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Working Paper
Innovation, investor sentiment, and firm-level experimentation
Due to frictions like informational externalities, firms invest too little in learning the productivity of newly available technologies through small-scale experimentation. I study the effect of investor sentiment on the relation between technological innovation and future firm-level R&D expenses, which include the resources used for small-scale experimentation. I find that rapidly improving investor sentiment strengthens the effect of technological innovation on one-year-ahead R&D expenses, and that the effect is more pronounced for high-tech firms with tighter financing constraints. The ...
Working Paper
The Monetization of Innovation
We develop a dynamic model for digital service firms, which invest in monetization to generate revenues from services provided to customers for free. Our model captures and explains why such firms often build a large customer base and become highly valued while continuing to suffer losses—traditional models would struggle to explain this pattern. Counterfactual analysis reveals that monetization uncertainty slows technological advancement by diverting resources away from innovation. We also show that regulation aimed at protecting user privacy has sizable adverse effect on firm size and the ...
Working Paper
The Diffusion of New Technologies
CORRECT ORDER OF AUTHORS: Aakash Kalyani, Nicholas Bloom, Marcela Carvalho, Tarek Hassan, Josh Lerner, and Ahmed Tahoun. We identify phrases associated with novel technologies using textual analysis of patents, job postings, and earnings calls, enabling us to identify four stylized facts on the diffusion of jobs relating to new technologies. First, the development of economically impactful new technologies is geographically highly concentrated, more so even than overall patenting: 56% of the most economically impactful technologies come from just two U.S. locations, Silicon Valley and the ...
Working Paper
Research in Commotion: Measuring AI Research and Development through Conference Call Transcripts
This paper introduces a novel measure of firm-level Artificial Intelligence (AI) Research & Development—the AIR Index—derived from the semantic similarity between earnings conference call transcripts and leading AI research papers. The AIR Index varies widely across industries, with sustained strength in computer and electronic manufacturing, and accelerating growth in computing infrastructure and educational services seen after the introduction of ChatGPT in November 2022. I find that the AIR Index is associated with an immediate increase in Tobin’s Q and can help explain the ...
Working Paper
Rising Skill Supply, Technological Changes, and Innovation: A Quantitative Exploration of China
Can the expansion of higher education lead to firm productivity growth? In this paper, we examine how China's college expansion program contributes to the rapid growth of firms' R&D expenditure and productivity. In our model, heterogeneous firms make endogenous R&D decisions, requiring them to allocate skilled workers between production and R&D. We structurally estimate the model using firm-level data on the level and distribution of R&D, as well as macro-level data on skill prices and sectoral allocation. Quantitative analysis reveals that between 2004 and 2018, the combination of the ...
Working Paper
Ideas and Firm Dynamics When It Takes Two to Tango
Teams of inventors now produce over 80 percent of U.S. patents, up from just 45 percent in 1976. Over the same period, inventor employment has become increasingly concentrated in large firms, rising six times more than overall employment concentration. To explain these trends, we develop a new model of endogenous team formation within firms and embed it in a general equilibrium model of the inventor labor market. Teams increase firms’ returns to scale by increasing the likelihood of productive matches between inventors. The value of these matches rises over time, possibly driven by ...
Working Paper
“Harvest Now Decrypt Later”: Examining Post-Quantum Cryptography and the Data Privacy Risks for Distributed Ledger Networks
This paper analyzes the risks posed by future-state quantum computers, specifically the “harvest now decrypt later” (HNDL) risk. We review foundational concepts of quantum computing to address the present and ongoing threat of HNDL to currently protected data. We use the Bitcoin network as an illustrative example to study the implications of HNDL for distributed ledger cryptocurrency networks that rely upon traditional cryptography. We posit that while cryptocurrency distributed ledger network maintainers could successfully deploy post-quantum cryptography (PQC) mitigations to protect the ...
Working Paper
Creativity and economic growth: theory, measures, and potentials for morocco
The current era of globalization is dominated by the rise of investments in intangible capital rather than tangible capital ? the ascendance of creativity over plant and equipment. This brief paper is motivated by the possibility that emerging market economies such as Morocco might take greater advantage of new tools and policies designed for this new era. To begin, I discuss the transformation of the global economy and the consequences of the transformed global economy for economic thinking and measurement. I refer to both old and new literature on the measurement of intangible investment ...
Working Paper
Surveying Business Uncertainty
We elicit subjective probability distributions from business executives about their own-firm outcomes at a one-year look-ahead horizon. In terms of question design, our key innovation is to let survey respondents freely select support points and probabilities in five-point distributions over future sales growth, employment, and investment. In terms of data collection, we develop and field a new monthly panel Survey of Business Uncertainty (SBU). The SBU began in 2014 and now covers about 1,750 firms drawn from all 50 states, every major nonfarm industry, and a range of firm sizes. We find ...
Working Paper
Pandemic-Era Uncertainty on Main Street and Wall Street
We draw on the monthly Survey of Business Uncertainty (SBU) to make three observations about pandemic-era uncertainty in the U.S. economy. First, equity market traders and executives of nonfinancial firms share similar assessments about uncertainty at one-year lookahead horizons. That is, the one-year VIX has moved similarly to our survey-based measure of (average) firm-level subjective uncertainty at one-year forecast horizons. Second, looking within the distribution of beliefs in the SBU reveals that firm-level expectations shifted towards upside risk in the latter part of 2020. In this ...