Events

Do VCs Help to Overcome Information Asymmetry due to Cultural Distance in Potential Acquisitions
Presenter: Gresa Latifi (TUM) (joint work with M. Colombo, J. Henkel, and B. Montanaro)
Discussant: Giulia Solinas (ISTO)

Government funding of innovation can have a significant impact not only on the rate of technical change, but also on its direction. In this paper, we examine the role that government grants and government departments played in the development of artificial intelligence (AI), an emergent general-purpose technology with the potential to revolutionize many aspects of the economy and society. We analyze all AI patents filed at the US Patent and Trademark Office and develop network measures that capture each patent’s influence on all possible sequences of follow-on innovation. By identifying the effect of patents on technological trajectories, we are able to account for the long-term cumulative impact of new knowledge not captured by standard patent citation measures. We show that patents funded by government grants, but above all patents filed by federal agencies and state departments, profoundly influenced the development of AI. These long-term effects were especially significant in early phases, and weakened over time as private incentives took over. The results hold controlling for endogeneity, and are robust to alternative specifications.

Contact: Rainer Widmann

The question of who gains from high-quality entrepreneurship is crucial to understanding whether investments in incubating potentially innovative start-up firms will produce socially beneficial outcomes. We attempt to bring new evidence to this question by combining new aggregate measures of local area income inequality and income mobility with measures of entrepreneurship from Guzman and Stern (2020). Our new aggregate measures are generated by linking American Community Survey data with the universe of IRS 1040 tax returns. In both fixed effects and IV models using a Bartik-style instrument, we find that entrepreneurship increases income inequality. Further, we find that this increase in income inequality arises due to the fact that almost all of the individual gains associated with increased entrepreneurship accrue to the top 10 percent of the income distribution. While we find mixed evidence for small positive effects of entrepreneurship lower on the income distribution, we find little if any evidence that entrepreneurship increases income mobility. (Joint work with John Voorheis)

Contact: Fabian Gaessler

We investigate how firms adapt to trademark protection, an extensively used but underexamined form of IP protection, by exploring a historical precedent: China’s trademark law of 1923 ‒ an unanticipated and disapproved response to end foreign privileges in China. By exploiting a unique, newly digitized firm-employee-level dataset from Shanghai in 1872-1941, we show that the trademark law shaped firm dynamics on all sides of trademark conflicts. The law spurred growth and brand investment among Western firms with greater dependence on trademark protection. In contrast, Japanese businesses, which had frequently been accused of counterfeiting, experienced contractions while attempting to build their own brands after the law. The trademark law also led to new linkages with domestic agents, both within and outside the boundaries of Western firms, and the growth of Chinese intermediaries. At the aggregate level, trademark-intensive industries witnessed a net growth in employment and the number of product categories. A comparison with previous attempts by foreign powers ‒ such as extraterritorial rights, bilateral treaties, and an unenforced trademark code ‒ shows that those alternative institutions were ultimately unsuccessful.

Contact: Klaus Keller

Innovators’ personal experience and social networks may affect their familiarity with customer needs, and in turn the types of products they bring to market. Consistent with this channel, we document that innovators create products that are more likely to be purchased by customers similar to them along observable dimensions including gender, age, and socio-economic status. With scanner data and a new phone applications database, we find that these homophily patterns hold even within detailed industries. Using quasi-random assignment of individuals to dorms during military service, we provide causal evidence that being exposed to peers from a lower income group increases an entrepreneur’s propensity to create necessity products. The finding is similar with an alternative research design leveraging idiosyncratic within-school variation in peer composition across classes and cohorts. Because innovators are predominantly men from privileged backgrounds, the social push channel implies that the gains from innovation are unequally distributed across customer groups, which we quantify in a growth model. (Joint work with Elias Einiö and Xavier Jaravel)

Contact: Fabian Gaessler

Workshop within the project “Regulation of the Data Economy in Emerging Economies – Shaping Data-Sharing Policies to Promote the Sustainable Development Goals”

In cooperation with the Ministerio de Ciencia, Tecnologìa e Innovación, Buenos Aires, Argentina

Efficient access to existing knowledge is essential to technical advance, yet little is known about how access-enhancing institutions shape intertemporal knowledge spillovers. In this paper, I investigate the cumulative technological impact of the CNIDR AIDS Database, the first, disease-targeted, online repository of electronic patent documents, launched in 1994. Tracing references from subsequent patents, I find that the marginal impact of the repository was largest (+30%) among patents for which the established disease-link was previously non-obvious to detect through standard bibliographic search, in line with predictions of stronger reduction of search costs. Further findings suggest that increased visibility and attention to more “hidden” prior art particularly benefited private sector HIV researchers, and was reflected in enhanced diffusion of technological knowledge across scientific community and geographic boundaries.

Contact: Fabian Gaessler

Gender pay inequality is a persistent feature of economies around the world, but whether and how it can be eliminated is poorly understood. We examine whether one proposed intervention for reducing the pay gap, salary transparency, influences gender pay inequality in the context of universities in Canada. We exploit the passing of a salary disclosure policy in one province, which significantly lowered the cost of monitoring gender inequality in public organizations. We find that, on average, salary disclosure reduces gender pay inequality. However, institutions respond to mandatory salary disclosure in different ways. Those that anticipate higher scrutiny ‒ top ranked institutions and those that faced higher historic gender inequality ‒ are more likely to improve their gender pay gap, despite facing low public scrutiny in the periods immediately after the policy. They do so by increasing female salary and decreasing male salary relative to institutions in provinces without salary disclosure. In contrast, institutions that anticipate lower external scrutiny only increase female salary. Furthermore, we show these responses to address gender pay inequality negatively correlate with other organizational outcomes, such male faculty retention and grant productivity, and the size of these effects correspond to the differential response by top and non-top ranked institutions. Combined, these findings suggest that implementing salary transparency may lead to heterogeneous responses by organizations in how they reduce the gender gap, which may have unintended consequences on other organizational outcomes.

Contact: Marina Chugunova

Tough Bargains: When Cooperation Is More Competitive than Competition
Presenter: Joachim Henkel (TUM)
Discussant: Timm Opitz (Max Planck Institute for Innovation and Competition)

Open-Border Policy and Knowledge Diffusion
Presenter: Rainer Widmann (Max Planck Institute for Innovation and Competition)
Discussant: Georg Windisch (TUM)