Working Papers

Abstract: This paper identifies the reallocation of human capital as a key channel of agglomeration spillovers for innovative firms. To measure agglomeration spillovers, I study how R&D labs in different local labor markets respond differently to scientific breakthroughs, which create large and unexpected shocks to innovation productivity in certain technology categories. Taking advantage of U.S. Census longitudinal establishment data matched with patent records, I systematically locate R&D labs in all local labor markets for each firm. I document four main findings. 

1. Following scientific breakthroughs, affected labs in thicker local labor markets (i.e., commuting zones with more inventors innovating in a certain field) produce more patents and higher-quality patents, consistent with positive agglomeration spillovers. 

2. The increase in patenting is mostly attributed to new hires rather than incumbent inventors. 

3. The thick labor market effect is concentrated in states and industries where there is lower enforceability of non-compete agreements and labor is more mobile. 

4. Using textual analysis to identify lab-level exposure to scientific breakthroughs, I find that inventors are reallocated to labs that are more favorably affected by shocks, which helps labs in thicker labor markets to more easily bring in inventors working in the same niche fields and having a diverse knowledge base. 

Taken together, these results point to labor mobility as a key force in explaining why innovative firms cluster, and suggest that the clustering of firms in thick labor markets can foster corporate innovation by facilitating productivity-enhancing reallocation of human capital following scientific breakthroughs.

Presented at:  2024 AFA (scheduled), 2023 FMA (scheduled), 2023 SFS Cavalcade, 2023 NBER Productivity, Innovation, and Entrepreneurship Program, 2023 North American Meeting of the Urban Economics Association (scheduled), 2023 Labor and Finance Group Conference (scheduled), 2023 China International Conference in Finance (CICF), 2023 Columbia Private Equity Conference, 2023 Junior Academic Research Seminars (JARS) in Finance, WEFI PhD Workshop, City University of Hong Kong, Georgia State University, Michigan State University, Northeastern University, Shanghai Advanced Institute of Finance (SAIF), Southern Methodist University, The Ohio State University, University of Hong Kong, University of Kentucky, University of Pittsburgh, University of Rochester, University of Wisconsin-Madison, Copenhagen Business School (canceled), Melbourne Business School (canceled), National University of Singapore (canceled), University of Maryland. 

Abstract: Why do small businesses exploit business opportunities better in some areas than others? In a sample of 1.2 million consumer-facing establishments, stores differ significantly across neighborhoods and census tracts in the uptake of risk-free positive NPV forgivable loans to which they are entitled. Local social capital strongly predicts loan uptake after controlling for close-by bank branches, income, and education. Increasing our social capital measures by one standard deviation increases the loan uptake by 6.4 percent of the sample mean, accounting for 20 percent of the variation at the zip code level. The effect is higher than the effect of having a bank branch within 1000 yards. Large, low growth stores in less-dynamic areas benefit more from strong social capital, while small, high-growth stores in more-dynamic areas benefit more from bank branches. Virtual connections act similarly to in-person social connections and have the greatest effect on loan uptake in already advantaged locations. Virtual connections within the county predict higher use of local banks over FinTech lenders, while out-of-county virtual connections predict more increased use of FinTech lenders.

Presented at:  2023 WFA, 2023 SFS Cavalcade, 2023 MFA, 2022 NBER's Entrepreneurship Working Group, 2022 Virtual Corporate Finance Seminar, 2022 North American Meeting of the Urban Economics Association (UEA), 2022 UBC Summer Conference, 2022 China International Conference in Finance (CICF), University of Maryland.

Abstract: I identify the entry effects of top innovative firms on incumbent innovation. I exploit the inter-temporal variation in patenting activities of local inventors in chosen commuting zones that attracted the firm headquarters and in runner-up commuting zones that were finalists of location choice. Treated and control groups have similar trends prior to the entry, while the local inventors in the chosen zones perform better in quality and quantity after the entry of top innovative firms. They apply 6.7% more patents, gain 16.8% more top patents, and receive 11.6% more citations. In addition, I investigate the potential mechanisms underlying local innovation spillovers. Entry effects are stronger among local inventors who are technologically or socially closer to the entering firm, after controlling for innovation incentives and labor mobility. Social closeness, isolated from technological proximity, consistently explains the innovation gains, which suggests knowledge diffusion is the important channel for local innovation productivity spillovers. Overall, my results indicate that top innovative firms foster innovation of local participants largely through knowledge spillovers.

Presented at:  2022 North American Meeting of the Urban Economics Association (UEA), 2022 China International Conference in Finance (CICF), WEFI Fellow Program, Stevens Institute of Technology PhD Workshop, University of Maryland.

Award:  2022 Nancy S. and Edward F. Ebert Graduate Award in Free Enterprise.

Work in Progress 

Value of Talent, Innovation and Labor Market Thickness: Evidence from Inventor Deaths

Abstract: Human capital is increasingly essential to the growth and success of a firm. In this paper, I highlight the value of human capital in patenting activities of innovative firms and examine the interaction effects of labor market thickness.  Using the pre-retirement deaths of inventors as an exogenous negative shock, I find firms suffer a significant and persistent decline in patenting outcomes, compared with their matched counterparties in the absence of such loss. Yet, a thick labor market mitigates the adverse effect. In particular, the reduction in innovation would be mostly zeroed out for firms located in an area with a high clustering of talent. I investigate two possible mechanisms underlying the thick market effects: risk-sharing and improved match quality. My results show that firms in a thick labor market do better in recruiting and retaining talent. Furthermore, I find a greater knowledge overlap and technological fit between onboarding inventors and the firms in a thick labor market, indicating a higher quality of worker-firm match which helps preserve human capital and recover innovation activities. Taken together, the results emphasize the importance of talent in firms’ innovation performance and suggest that labor market thickness can play a crucial role in shaping firms’ human capital management.

Presented at:  WEFI Fellow Program, University of Maryland.

Board Diversity and M&A Strategies

Abstract: I construct a multidimensional measure of experience diversity in directors to examine the effects of board diversity on M&A strategies. Using the diversity in the supply of directors as an instrument, I exploit the exogenous variation in board composition and show that greater board experience diversity leads to more diversifying strategies. Specifically, firms with a more diversified board tend to complete more deals. They are more likely to acquire a target that operates in a different industry, is located at a more distant place, and has a lower cash flow correlation and lower level of product similarity. Announcement return and post-merger performance are not better for more diversified acquirers. 

Presented at:  University of Maryland.