Technological Innovation, Labor Dynamics, and Firm Responses
Paper Session
Sunday, Jan. 4, 2026 8:00 AM - 10:00 AM (EST)
- Jie He, University of Georgia
Private Firms: Friends or Foes of Public Firms?
Abstract
We examine the impact of positive private firm innovation shocks and private firm liquidity shocks on existing public firm peers using an extensive dynamic textual network of roughly a half million public and private product market peers from 2000 to 2021. We document that state-level shocks to the incentives of private and public firms to invest in R&D have positive effects on public firms. Given these shocks are stronger for private firms located in these states, these results are consistent with private firms developing products that are complementary to public firms. We also find that after these innovation shocks, related public firms increase acquisitions of private firms and have improved profitability, sales growth, and investments, including R&D. Measures of competition and competitive threats also decline following private firm innovation shocks. In contrast, we find that state-level liquidity shocks, which can instead relax financing constraints of private firms located in these states, negatively impact related public firms, consistent with private firms increasing the competitive pressure on public firms. These results suggest that non-innovation demand or liquidity shocks enable private firms to challenge public firms as competitors, while innovation shocks increase private firm complementarities to public firms thus benefiting both public and private firms.Monopolizing Minds: How M&As Stifle Innovation Through Labor Market Power
Abstract
This paper argues that mergers and acquisitions (M&As) reduce inventors’ innovation incentives and outputs by increasing firms’ labor market power and limiting the rents inventors can capture. We test this mechanism using individual-level longitudinal data from the U.S. Census Bureau. We find that, at both target and acquiring firms, inventors exposed to greater increases in labor market concentration—particularly in already concentrated markets—produce fewer patents, earn lower wages, and exhibit reduced job mobility following mergers. In aggregate, the negative impact of increased labor market power on inventor productivity outweighs the potential benefits from innovation synergies. Overall, our findings highlight the critical role of labor market dynamics and inventor incentives in evaluating the innovation consequences of M&As.The Value of Corporate Patent Utilization
Abstract
We use textual analysis of firm patent and product filings to construct a novel measure of patent utilization rate, which reflects the extent to which a firm’s patents are applied in its new products. We validate the measure by showing that patents utilized in new products are more likely to belong to firms’ core technology fields, receive more self-citations, and are less likely to be sold, and that new products supported by more patents receive higher announcement returns and are more likely to be breakthrough innovations. Firms with higher patent utilization rate experience more active new product development, stronger market share growth, and higher profitability improvement and valuation. The effects are predominantly driven by the utilization of high-value patents, and are more pronounced for firms in competitive product markets. We address endogeneity concerns using a shift-share instrumental-variable approach and show robust findings. Our results highlight the costs of patent underutilization and the strategic importance of innovation commercialization.Discussant(s)
Gregor Schubert
,
University of California-Los Angeles
Jan Bena
,
University of British Columbia
Kai Li
,
University of British Columbia
Thomas Chemmanur
,
Boston College
JEL Classifications
- G3 - Corporate Finance and Governance