Jeongsik Lee

Heterogeneity, Brokerage, and Innovative Performance: Endogenous Formation of Collaborative Inventor Networks

In this study, I examine how past performance influences the relative positions of actors in a network and how the actor-level heterogeneity in quality mediates the often-demonstrated association between brokerage and performance. On the collaboration network of U.S. biotech inventors during 1976--1995, I find that inventors with superior track records are more apt to form collaboration ties that enhance brokerage, thereby occupying positions that allow them to broker across network boundaries. Controlling for past performance significantly weakens the positive relationship between brokering position and innovative performance. Furthermore, when inventor-level heterogeneity is controlled for through inventor fixed effects, the position-performance correlation disappears. These findings suggest that, at least for collaborative inventors, actor-level heterogeneity such as performance history largely drives the asymmetry in brokerage, explaining most of the position--performance association.

Productivity and the Role of Complementary Assets in Firms’ Demand for Technology Innovations

This article uses data on transactions in the pharmaceutical industry to examine the demand-side of technology outsourcing. By integrating a transaction--cost economics perspective with the analysis of internal R&D capabilities, we find that firms with relatively more cospecialized complementary assets or relatively strong internal R&D productivity have a lower propensity to source a technology from outside the firm. We show, however, that since downstream capabilities and internal R&D are complementary activities in the presence of asset specificity and transaction costs, a decrease in internal R&D productivity reduces the marginal value of the downstream assets within firm boundaries, thus stimulating the demand for external technology. Copyright 2010 The Author 2010. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

Dancing with the Enemy? Relational Hazards and the Contingent Value of Repeat Exchanges in M&A Markets

I examine the problem of relational hazards between repeat exchange partners and the contingent roles of trade uncertainty and future exchange prospects in moderating the potentially conflicting effects of past exchanges on these hazards, thereby facilitating or restraining the formation of relational embeddedness. On the data of advisory relationships in U.S. mergers and acquisitions from 1981 to 2004, I find that firms that repeatedly hire the same investment banks as financial advisors tend to overpay for acquisition targets, as reflected by negative investor reactions measured in the cumulative abnormal return. In addition, the degree of overpayment increases with the frequency of prior exchanges. This adverse effect of exchange history grows if the uncertainty regarding the target firm rises. However, better prospects for future business with acquiring firms help mitigate this negative effect, although this moderating effect varies across the types of exchange experience. The findings suggest that a potentially complex and nuanced process underlies repeat exchanges, which are an oft-claimed precursor of relational embeddedness, to deliver tangible economic benefits. This study contributes to the emerging literature on the “dark side” of embeddedness and, more broadly, to the sociology of markets and organizations by substantiating the contingency mechanisms that shape the value of a repeat relationship in market exchanges.

The Relationship between Innovation and Market Share: Evidence from the Global LCD Industry

We investigate the impact of technological capability on firm market share using technology investment data in the global thin-film-transistor liquid-crystal-display panel industry from 1999 to 2007. The Arellano–Bond estimation of the dynamic panel model indicates that prior technological capability is positively correlated with current market share. The magnitude of this effect appears economically substantial: an improvement of technological capability by one standard deviation implied a permanent increase of 2.6 percent-point in quarterly market share, a return tantamount to

Two-Sided Platform Competition in the Online Daily Deals Promotion Market

470 million in 2007 sales. The Granger test reveals that technological capability helps to predict future market share, but that the inverse is not true.

Generalist Incumbents and Effective Learning by Hiring

We empirically investigate the platform competition in the online daily deals promotion market that is characterized by intense rivalry between two leading promotion sites, Groupon and LivingSocial, that broker between merchants and consumers. We find that deals offered through Groupon, the incumbent, sell more and generate higher revenues than those offered by LivingSocial, the entrant. We show that the greater network size in the consumer side entirely explains the incumbents lead in the merchant side performance, indicating the existence of cross-side network effects at the aggregated market level. However, this performance advantage is dampened by the entrants competitive chasing at local markets through offers of greater discounts and lower prices. Moreover, the incumbent advantage quickly attenuates as the merchants repeat promotions over time. These countering forces appear to prevent this market from achieving a tipping equilibrium. Our findings thus help explain why different market structures arise in two-sided markets with network externalities.

Linking Market Entry and Firm Growth: When to Enter and Where to Grow?

Why are some firms better able to absorb new knowledge through learning by hiring? Focusing on human capital attributes of the incumbents in the hiring firm, we argue that presence of generalists - jack of all trades who possess knowledge across disparate domains – facilitates post-hiring knowledge diffusion, because their particular behavioral and cognitive patterns allow them to render unique services to hiring firms. Using patent data, we empirically test the idea by exploiting a series of policy shocks to address endogeneity issues. The results support our key proposition, and further show that the effect of generalists on post-hiring knowledge diffusion depends on important boundary conditions.

Deadlines, Work Flows, Task Sorting, and Work Quality

This proposed symposium offers new insights on market entry and firm growth by exploring the links between entry and growth, each of which has been studied relatively independently of each other in...

Two-sided platform competition with multihoming agents: An empirical study on the daily deals market

We examine deadlines-induced behavior using large-scale, high frequency data on about 5 million U.S. patents and published applications. We motivate the study with a model of rational agents facing discontinuous incentives around deadline thresholds, without using time-inconsistent preferences invoked in behavioral economics models of deadline-related behavior. Consistent with our model predictions, we find notable clustering of more complex patent applications around potential deadlines at month-, quarter- and year-ends, along with a small to moderate decline in work quality around those periods.

Search Boundary, Knowledge Recombination, and Technological Breakthroughs

The Internet and mobile revolutions gave birth to many information-based platforms that have low entry costs with highly imitable business models. Exploiting granular deal-level data, we empirically study the U.S. daily deals promotion market, characterized by frequent multihoming of consumers and merchants leading to intense competition in over 150 regional markets between two major platforms, Groupon and LivingSocial. Consistent with the competitive pressure due to prevalent multihoming on the consumer side, we find little inter-platform difference in deal terms such as discount rate, price and value offered to consumers. On the merchant side, merchants that performed worse in the first promotion were more likely to switch to a competing platform for the next promotion. However, such platform switching brought little improvement in coupon sales in the subsequent promotion, particularly when the merchant switched from the market leader to a newer platform. Being first in a regional market provided an advantage to the platform in coupon sales, but that advantage quickly attenuated as promotions were repeated. Thus, in the presence of multihoming agents, the daily deal platforms appear to find it difficult to create a competitive bottleneck in either side of the market. The insight from our findings can be extended to other infomediary platform markets.