Empirical studies on firm-level productivity and innovation

Abstract

In Chapter 1, I define a novel concept of low productivity spells. Instead of treating productivity as a continuous variable, I define a low-productivity state as poor productivity growth over 2 years consecutively. This provides an alternative insight into understanding firms which pose a potential drag on aggregate productivity growth. Using a competing risk framework, I find that over the course of 1991--2014, the exposure of import competition from China had a significant and negative effect on the exit from these low-productivity spells into high-productivity performance for listed firms in the U.S. On the other hand, this import exposure had no effect on the same firms shutting down. Together, these imply that the growth in import penetration from China had the effect of trapping U.S. manufacturing firms in low-productivity spells for longer.

In Chapter 2, I investigate the effect of the America Invents Act (AIA) in 2011 on the patents granted by small firm compared with large firms. In first constructing my dataset, I further bootstrap the algorithm proposed by Autor, Dorn, Hanson, Pisano and Shu (2017) in merging patent data from the United States Patents and Trademarks Office USPTO with firm-level data from COMPUSTAT to better correct for false positives and true negatives, as well as enabling it to be more replicable. With a difference-in-difference framework using de-trended patenting data, I find a negative effect by the AIA on patents granted to small firms compared with large firms. However, this effect appears to be driven primarily by the amount of cash holdings firms have. A triple-difference framework which includes cash holdings finds the AIA had no significant effect on the patents granted to small firms which are cash-poor compared with large firms which are also cash-poor.

In Chapter 3, I examine the effect of Chinese import competition on innovation by U.S. manufacturing firms originally investigated by Autor, Dorn, Hanson, Pisano and Shu (2017) but within a framework that differentiates this effect between small and large firms. In addition, I also measure the innovation response by firms using patents granted to them instead of their patent applications per se. With a model without heterogeneous effects, I find that the import penetration growth from China had increased innovation on average by all U.S. manufacturing firms when innovation is measured by the patents granted each firm. In a model with heterogeneous effects, I find this effect to be insignificantly different for large firms compared with small firms, and for cash-rich firms compared with cash-poor firms.