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R&D, Patents, and the Future of Innovation

Paper Session

Saturday, Jan. 5, 2019 10:15 AM - 12:15 PM

Hilton Atlanta, Grand Ballroom A
Hosted By: American Finance Association
  • Chair: Lauren Cohen, Harvard Business School

Speech is Silver, But Silence is Golden: Information Suppression and the Promotion of Innovation

Gaurav Kankanhalli
Cornell University
Alan Kwan
University of Hong Kong
Kenneth Merkley
Cornell University


An innovation is difficult to finance as mere disclosure reduces its value. We study strategic non-disclosure in a novel setting of mandatory disclosures of IP licensing agreements made by public firms, wherein key information is often redacted. Surprisingly, redacting firms are received well by capital markets relative to disclosing firms. Such firms also innovate more in the future. Redaction conceals an idea from rivals while protecting and signaling its value. Complementing this view, frequent redactors and firms whose redaction is confounded by high product market competition suffer, not benefit, suggesting signal jamming - that information frictions are only partly resolved.

Property Rights and Debt Financing

Paula Suh
University of Georgia


I examine how increasing firms' ownership of employee patents affects debt financing. I exploit a Court of Appeals Federal Circuit ruling that shifted property rights to employee patents from employees to firms, and find that firms' debt financing increases by 18%. The increase is attributable to firms' more efficient and productive use of patents, which improves the pledgeability of patents as collateral. I further show that a reduction in holdup problems increases synergistic value of patents through enhanced asset complementarity, inventor collaboration, and innovation productivity.

The Long-Term Consequences of the Tech Bubble on Skilled Workers' Earnings

Johan Hombert
HEC Paris
Adrien Matray
Princeton University


We use French matched employer-employee data to track skilled individuals entering the
labor market during the late 1990s tech bubble. The boom led to a sharp increase in the share of skilled entrants in the tech sector, which offers relative higher wages at the time. When the boom ends, however, the wage premium reverses and these skilled workers end up with a 5.5% wage discount ten years out, relative to similar peers who started in a non-tech sector. Other moments of the wage distribution of the boom, pre-boom, and post-boom cohorts are inconsistent with
explanations based on a selection effect or a cycle effect. Instead, we provide suggestive evidence
that workers allocated to the booming tech sector accumulate human capital early in their career that rapidly becomes obsolete.
Tania Babina
Columbia University
William Mann
University of California-Los Angeles
Stefan Lewellen
Pennsylvania State University
Umit G. Gurun
University of Texas-Dallas
JEL Classifications
  • G3 - Corporate Finance and Governance