Research Statement

My research statement, which includes titles and abstracts of my research papers, is available as pdf

Visitors to this page may be interested in my Profile page, Job Market Paper, other Research Papers, Teaching Statement (which contains links to downloadable pdfs of my teaching scores), Projects page (which details work that is not yet ready for submission to peer-reviewed journals), and my Job Market Applications page (which provides complete sets of job market packets).

My main research areas are the financing of entrepreneurship and the economics of innovation. My work consists primarily in the application of industrial organization economics and corporate finance to entrepreneurship and business strategy. My work focuses on the use of micro-data in large scale empirical analysis. I seek to base my work on clearly specified underlying theory and believe that my work contains useful theoretical innovation, although the primary value added of my work is usually empirical. My Job Market Paper (How Start-up Firms Innovate) and one published paper (Government-Sponsored versus Private Venture Capital) consider the intersection of innovation and entrepreneurship. My other research, including two papers in the process of submission to peer-reviewed journals and a set of projects currently in development, is split evenly between these two areas.

In How Start-up Firms Innovate, I propose a `system vs. components' theory of innovation to understand the relationship between inventive activity and commercialization investment choices for patent-holding high-technology start-up firms. I test the theory using cross-sectional analyses and a difference-in-difference analysis. The theory requires that entrepreneurs maximize their expected profits given both the available technological opportunity and the state of technology in their industry. Start-up firms should specialize to pit their strengths against incumbents' weaknesses or generalize to best incumbents on every dimension. Moreover, policy that affects commercialization investment choices should also affect research and development choices, and vice versa. I show that following the introduction of the 2002 Sarbanes-Oxley Act, which raised the costs of an initial public offering, start-up firms preferred to specialize in component-based invention rather than developing competitive systems.

A companion paper to my job market paper, Venture Capitalists as Vendors of Complementary Components presents a two-stage, complete information, economic model of start-up innovation. The model places a structure on the nature of technological innovation by assuming that high-technology products are made up of systems of complementary components. It then uses this structure to understand the technological differences between successful venture-capital-backed start-up firms that achieve either an initial public offering (IPO) or an acquisition. The model suggests that venture-capital-backed start-up firms that get acquired by incumbents are purchased because they specialized in creating a high-quality component that has a complementarity with the incumbent's other components. This complementarity reduces the cost of production for the incumbent and is welfare improving for consumers. The model also suggests that firms that will secure IPOs should follow a general technology strategy and internalize the complementarities between components by creating an entire rival system of components. IPOs enhance welfare by increasing competition in product markets. Whether a venture-capital-backed start-up firm should elect to pursue an acquisitions or an IPO depends on the available technological opportunity and the relative state of technologies in their innovative ecosystem. Therefore, acquisitions and IPOs are alternative profit-maximizing strategies, and both enhance consumer welfare.

In Government-Sponsored versus Private Venture Capital, my co-authors and I argue that a normative reason for governments to subsidize venture capital (VC) markets is to address market failures associated with start-up firms. We then consider the effectiveness of a particular subsidy program in Canada -- the creation of government-sponsored venture capital (GSVC) funds. Using an instrumental variables approach, we found results to suggest that GSVCs were not successful in addressing market failures related to innovation and competition, and may instead be `crowding out' conventional private venture capitalists from the market for entrepreneurial finance.

Other work that is currently in the process of submission to peer reviewed journals includes The Role of VCs in Acquisitions and Patent Thickets. In The Role of VCs in Acquisitions, James Brander and I provide evidence from an event study of 19,708 acquisitions of privately-held firm to suggest that one important role of venture capitalists is to mitigate information asymmetries for their portfolio companies. In Patent Thickets, David Teece and I conduct a meta-analysis of 164 papers that define the term `patent thicket'. We then create a taxonomy of patent thickets based on the type of market failure that emerges from specific patent-based relationships. We also review evidence of the existence and hindrance to innovation of various types of patent thicket, and discuss appropriate policy responses.

References for all of my research papers are available from my Papers page. Abstracts are available from the individual paper wikipages.