Johan Hombert

Can Innovation Help U.S. Manufacturing Firms Escape Import Competition from China

We study whether R&D-intensive firms are more resilient to trade shocks. We correct for the endogeneity of R&D using tax-induced changes to the cost of R&D. On average across US manufacturing firms, rising imports from China lead to slower sales growth and lower profitability. These effects are, however, significantly smaller for firms with a larger stock of R&D -- by about half when moving from the 25th percentile to the 75th percentile of the R&D stock distribution. As a result, while the average firm in import-competing industries cuts capital expenditures and employment, R&D-intensive firms downsize considerably less.

Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France

We study a large-scale French reform that provided generous downside insurance for unemployed individuals starting a business. We study whether this reform affects the composition of people who are drawn into entrepreneurship. New firms started in response to the reform are, on average, smaller, but have similar growth expectations and education levels compared to start-ups before the reform. They are also as likely to survive or to hire. In aggregate, the effect of the reform on employment is largely offset by large crowd-out effects. However, because new firms are more productive, the reform has the impact of raising aggregate productivity. These results suggest that the dispersion of entrepreneurial abilities is small in the data, so that the facilitation of entry leads to sizable Schumpeterian dynamics at the firm-level.

The Real Effects of Lending Relationships: Evidence from Innovative Firms and Inventor Mobility

We study whether relationship lending is conducive to the financing of innovation. Exploiting a negative shock to relationships, we show that it reduces the number of innovative firms, especially those that depend more on relationship lending such as small, young, and opaque firms. This credit supply shock leads to reallocation of inventors whereby young and promising inventors leave small firms and move out of geographical areas where lending relationships are hurt. Overall, our results suggest that credit markets affect both the level of innovation activity and the distribution of innovative human capital across the economy.

The Competitive Effect of a Bank Megamerger on Credit Supply

We study the effect of a merger between two large banks on credit market competition. We identify the competitive effect of the merger using matched loan-level and firm-level data and exploiting variation in the merging banks’ market overlap across local lending markets. On the credit market side, we find a reduction in lending, in particular through termination of relationships. In the average market, bank credit decreases by 2.7%. On the real side, firm exit increases by 4%, whereas firms that do not exit and firms that start up experience no adverse real effect on investment and employment.

Fire Sales: Revisiting the Market Equilibrium Approach

I explore the impact of fire sales on welfare. Because they allocate assets according to financial muscle rather than real efficiency, they are usually seen as socially costly. Though I show the following irrelevance result: When firms are cashless and use industry-specific assets, the competitive equilibrium exhibits fire sales and though is socially optimal. By contrast, when cash-rich outsiders can acquire assets in the industry, firms hoard less liquidity and the asset resale price is lower than in the social optimum. Although too many assets are reallocated from efficient cash-poor firms towards inefficient cash-rich firms, restricting such asset transactions (for example with anti-takeover laws) makes a bad situation worse.