Work in Progress

Working papers

Competition and Innovation: The Breakup of IG Farben

Rej&R at American Economic Review
Discussion Paper Here (SSRN) - Updated 12/2024
Coverage FAZ (German) ProMarket FinReg

Single-authored

IG Farben patenting in comparison to firms in electronics industry (Synthetic control) — **Abstract** The relationship between competition and innovation is difficult to disentangle, as exogenous variation in market structure is rare. The 1952 breakup of Germany’s leading chemical company, IG Farben, represents such a disruption. After the Second World War, the Allies occupying Germany imposed the breakup because of IG Farben’s importance for the German war economy instead of standard antitrust concerns. In technologies where the breakup reduced concentration by creating multiple successor firms with technological capabilities, patenting increased strongly, predominantly by domestic firms unrelated to IG Farben. The increase in patenting is not driven by alternative explanations such as product market competition, an increased propensity to patent, duplication of research, or mobility of IG Farben inventors. Instead, the breakup seems to have increased innovation among the IG Farben successors, which then spilled over to the broader industry: The IG Farben’s successors also increased their patenting activities and specialized relative to the pre-breakup period.

Regression: Quality-weighted patent count — **Abstract** The relationship between competition and innovation is difficult to disentangle, as exogenous variation in market structure is rare. The 1952 breakup of Germany’s leading chemical company, IG Farben, represents such a disruption. After the Second World War, the Allies occupying Germany imposed the breakup because of IG Farben’s importance for the German war economy instead of standard antitrust concerns. In technologies where the breakup reduced concentration by creating multiple successor firms with technological capabilities, patenting increased strongly, predominantly by domestic firms unrelated to IG Farben. The increase in patenting is not driven by alternative explanations such as product market competition, an increased propensity to patent, duplication of research, or mobility of IG Farben inventors. Instead, the breakup seems to have increased innovation among the IG Farben successors, which then spilled over to the broader industry: The IG Farben’s successors also increased their patenting activities and specialized relative to the pre-breakup period.

Filling the Gap: The Consequences of Collaborator Loss in Corporate R&D

R&R at Management Science
Discussion Paper Here (SSRN) - Updated 12/2024

with Fabian Gaessler, Karin Hoisl, Dietmar Harhoff and Matthias Dorner

(Older version entitled ‘Filling the Gap - Firm Strategies for Human Capital Loss’: AOM Best Paper)

Abstract We examine how collaborator loss affects the individual productivity of knowledge workers in corporate R\&D. Specifically, we argue that the effect of such loss depends on whether the lost collaborator was internal or external to the organization, which may have compensatory measures in place to maintain the continuity of R\&D efforts. To empirically investigate the effect of internal and external collaborator loss, we leverage 845 unexpected deaths of active inventors. We find a substantial negative effect on inventive productivity for the loss of external collaborators, particularly when the collaborator was of presumably high relevance to the remaining inventor. In contrast, the effect for the loss of internal collaborators is virtually zero. We show that the organization's knowledge management and hiring capabilities are instrumental in explaining the muted effect of internal collaborator loss.

Competing for Talent: Large Firms and Startup Growth

with James Bessen and Ronja Röttger
Discussion Paper on SSRN
Coverage HBR

Abstract This paper explores the impact of large firms’ hiring in local labor markets on the salaries offered by startups and on startup growth and performance. We analyze firm data matched to help-wanted ads and find strong evidence of “crowding out.” A standard deviation increase in the share of ads posted by large firms raises startup pay offers by 5-10% for critical managerial, STEM, and sales jobs, and it reduces expected startup growth by 36%. Crowding is diminished by employee mobility and by spillovers to startups in closely related businesses. It is increased by big firm markups, which may have a large effect on startups. Results are robust to a shift-share instrumental variable strategy. Crowding has important implications for firm strategy, regional policy, and for understanding the slowdown in the aggregate growth of startup firms.

In Progress

Valuing Pharmaceutical Patent Thickets

with John McKeon and Timothy Simcoe

Abstract (Preliminary) Policymakers have expressed concerns about strategic use of the patent system by pharmaceutical companies. Motivated by those concerns, we study the valuation of patents throughout the drug development life cycle. We propose a simple model of patent value that highlights the resolution of scientific uncertainty as well as the impact of new patents on market exclusivity. Using data on patenting throughout the drug development process, we find that stock market event studies indicate that patents issued later in the drug-development process are more valuable, even though these "secondary" patents are generally viewed as weaker than the more highly cited patents covering a new molecule. In regressions that control for uncertainty, we find that additional exclusivity, continuation status, and new use classification remain important factors to explain patenting and patent value.