Jan Bena

Corporate Innovations and Mergers and Acquisitions

Using a large and unique patent-merger data set over the period 1984 to 2006, we show that companies with large patent portfolios and low R&D expenses are acquirers, while companies with high R&D expenses and slow growth in patent output are targets. Further, technological overlap between firm pairs has a positive effect on transaction incidence, and this effect is reduced for firm pairs that overlap in product markets. We also show that acquirers with prior technological linkage to their target firms produce more patents afterwards. We conclude that synergies obtained from combining innovation capabilities are important drivers of acquisitions.

Heterogeneous Innovation, Firm Creation and Destruction, and Asset Prices

We study the implications of creative destruction on asset prices. We develop a general equilibrium model of endogenous firm creation and destruction in which “incremental” innovation by incumbents and “radical” innovation by entrants drive productivity improvements. Firms’ incentives to innovate generate time-varying economic growth and countercyclical economic uncertainty. The model matches key properties of consumption and asset prices, as well as novel facts on the process of creative destruction in the United States obtained using a sample of patents from 1975–2013. We show that the interplay between incumbents and entrants is an important determinant of risks priced in the financial markets.Received June 2, 2014; accepted September 14, 2015 by Editor Wayne Ferson.

Labor-induced Technological Change: Evidence from Doing Business in China

We study how the change in the price of labor affects the direction of technological change using a novel measure decomposing innovations into products (new goods) and processes (lower production costs). Using the 1999 U.S.-China agreement as a shock that lowered effective labor cost, we find that U.S. firms operating in China decrease their share of process innovations by 9% and that this adjustment is driven by lower process innovation. We obtain the same results using a staggered loosening of restrictions on foreign ownership across industries in China over 1995-2012. This suggests that cheap abundant labor substitutes for labor-saving innovation.We study how the change in the price of labor affects the direction of technological change using a novel measure decomposing innovations into products (new goods) and processes (lower production costs). Using the 1999 U.S.-China agreement as a shock that lowered effective labor cost, we find that U.S. firms operating in China decrease their share of process innovations by 9% and that this adjustment is driven by lower process innovation. We obtain the same results using a staggered loosening of restrictions on foreign ownership across industries in China over 1995-2012. This suggests that cheap abundant labor substitutes for labor-saving innovation.

The Effect of Credit Rationing on the Shape of the Competition-Innovation Relationship

Using a dynamic model of a step-by-step innovation race between financially constrained firms, I study how financial constraints affect innovation activity. The novel theoretical results derive from an analysis of the interaction between the incentive effect of competition on innovation and the effect competition has on the degree of credit rationing. I find that the negative effect of financial constraints on firm- and aggregate-level R&D investment is most pronounced at both high and low levels of competition. These predictions are supported by empirical evidence: The competition-innovation relationship has an inverted-U shape in less financially developed systems relative to the benchmark pattern observed in countries with highly developed financial systems. Innovation-enhancing policies implemented through competition reforms ought to be complemented by promoting financial development.

Multinational Firms and the International Transmission of Crises: The Real Economy Channel

We study how non-financial multinational companies transmit negative shocks from their subsidiaries located in countries experiencing a negative shock to subsidiaries in countries not experiencing one. We find that investment is 18% lower in subsidiaries of these parents relative to the same-industry, same-country subsidiaries of parents that are headquartered in the same parent country but do not have a subsidiary in a country experiencing a negative shock. Employment growth rate in the affected subsidiaries is zero or negative while it is 1.4% in the subsidiaries of unaffected parents. The aggregate industry-level sales and employment are also negatively impacted in the countries of the affected subsidiaries.