellence, ensures vitality, makes a difference in the world, and seeks to meet the needs of people. As the Church wrestles with failure as a means to produce and promote innovation, the local church responds to God’s call and partners with God in God’s creative and redemptive work throughout the world. Thus, as the Church seeks to continue its impactful work in the world, the Church must establish a sound methodology for innovation and untap the creative fountain of Design Thinking. Throughout the history of the Christian Church, there have been countless extraordinary saints who have innovated, revolutionized, and championed fresh expressions and aspects of the Church. However, while it is important to remember the Church’s noteworthy saints and their significant contributions, we should not forget that there were failures along the way, and these should not be ignored. For the majority of United Methodist ministers, John Wesley is one of the most esteemed and highlighted saints who dynamically revolutionized, innovated, and restructured the Church. Nevertheless, he too experienced failures throughout his life and ministry. Still, with each moment of failure, Wesley pressed on and pivoted to innovate in successful ways that changed the world forever, even birthing and shaping the people called Methodists. In today’s rapidly changing world, local churches need to follow the example of John Wesley – embrace good failure, practice innovation, and restore imagination to ensure their future. Regardless of how fast the world continues to spin, churches must recognize profound changes must be made to establish a sound framework for failure and innovation, foster an innovative culture, and evoke an operational model change that allows the Church to be better than it was yesterday. Ultimately, local churches must awaken its innovative spirit and join God in God’s ministry throughout the world.

Within the current cultural milieu of eclectic pluralism the Western Church currently finds itself in, innovation must be a central focus within all aspects of ministry in the Christian Church. With the focus that the local church must put on innovation, one aspect that will continually be an important factor is how the Church understands, interprets, and utilizes failure. The challenge for the local church is to rethink its notion of failure which will allow for creativity, new life, and ultimately, transformational innovation. By establishing a proper framework and definition of failure, the Church will be able to embrace good failure and the benefits it can offer. Calling the Church to embrace failure is also a call to embrace innovation and Design Thinking. Good failure is not fully beneficial without these two essential and creative tools. For every church struggling to muster the confidence to dive into creative exploration and experimentation or the minister who wrestles with sustaining a culture open to change and new ideas, applying the principles of innovation and Design Thinking aid immensely on one’s journey towards success. This path towards success will not be simple. At times, the path will be consumed with failure and disruption. Still, good failure must be embraced in order to foster adaptive learning, growth, and mastery. By adopting an innovative culture and leaning into good failure, the Church embraces culture that generates change, pursues excellence, ensures vitality, makes a difference in the world, and seeks to meet the needs of people. As the Church wrestles with failure as a means to produce and promote innovation, the local church responds to God’s call and partners with God in God’s creative and redemptive work throughout the world. Thus, as the Church seeks to continue its impactful work in the world, the Church must establish a sound methodology for innovation and untap the creative fountain of Design Thinking. Throughout the history of the Christian Church, there have been countless extraordinary saints who have innovated, revolutionized, and championed fresh expressions and aspects of the Church. However, while it is important to remember the Church’s noteworthy saints and their significant contributions, we should not forget that there were failures along the way, and these should not be ignored. For the majority of United Methodist ministers, John Wesley is one of the most esteemed and highlighted saints who dynamically revolutionized, innovated, and restructured the Church. Nevertheless, he too experienced failures throughout his life and ministry. Still, with each moment of failure, Wesley pressed on and pivoted to innovate in successful ways that changed the world forever, even birthing and shaping the people called Methodists. In today’s rapidly changing world, local churches need to follow the example of John Wesley – embrace good failure, practice innovation, and restore imagination to ensure their future. Regardless of how fast the world continues to spin, churches must recognize profound changes must be made to establish a sound framework for failure and innovation, foster an innovative culture, and evoke an operational model change that allows the Church to be better than it was yesterday. Ultimately, local churches must awaken its innovative spirit and join God in God’s ministry throughout the world.

In 2021, congregational life in America feels troubled. The residue of vitality in vacant Sunday school classrooms, dated worship bulletins, antiquated committee structures, and worn pew cushions reminds churchgoers of the ways congregations once successfully capitalized on the intersection of industrialization and an evangelical spirit. However, today, the world has changed. Traditional churches that mirror a now-shuttered factory across town struggle under the weight of dated, worker-dependent, industrial expressions of congregational life. These congregations feel trapped, which inhibits innovation and steers churches toward the same fate as those factories across town. Some believe that what local churches need is a way to cultivate innovation. To do this, congregations need the tools and a pathway that leads to innovative breakthroughs. Design thinking is a process built on an accessible set of tools that can provide teams in any field the steps necessary to cultivate innovation. For the church, and specifically local congregations, innovation cannot happen in a vacuum. Churches have histories and traditions, most of which root themselves in a tradition connected to the book of Acts. As churches cling to specific traditions, they often maintain practices as traditionalism, which begets a shallow expression of tradition. In these instances, faithful innovation is necessary. However, to innovate for the sake of innovation alone represents a shallow expression of innovation. The church needs to hold together tradition and innovation in ways that give life to a shared life rooted through embodied traditions. Faith by Design explores and exploits intersections between the embodied traditions outlined in Acts and the modern pathway to innovation described in design thinking. By adapting the approaches, tools, and practices of design thinkers and then exploiting these processes' intersections with the stories of the early church in Acts, the congregations can discover and design a renewed sense of life and vitality. Faith by Design invites congregations to explore the design thinking process and practices within the rich Christian tradition in ways that will help cultivate the conditions necessary for the emergence of renewed practices and behaviors which beget life, vitality, and hope.  

In 2021, congregational life in America feels troubled. The residue of vitality in vacant Sunday school classrooms, dated worship bulletins, antiquated committee structures, and worn pew cushions reminds churchgoers of the ways congregations once successfully capitalized on the intersection of industrialization and an evangelical spirit. However, today, the world has changed. Traditional churches that mirror a now-shuttered factory across town struggle under the weight of dated, worker-dependent, industrial expressions of congregational life. These congregations feel trapped, which inhibits innovation and steers churches toward the same fate as those factories across town. Some believe that what local churches need is a way to cultivate innovation. To do this, congregations need the tools and a pathway that leads to innovative breakthroughs. Design thinking is a process built on an accessible set of tools that can provide teams in any field the steps necessary to cultivate innovation. For the church, and specifically local congregations, innovation cannot happen in a vacuum. Churches have histories and traditions, most of which root themselves in a tradition connected to the book of Acts. As churches cling to specific traditions, they often maintain practices as traditionalism, which begets a shallow expression of tradition. In these instances, faithful innovation is necessary. However, to innovate for the sake of innovation alone represents a shallow expression of innovation. The church needs to hold together tradition and innovation in ways that give life to a shared life rooted through embodied traditions. Faith by Design explores and exploits intersections between the embodied traditions outlined in Acts and the modern pathway to innovation described in design thinking. By adapting the approaches, tools, and practices of design thinkers and then exploiting these processes' intersections with the stories of the early church in Acts, the congregations can discover and design a renewed sense of life and vitality. Faith by Design invites congregations to explore the design thinking process and practices within the rich Christian tradition in ways that will help cultivate the conditions necessary for the emergence of renewed practices and behaviors which beget life, vitality, and hope.  

This dissertation is written in three progressively restrictive parts. Part I is a set of two expansive essays on collaborative supply chain management that proposes several new perspectives and interconnections between current day global business and economic issues, and the evolving supply chain structures and decision-making paradigms that depend on extensive inter-firm collaboration. Part I also develops new guidelines for both practitioners as well as academic researchers in their quest to incorporate collaborative requirements as an explicit component of existing planning frameworks and modeling approaches. Part I further comments on how the technological evolution of manufacturing, service, and general business processes have led to decentralized structures that require a fundamentally collaborative approach to the planning of such processes. We also argue that existing supply chain decision-making and planning approaches are modeled in the fashion of corporate and enterprise resource planning systems, which given their scope, limit the extent of collaboration in both planning and in execution. The arguments and discussion in this part are not specific to any particular supply chain function and is without technological bias. The frameworks presented in Part I are also unified in their approach to managing supply chains of service providers, manufacturing partners, or some combination of both types of activities. This unified presentation is also a fundamental contribution of this first part of the dissertation.

Part II of the dissertation, while still expansive in scope of application and the range of industry sectors and supply chain environments discussed, develops the ideas presented in Part I for more specific (or functional) categories of business processes. A commonly accepted categorization of operational processes, at least in manufacturing settings, is into (i) product design and development or related projects, which are akin to services in the nature and interaction between implied tasks, (ii) procurement, production, and customer service processes, and (iii) logistics and distribution networks. Projects are typically represented as a network of inter-related activities bound by a common purpose, and by a time-line dictated by a finite product or project life cycle; activities are also sometimes defined and created in response to project environments. Processes in the procurement, production, customer service, or logistics domains, on the other hand, are typically modeled as a set of inter-related but more loosely coupled activities that are repeated indefinitely across multiple product or project life cycles. Our primary concern in Part II is to understand environments where projects and processes span multiple firms, and therefore require a collaborative effort, not only for executing the activities entailed, but also in the planning of the tasks and projects.

Modeling of supply chain management problems (such as those discussed subsequently in Part III) assume that the fundamental structure of tasks and processes are at least well-defined for analysis and subsequent design of parameters for optimal performance. Often, however, the inclusion and structuring of these tasks is also a collaborative exercise that requires negotiation and careful consideration of the costs and advantages presented by alternative sets of tasks. The scope of tasks is also frequently determined by their assignment to one or more firms with differing capabilities. For example, the range of logistics activities and services provided by a specialized firm would be greater than a manufacturer assuming additional responsibility for the distribution or procurement logistics. Similarly, the capabilities of a supplier would either expand or restrict the range of tasks that would be included in the design and development of a product or a service. Therefore, Part II of the dissertation, consisting of Chapters 4 and 5, develops strategic frameworks that can allow the definition and structuring of tasks and processes in a collaborative setting. These chapters present frameworks for strategy and for defining project or process objectives which are commonly the guideposts for task definition and structuring.

These frameworks presented in Part II can also help determine the degree of collaboration either warranted or indeed suitable for different project and logistics environments. Thus, we propose that some business and technology environments call for more cohesive or coupled structuring of tasks that in turn require collaborative frameworks for planning and execution. Some other environments, either as a result of market forces or technological constraints, are a bad fit for collaborative efforts unless they are seamless and frictionless. Identifying such environments through a small set of market and technological factors is a fundamental contribution of Part II of the dissertation. Similar to our efforts in Part I, we also chart the evolution of collaborative planning and execution environments; here we adopt a more direct case based approach to illustrating issues, and related concepts. Another significant contribution of this second part is to outline how various facets of the operating environment shape the parameters of the collaborative arrangements between partner firms. In particular, we address the environmental and strategic forces that motivate a model of work sharing in environments where collaboration is not a technological requirement. Thus, we address the fundamental value proposition in collaborative logistics management for the outsourcing provider and the contracting firm, and discuss how product or process technology and structure influences such choices by firms.

Part III, which is more restrictive in its statements and conclusions, is devoted to models of collaborative supply chain management that are motivated by the imperatives outlined in Part I, but whose elements are defined by the strategic frameworks and structuring guidelines of Part II . While Part III derives guidance from Part II in the formulation of its models, it can also be viewed and read independently for its contributions to the (related) academic literature. Part III consists again of two independent modeling exercises. Through either of these exercises, we address two of the most important problems in collaborative supply chain planning: partner selection, or alternatively task and project assignment, and decentralized capacity management in a supply chain or logistics environment. These models describe two environments where collaborative planning is vital to the success of firms: (i decentralized and collaborative projects or programs that frequently determine how supply chains of diverse firms are structured and take form, and (ii) decentralized logistics and transportation systems where firms in a supply chain must invest in common infrastructure, and further determine the material flows utilizing such infrastructure. In both cases, we show how decentralized structures can be inefficient relative to centralized decision-models, while characterizing the equilibrium behavior of firms in decentralized decision-frameworks under the proportional risk-sharing regimes. We then provide mechanisms that can coordinate the decentralized systems. These mechanisms turn out to be highly conditional on the rules of information exchange and the decision-hierarchies in the supply chain, and therefore can claim to remedy coordination problems in only a subset of collaborative environments. However, this subset -- as it turns out -- is not insignificant, as many different supply chains operate with such restrictive information exchange and decision-hierarchies.

In the next introductory chapter, we provide a more detailed synopsis of Parts I-III with the objective of identifying the considerable interconnections between the various chapters within the three parts. We also aim to highlight the contributions of the work to various streams of academic literature. Throughout this dissertation, we strive to maintain a dual tone of discussion: One for practitioners and researchers in the field of operations strategy that focuses on synthesizing insights on supply chain structure and the crucial elements of collaborative supply chain planning for the sake of managers, and the second theme focusing on more fundamental operations research problems underlying the collaborative planning environment.