Date of Award

5-1-2022

Language

English

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

College/School/Department

Department of Economics

Content Description

1 online resource (xii, 128 pages) : color illustrations.

Dissertation/Thesis Chair

Chun-Yu Ho

Committee Members

Gerald R. Marschke, Haruka Takayama

Keywords

Technological innovations, Technology transfer, Consolidation and merger of corporations, Banks and banking, Venture capital, Industrial productivity, Financial crises

Subject Categories

Economics

Abstract

Firms’ productivity gain and technological innovation have been vital to ensure a country’s long-term economic growth and competitive advantage. This dissertation focuses mainly on drivers and barriers nurturing to firms’ productivity gains and innovative activities to suggest policy implications. The first essay examines the impacts of inventor mobility in value creation in mergers and acquisitions (M&As). We employ a two-sided matching model for acquirers and targets that allows them to choose whom to merge with. Applying this model, we examine how inventor mobility affects value creation in M&As in the manufacturing sector. Inventors exchanged between inventing firms have been interpreted as a mechanism of knowledge transfer. For firms in the M&A market, it can be seen as (1) an indicator of compatibility and therefore a predictor of M&A, (2) a search and screening strategy for identifying a potential merger partner’s compatibility, (3) or laying the groundwork for a successful merger. We measure inventor mobility by the turnover of inventors between acquirer and target before the merger. Based on a sample of 348 mergers of the U.S. manufacturing firms during 1980-2015, we find that an exchange of inventors between firms increases the value of their merging, which in turn increases their merger likelihood. After instrumenting for inventor mobility, the positive relationship between mobility and merger likelihood remains, suggesting at least some of mobility’s effect on merger likelihood is causal ((1) and (3)). The second essay investigates how venture capital alters the impact of banking crises on innovation based on cross-country industry-level data for the period 1980-2012. We exploit the banking crisis as a quasi-experiment for the tightening of bank credit and show several findings. First, the banking crisis causes a lower aggregate rate of innovation for at least five years. Second, the innovation dampening effect of the banking crisis is stronger for industries depending more on external finance. Third, even for those industries depending on external finance, the innovation dampening effect of the banking crisis can be mitigated by a more developed venture capital market. Overall, our results highlight that venture capital financing can substitute bank financing for funding innovation during and after banking crises. Our results are robust to the uses of alternative measures of venture capital and external finance dependence, specification, dates of the banking crisis, and post-crisis time window. Finally, the supporting role of venture capital financing for innovation during and after banking crises is stronger for countries with better intellectual property rights and higher political democratization. The third essay explores the impacts of divestment on productivity of foreign affiliates based on firm-level data from Korea for the period 2006–2019, in which financial crises provide exogenous shocks to generate most of the observed divestments. Those divestments provide a unique setting to examine the benefit of foreign ownership and its persistence. Our empirical analysis leads to several conclusions. First, former foreign affiliates experience significant drops in total factor productivity and export even with increase of employment, capital stock, and imported inputs. Second, our results on productivity loss are stronger for former foreign affiliates having a higher capacity to absorb parents’ technology and having parents with lower transaction costs to transfer technology. Overall, our results suggest that the benefits of foreign ownership depend on a continuous knowledge transfer, and their persistence is particularly low for former affiliates firms relying on technology transfer. Finally, we rule out that access to trade markets, outsourcing, financial support, and transfer pricing are the main benefits of foreign ownership, and also show that the benefit of foreign ownership cannot be replicated by domestic parent ownership.

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