Robert Seamans

Fighting City Hall: Entry Deterrence and Technology Upgrades in Cable TV Markets

This article investigates how private firms respond to potential entry from public firms. This paper uses a data set of over 3,000 U.S. cable TV systems to present evidence consistent with entry deterrence. Incumbent cable TV firms upgrade faster when located in markets with a potential municipal entrant. However, the same systems are then slower to offer new products enabled by the upgrade, suggesting upgrades in these markets occur for strategic reasons. Incumbent cable systems also upgrade faster in response to municipal entry threats than to private entry threats. Understanding how private firms respond to potential entry from public firms is especially important in light of recent U.S. government entry into several industries. This paper was accepted by Bruno Cassiman, business strategy.

Threat of Entry, Asymmetric Information and Pricing

This paper examines the impact of asymmetric information on incumbent firms’ propensity to engage in limit pricing when faced with threat of entry. I draw from information economics to argue that incumbents will use price to respond ex ante to entry in situations characterized by asymmetric information. I suggest two situations in which asymmetric information can arise: when potential entrants are from outside the primary industry and when incumbent firms are members of R&D consortia. I then study pricing in the US cable TV industry to show that pricing patterns of incumbent cable TV systems are consistent with limit pricing when the relationship between the incumbent and potential entrant is characterized by asymmetric information.

Debtor Rights, Credit Supply, and Innovation

Firms’ innovative activities can be sensitive to public policies that affect the availability of capital for risky projects. In this paper, we investigate the effects of regional and temporal variation in U.S. personal bankruptcy laws on firms’ innovative activities. We find bankruptcy laws that provide stronger debtor protection decrease the number of patents produced by small firms. Stronger debtor protection also decreases the average quality, and variance in quality, of firms’ patents. We find evidence that the negative effect of stronger debtor protection on experimentation and innovation may be due to the decreased availability of external finance in response to stronger debtor rights — an effect amplified in industries with a high dependence on external finance. Hence, while it is typically assumed that stronger debtor protection encourages innovation by reducing the cost of failure for innovators, we show that it can instead dampen innovative activities by tightening the availability of external finance to innovators.

The Internet and Racial Hate Crime: Offline Spillovers from Online Access

This research note reports on an empirical investigation of the effect of the Internet on racial hate crimes in the United States from the period 2001-2008. We find evidence that, on average, broadband availability increases racial hate crimes. We also document that the Internets impact on these hate crimes is not uniform in that the positive effect is stronger in areas with higher levels of racism, which we identify as those with more segregation and a higher proportion of racially charged search terms, but not significant in areas with lower levels of racism. We analyze in depth whether Internet access will enhance hate group operations but find no support for the idea that this mechanism is driving the result. In contrast, we find that online access is increasing the incidence of racial hate crimes executed by lone wolf perpetrators. Several other mechanisms that could be driving the results are described. Overall, our results shed light on one of the many offline societal challenges from increased online access.

Cannibalization and Option Value Effects of Secondary Markets: Evidence from the US Concert Industry

We examine how reducing search frictions in secondary markets affects the value appropriated by firms in primary markets. We characterize two effects on primary market firms caused by intermediaries entering secondary markets: the ‘cannibalization’ and ‘option value’ effects. Separation between primary and secondary markets can drive which of the two effects dominates. Firms selling valuable and scarce products are more likely to have separate primary and secondary markets, and will therefore appropriate more value when secondary markets thicken. Firms selling products which are not valuable and scarce will be hurt. Further, we hypothesize that firms have incentives to engineer scarcity by limiting supply when secondary markets thicken to separate primary and secondary markets. We find support for these hypotheses in the U.S. concert ticket industry.

The Role of R&D in Entrepreneurial Finance and Performance

We extend theories of the firm to the entrepreneurial finance setting and argue that R&D-focused start-up firms will have a greater likelihood of financing themselves with equity rather than debt. We argue that mechanisms that reduce information asymmetry, including owner work experience and financier reputation, will increase the probability of funding with more debt. We also argue that startups that correctly align their financing mix to their R&D focus will perform better than firms that are misaligned. We study these ideas using a large nationally representative dataset on start-up firms in the United States.

The Effect of the Internet on Newspaper Readability

How has the Internet affected newspaper content? We build a dataset that matches newspaper readability measures to Internet penetration at the county-year level from 2000 – 2008. We document a positive relationship between Internet penetration and newspaper readability. This result appears remarkably robust. The relationship is evident in non-parametric graphs of the raw data, annual cross-sections and panel data models. Our cross section results rely on an instrumental variables approach that uses lightning strikes to instrument for Internet penetration. Thus, contrary to a commonly held belief that the Internet is “dumbing down” content, we find evidence supporting the opposite hypothesis: newspaper content appears to be getting more sophisticated in response to increased Internet penetration.

Entrepreneurship, Innovation, and Political Competition: How the Public Sector Helps the Sharing Economy Create Value

With the recent growth of the sharing economy, regulators must frequently strike the right balance between private and public interests to maximize value creation. In this paper, we argue that political competition is a critical ingredient that explains whether cities accommodate or ban ridesharing platforms and that this relationship is moderated in more populous cities and in cities with higher unemployment rates. We empirically test our arguments using archival data covering ridesharing bans in various U.S. cities during the 2011-2015 period. We supplement these data with semi-structured interviews. We find broad support for our arguments while mitigating potential endogeneity concerns. Our study has important implications for the nonmarket strategy, entrepreneurship and innovation, and public-private partnership literatures. In addition, our findings inform policy debates on the sharing economy.

Repositioning and Cost-Cutting: The Impact of Competition on Platform Strategies

Organizational structures are increasingly complex. In particular, more firms today operate as multisided platforms. In this paper, we study how platform firms use repositioning and cost-cutting in response to competition, elucidate external and internal factors that constrain or enable these responses, and examine how the firms’ responses affect their performance. Our empirical context is the U.S. newspaper industry, which has experienced increased competition following the entry of Craigslist, an online provider of classified ads. We find that when Craigslist enters a newspaper’s market, the newspaper repositions itself away from other newspapers by changing its content. This results in greater differentiation between newspapers in a market, but occurs primarily in markets in which reader preferences are heterogeneous. When reader preferences are homogeneous, newspapers are more likely to engage in cost-cutting. Both responses are more pronounced for newspaper firms whose sister firms have already exper...

Intra-Firm Spillovers? The Stock and Flow Effects of Collocation

We study how intra-firm collocation — geographic clustering of business establishments owned by the same parent company — influences performance, decomposing the collocation effect into stocks and flows to learn about the mechanisms behind intra-firm agglomeration. Using Census micro data on the full population of U.S. hotels and restaurants from 1977-2007, we find that doubling the intensity of intra-firm collocation is associated with a productivity increase of about 2%. Further analyses reveal that a significant component of the productivity gains are attributable to stock effects, in the sense that productivity effects persist after an establishment ceases to be collocated. The results are consistent with the idea that proximity to other establishments owned by the same parent firm facilitates knowledge transfer, which has broad implications for firm strategy.