HBS Theses and Dissertations

In this dissertation, I present three essays on the dynamics of intellectual property bargaining and trade, particularly of patents. The first essay presents a game theoretic model examining the sale of intellectual property rights from small inventors with buyers of varying commercialization capacity across intellectual property rights regimes with full and no property rights protection. The essay finds that in Nash equilibrium in both single seller and infinite seller scenarios, sellers generally approach firms with greater commercialization capabilities if property rights are strong, and approach firms with lesser commercialization capabilities if property rights are not protected. The second essay examines the sale of patents from small inventors and entities to firms from 1992 to 2000. I exploit the 1996 Supreme Court case Markman v. Westview Instruments, arguing that patent protection weakened afterwards, to compare patent sales to firms with greater or weaker commercialization capabilities, which I proxy using industrial patent holdings. Using a conditional fixed-effects multivariate choice model, I find that patent sales are more highly concentrated towards firms with weaker patent holdings after Markman. The last essay develops a conceptual model of patent dynamic capabilities for firms, developing several predictions in conjunction with the technology life-cycle model.

This dissertation explores some of the implications of a richer conceptualization of human cognitive processes on three strategically important phenomena. Each essay explores its phenomenon of interest using findings on cognition from different fields including cognitive neuroscience, cognitive psychology, and social psychology, among others, and uses this cognitive perspective to generate novel predictions.

The first essay explores the process by which decision makers make subjective forecasts, that is, forecasts that are based on subjective estimates and "gut feeling" as opposed to a rational decision calculus. It develops a parsimonious model of this process that is fundamentally based on the associative nature of information processing in the mind. The model has some counter-intuitive properties and is able to account for some well-documented cognitive "biases". Finally, when applied to strategic forecasting settings of significant complexity that entail deliberation, it generates some novel predictions. 

The second essay explores the phenomenon of creative strategic leaps, that is, the phenomenon whereby the leaders of some firms are able to identify radically different strategic opportunities from the status-quo of the industry. The essay models these mental leaps as re-categorizations of strategic situations by these leaders. It develops a formal, micro-founded model of categorization that is based on findings from multiple disciplines including cognitive psychology, social psychology, cognitive neuroscience and marketing. The model is then used to propose two techniques that could increase the chances of making such novel mental leaps.

The final essay explores the emotional impact of the prior performance of a firm on its strategic decision making process, specifically on the distance of its strategic search and choices. It identifies a few robust mechanisms from cognitive psychology, cognitive neuroscience and behavioral economics relating to the impact of emotions on cognitive functioning, and then integrates and applies them to generate two hypotheses. The hypotheses make empirically testable predictions on the M&A choices of firms, which are then tested using a large panel dataset. Strong support is found for the predictions in the data.

This dissertation explores themes surrounding digital innovation and its effects on industries and firm- and employee-level productivity. Using novel and often proprietary sources of data, I take an empirical approach to asking how digital technology has transformed entire industries (e.g. medical devices and medical care), as well as how employees interact with tasks (e.g. technology-enabled remote work and telemedical care), with a focus on unpacking mechanisms driving each result. In each of these chapters, I focus on phenomena with large-scale impacts, from the digital transformation of a 150 billion US dollar medical device industry in the US, to increased productivity at the US Patent and Trademark Office that could lead to 1.3 billion US dollar in value as a result of new patent approvals, to potentially saving 70,000 lives a year as a result of telemedical intervention in the intensive care sector in the US

Corporate strategy --- what activities a firm performs --- and location strategy --- where it performs them --- have mostly been studied separately. However, geographic proximity enables the exchange of goods, workers, and knowledge --- precisely the types of resource flows that also motivate internalizing activities inside firm boundaries. This dissertation presents three essays that explore the interdependence of corporate- and location strategy and its implications for location choice and firm performance. Chapter 1 studies the effects of geographic proximity between firms in the same industry on their survival. While in theory, co-location can enhance firm productivity, the existing empirical evidence is mixed. In this paper, I argue that proximity between firms affects their performance differently depending on whether they compete locally or in broader national markets. Using road upgrades in the context of Brazil as an exogenous shock to proximity between incumbent firms, I find that in locally traded industries, greater proximity leads to increased exit of the smallest firms and higher survival rates of the largest --- effects that are consistent with increased competition. Meanwhile in nationally traded industries, firms of all sizes see improved survival rates, consistent with increased agglomeration spillovers. The results shed light on contradictory findings in the literature and show how investments in transportation infrastructure, such as roads, intensify both competition and agglomeration forces. In contrast to the focus on stand-alone firms in Chapter 1, Chapter 2 studies the spatial organization of complex, multibusiness firms. While prior research has focused on how firms co-locate with others, here we focus on the geographic proximity between the different units of the firm itself. We propose and test the hypothesis that multibusiness firms exhibit ``internal agglomeration” --- a systematic co-location of their different plants --- and that this is driven by the desire to share resources within the firm. Using data on the location and corporate structure of a large sample of U.S. manufacturing firms, we find that internal agglomeration exists and is primarily related to the sharing of labor. The findings suggest that internal labor markets are potentially an important source of competitive advantage in multibusiness firms. Building on the findings of Chapter 2, Chapter 3 studies the extent and drivers of internal labor markets in multibusiness firms directly. Using a large sample of multi-business firms from Brazil and a rich employer-employee matched dataset, we track all internal worker movements across the firms' units. We find that multibusiness firms redeploy a large share of their workers internally, especially managers and workers with more firm-specific experience. Redeployed workers earn a large wage premium over otherwise comparable workers hired though external labor markets. Geographic proximity and resource relatedness between the firms’ plants facilitate redeployment. In contrast to prevailing views of internal labor markets as a means to avoid external labor market frictions, our findings are consistent with internal labor markets as conduits of knowledge. Taken together, the three chapters of the dissertation provide evidence that strategic decisions around a firm's product- and geographic boundaries are intimately related, and that resource sharing is implicated in both.

ABSTRACT 1: This paper examines whether mobile telecom operators with access to different kinds of knowledge pursue different strategies in politically risky markets. Using data from 2000-2010 I find that firms with country-specific knowledge, gained via presence in the local market, and general knowledge, gained through a long history of operations, were more likely to increase or maintain investment and operations even as political risk rose to the highest levels while peer firms drop both investment and operations. Firms with market-risk knowledge, gained through previous experience confronting political risk, drop investment similar to peer firms but increase operations to capitalize on their short-term competitive advantage. Therefore, country-risk knowledge and general knowledge are associated with strategies that are durable to political risk, while market-risk knowledge is associated with the distinct strategy for political risk of increased operations. These results contribute to the literature by documenting distinct market-based strategies for firms with differing knowledge sets that remain in a market as political risk rises. ABSTRACT 2: Scholars of corporate governance have debated the relative importance of country and firm characteristics in understanding corporate governance variation across emerging economies. Using panel data and a number of model specifications, we shed new light on this debate. We find that firm characteristics are as important as and often meaningfully more important than country characteristics. In fact, 16.8% percent of firms in emerging economies have been able to exceed the 75th percentile of ratings in developed economies. Our results suggest that over recent years firms in emerging economies had more capability to rise above weak home-country institutions than previously suggested. ABSTRACT 3: Outsourcing firms seeking to avoid reputational spillovers that can arise from dangerous, illegal, and unethical behavior at supply chain factories increasingly rely on private social auditors to provide strategic information about the conduct of their suppliers. But little is known about what influences auditors’ ability to identify and report poor supplier conduct. We find that individual supply chain auditors’ monitoring practices are shaped by social factors including their experience, gender, and professional training; their ongoing relationships with suppliers; and the gender diversity of their audit teams. Providing the first comprehensive and systematic findings on supply chain monitoring, our study identifies previously overlooked transaction costs and suggests strategies to develop governance structures to mitigate reputational spillover risks by reducing information asymmetries between themselves and their suppliers.

This dissertation is comprised of three studies investigating sources of variation in firm practices. Firm practices may differ both due to differences in the practices firms choose to implement – different types of firms may make different selections – and due to differences in implementation success of similar practices – variation in internal firm conditions may result in differences in otherwise similar practices. The first essay examines a difference in firm practice selection whereas the second and third essays examine differences in firm practice implementation. Essay one considers how ownership impacts the management practices implemented by firms, specifically considering the founder CEO firm’s adoption of management practices as compared to firms with other owner-manager types. Founder CEO firms adopt fewer management practices than firms under other ownership structures, both due to a lack of awareness about the lower quality of their practices and due to greater value placed on the nonpecuniary benefit provided by potentially less efficient but power-preserving practices. Essays two and three use data from a Fortune 100 retail chain that implemented a new restocking practice across a subset of its retail stores. Essay two examines how prior experience with the old restocking practice impacts a team’s ability to perform and learn the new restocking practice. Teams with greater exposure to the old practice perform worse at first – due to experiencing a competency trap – but then improve more rapidly – due to greater efficiency of communication and coordination. Essay three focuses on the impact of pilot use when rolling out the new practice, proposing that a main function of pilot implementations is to allow for vicarious learning opportunities for stores subsequently implementing the practice. The relative performance of the pilot stores as well as the contextual similarity of these stores to the stores learning from them matters a great deal. Nonpilot stores increasingly rely only on their own experiences rather than the pilots’ experiences in instances where the learning opportunities become less obvious.