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Essays on Innovation and Corporate Finance

Author : Yabo Zhao

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Page : 0 pages

File Size : 35,36 MB

Release : 2022

Category : Human capital

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Book Description

This dissertation consists of two essays lying into the intersection of innovation and corporate finance. The first essay, included in Chapter 2, is “Asymmetric Information, Patent Publication, and Inventor Human Capital Reallocation”. I empirically study whether and how patent publication affects inventor human capital reallocation. Leveraging (i) the American Inventor’s Protection Act (AIPA) that requires patent applications to be published within 18 months of filing rather than when granted, (ii) plausible quasi-random assignment of patent examiners, and (iii) a large dataset tracking inventors’ career paths, I adopt a difference-in-differences design and show that the expedited patent publication helps inventors switch employers. Additional analyses suggest that increased mobility is driven by expanded outside employers’ information and reduced information asymmetry: the effect is more pronounced among inventors of high-quality, with scarcer existing information, or in technologies where patents are more informative. I provide suggestive evidence that indicates a positive effect on enhancing inventor-firm matching and increased patenting output. This study highlights an important yet overlooked facet of patent publication: inventor human capital reallocation. The second essay, included in Chapter 3, is “The Spillover Effects of Patent Litigation: Evidence from the Quasi-random Assignment of Patent Examiners”. It is a joint work with Julian Atanassov and Vikram Nanda. The increasingly fragmented ownership of intellectual property implies that patent lawsuits will have spillover effects well beyond litigated patents and firms. In this study, we examine the spillover effects of patent litigation on follow-on innovation, firm valuation, and inventor human capital flows. Using quasi-random assignment of patent examiners and a novel measure of citation-quality, we confirm findings in extant literature that litigated patents receive more subsequent citations but show that those citations are of lower quality. Further, technologically related patents suffer significant declines in quantity and citation-quality, suggesting a negative overall effect of weaker property rights on follow-on innovation. In addition, firms that are technologically close to litigant-firms, reduce R&D expenditure, lose inventors, and suffer significant declines in the quantity and quality of innovation and firm value. Product-market rivals with unrelated technologies are beneficiaries. Overall, our evidence highlights that accounting for spillover effects, patent lawsuits are far more pernicious to innovative activity than previously recognized.







Innovation in Corporate Finance

Author : Polina Sperling

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Page : 0 pages

File Size : 35,38 MB

Release : 2021

Category : Competition

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Book Description

This dissertation focuses on corporate innovation. The three essays explore different aspects of how corporations manage, motivate, and use their innovation. The first essay explores patent litigation as a competitive tool used either by large corporations with declining innovation capabilities or by corporations facing greater competition from innovative industry rivals. Results suggest that large firms are more likely to pursue patent litigation to deter competition from startups that tend to generate patents with more forward citations. The second essay focuses on a firm's decision to pursue innovation and lobbying to form competitive barriers. The essay finds that the largest firms produce most of the knowledge output within an economy as measured by firm-year forward citations. Similarly, lobbying is shown to be predominant among the largest firms. The essay further studies a specific type of innovation, Clean Technology, and how large corporations' success in clean technology development influences their decision to pursue lobbying activities. Overall, the findings suggest that firms' engagement in lobbying depends on the success of their innovation activities. This finding is consistent the protectionist role of lobbying when firms pursue lobbying to protect the status quo. Lastly, the third essay looks at how firms motivate innovation through the board of directors. The essay examines director equity compensation as a mechanism used to align the boards' incentives with the incentives of shareholders. Results support the incentives alignment mechanism, and they highlight the important role that the board of directors plays in the pursuit of corporate innovation



Essays in Corporate Finance

Author : Xingyi Chen

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Page : 184 pages

File Size : 22,97 MB

Release : 2018

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Book Description

This dissertation studies two questions in corporate finance: 1) Does knowledge sharing affect innovation? and 2) How do profit sharing and loss sharing affect the choice of underwriting fees and offer prices in the IPO market? In the first chapter, I investigate the impact of knowledge sharing on innovation using the staggered adoption of the Uniform Trade Secrets Act as a plausibly exogenous source of variation in inter-firm information flow. I find that innovation becomes less efficient when information is more fragmented. To overcome the problem of limited informal knowledge exchange, companies are more likely to acquire technology in strategic alliances or through merger and acquisitions. I argue that the decrease in innovation is unlikely to be a result of substitution from patenting to "padlocking" by showing that when information flow is more restricted in a state, the innovation level of companies in that state is not affected; but that of the competitors of firms in that state declines. In the second chapter, we model share flotation, starting with the standard contract that assigns all profits above the offer price to investors, and all losses below to the underwriter. We then add profit and loss sharing to the model, and allow the issuer to set the fee and the underwriter to set the price in the initial public offerings market. However, participants deviate in practice, such that investors share some of their profits, and some of the underwriter's losses. We find that profit sharing transfers wealth from issuers to underwriters without affecting the offer price, whereas loss sharing makes both the issuer and underwriter better off, while increasing the offer price. Empirical estimation indicates minimal profit sharing but substantial loss sharing.



Essays in Behavioral Corporate Finance

Author : Hui Zheng

Publisher :

Page : 186 pages

File Size : 13,19 MB

Release : 2012

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Book Description

This dissertation explores the extent to which managerial overconfidence affects corporate decisions. This analysis includes three essays, which address a wide range of corporate decisions including financing, investment, acquisition, innovation, liquidity management and advertising decisions. The first essay introduces a fine-tuned test of the relationship between managerial overconfidence and corporate decisions by taking the chief financial officer (CFO) overconfidence effect into account. Ex-ante, I identify financial policies and non-financial policies such as investment, innovation and acquisition as the primary managerial duties of CFOs and chief executive officers (CEOs) respectively. I construct overconfidence measures for both CEOs and CFOs and test the impact of CEO and CFO overconfidence, both on financial decisions and on nonfinancial decisions. Based on a sample of 1,173 S & P 1500 firms, I find that financial policies are primarily affected by CFO overconfidence while only CEO overconfidence affects nonfinancial decisions. My findings demonstrate that managerial biases affect corporate decisions and managerial duties shape the ways in which top managers influence corporate policies. The second essay investigates how overconfident CEOs allocate resources toward innovation activities. It argues that overconfident CEOs tend to have greater innovation input. To finance innovation, they save more cash out of the cash flow and spend more on innovation when the cash flow is high. Results from an empirical analysis of 1,015 S & P 1500 firms support this argument. Moreover, based on a series of financial constraint measurements, the effect of CEO overconfidence on liquidity management is found to be more pronounced in financially constrained firms and in highly innovative firms, but not in firms without financial constraints. With regards to innovation performance, overconfident CEOs tend to have more patents, but the overall quality of their patents is not significantly better than that of rational CEOs. The third essay introduces a simple model of firm advertising behavior in monopolistic competition industries and applies it to the situation of managerial overconfidence. The model shows that the optimal advertising to sales ratio is determined by both firm advertising competency and consumer preference. Overconfident CEOs are more willing to use advertising as a means to convey the quality of their firms and products. Such overestimation of the effects of advertising by overconfident CEOs will result in overspending on advertising. When financially constrained, an overconfident CEO's tendency to overspend will be curbed to some extent, but his amount of advertising will increase with cash flows. An empirical analysis of 654 S & P 1500 firms supports these predictions. The distorted effect of managerial overconfidence is more prominent when firms are financially constrained and when the overconfidence measure is continuous.