Three Essays on Corporate Innovations
CitationXu, Lilei. 2015. Three Essays on Corporate Innovations. Doctoral dissertation, Harvard University, Graduate School of Arts & Sciences.
AbstractThis thesis consists of three essays on corporate R&D and innovations in the United States.
Utilizing the newly collected survey of Business Research Development and Innovations (BRDIS), the first chapter establishes several stylized facts regarding the distribution of R&D spending as well as innovation outcomes, highlighting the fact that businesses with very little reported R&D also produce a fair amount of innovations, measured both by patent filings and new product introductions. In addition, service industries have become a major contributor to R&D spending and patenting activities. As most of our traditional studies in innovations have focused on manufacturing firms, these newly documented facts suggest a new perspective for future innovation research, with a refreshed look at the traditional definition of industry and firm linkages, as the rigid definition based on a manufacturing-dominated economy becomes less and less relevant in a new era of service-dominated economy.
The second chapter of the work validates the self-reported measures of innovations from the BRDIS survey by studying its relationship with real economic measures. More specifically, by matching information of publicly listed firms from Compustat to the BRDIS dataset, I have found that Tobin's q ratio positively predicts firms’ future innovative successes, even after controlling for R&D and patent information. On a separate account, I have matched the BRDIS data with the Annual Survey of Manufacturers, and found that intensity measures of innovations (percentage of sales from newly introduced product/services) are positively associated with productivity growth of manufacturing firms.
The last chapter studies the impact of credit constraints on firms' investment decisions (both capital expenditures and R&D spending) during the recent financial crisis. Using exogenous shocks coming from the syndicated loan market, the paper finds that credit constraints caused sharper declines in public firms' capital expenditures in 2009, and the impact was long lasting. However, the adverse effect of credit constraint was confined to firms with low internal liquidity reserves. Firms with high internal capital reserve were able to use the liquidity buffer to smooth out external shocks. However, no adverse impacts on R&D spending were identified for the sample of public firms, which supports commonly-held views in the corporate finance literature, namely, adjustment costs of R&D are high and firms usually depend upon internal capital and equity finance to support R&D activities.
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