Members of the NBER's Productivity, Innovation, and Entrepreneurship Program met March 15 in Cambridge. Program Directors Nicholas Bloom of Stanford University and Josh Lerner of Harvard Business School, Research Associate Serguey Braguinsky of University of Maryland, and Faculty Research Fellow Sabrina T. Howell of New York University organized the meeting. These researchers' papers were presented and discussed:
Shai Bernstein and Rebecca Diamond, Stanford University and NBER, and Timothy McQuade and Beatriz Pousada, Stanford University
The Contribution of High-Skilled Immigrants to Innovation in the United States
Bernstein, Diamond, McQuade, and Pousada characterize the contribution of immigrants to U.S. innovation, both through their direct productivity as well as through their indirect spillover effects on their native collaborators. To do so, the researchers link patent records to a database containing the first five digits of 160 million of Social Security Numbers (SSN). By combining this part of the SSN together with year of birth, they identify whether individuals are immigrants based on the age at which their Social Security Number is assigned. The researchers find that over the course of their careers, immigrants are more productive than natives, as measured by number of patents, patent citations, and the economic value of these patents. Immigrant inventors are more likely to rely on foreign technologies, to collaborate with foreign inventors, and to be cited in foreign markets, thus contributing to the importation and diffusion of ideas across borders. Using an identification strategy that exploits premature inventor deaths, the researchers find that immigrants collaborators create especially strong positive externalities on the innovation production of natives, while natives create especially large positive externalities on immigrant innovation production, suggesting that combining these different knowledge pools into inventor teams is important for innovation. A simple decomposition suggests that despite immigrants only making up 16% of inventors, they are responsible for 30% of aggregate U.S. innovation since 1976, with their indirect spillover effects accounting for more than twice their direct productivity contribution.
Greer K. Gosnell, London School of Economics; John A. List, University of Chicago and NBER; and Robert Metcalfe, Boston University
The Impact of Management Practices on Employee Productivity: A Field Experiment with Airline Captains (NBER Working Paper No. 25620)
Increasing evidence indicates the importance of management in determining firms' productivity. Yet, causal evidence regarding the effectiveness of management practices is scarce, especially for high-skilled workers in the developed world. In an eightmonth field experiment measuring the productivity of captains in the commercial aviation sector, Gosnell, List, and Metcalfe test four distinct management practices: (i) performance monitoring, (ii) performance feedback, (iii) target setting, and (iv) prosocial incentives. The researchers find that these management practices -- particularly performance monitoring and target setting -- significantly increase captains' productivity with respect to the targeted fuel-saving dimensions. The researchers identify positive spillovers of the tested management practices on job satisfaction and carbon dioxide emissions, and captains overwhelmingly express desire for deeper managerial engagement. Both the implementation and the
results of the study reveal an uncharted opportunity for management researchers to delve into the black box of firms and rigorously examine the determinants of productivity among skilled labor.
Laurent Fresard, University of Lugano and Sustainable Forestry Initiative, and Gerard Hoberg and Donald E. Bowen III, University of Maryland
Technological Disruptiveness and the Evolution of IPOs and Sell-Outs
Fresard, Hoberg, and Bowen show that the recent decline in IPOs on U.S. markets is related to changes in the technological disruptiveness of startups, which they measure using textual analysis of patents from 1930 to 2010. The researchers focus on VC-backed startups and show that those with ex-ante disruptive technologies are more likely to exit via IPO and less likely to exit via sell-out. This is consistent with IPOs being favored by firms with the potential to carve out independent market positions with strong defenses against rivals. The researchers document an economy-wide trend of declining technological disruptiveness since World War II that accelerated since the late 1990s. This trend predicts fewer IPOs and more sell-outs, and the researchers find that roughly 20% of the recent dearth of IPOs, and 49% of the surge in sell-outs, can be attributed to changes in firms' technological characteristics.
Timothy J. DeStefano, Organisation for Economic Co-operation and Development, and Richard Kneller and Jonathan D. Timmis, University of Nottingham
Cloud Computing and Firm Growth
The arrival of the cloud has enabled a shift in the nature of ICT use, from investment in sunk capital to a pay-on-demand service that allows firms to rapidly scale up. DeStefano, Kneller, and Timmis use new firm-level data to examine the impact of cloud on firm growth in the UK, using zipcode-level instruments of the timing of high-speed fiber availability and expected speeds. The researchers find cloud leads to the growth of young firms in terms of employment and productivity, but they become more concentrated in fewer plants. For older firms the researchers find no scale or productivity growth, but instead disperse activity by closing plants and moving employment further from the headquarters. In addition, the plants that close tend to be those without access to fiber broadband.
Nicolas Crouzet, Apoorv Gupta, and Filippo Mezzanotti, Northwestern University
Shocks and Technology Adoption: Evidence from Electronic Payment Systems
Crouzet, Gupta, and Mezzanotti provide new evidence on the diffusion of technologies subject to positive adoption externalities. Using data on Indian electronic payment systems, they show that the 2016 demonetization -- which led to a temporary reduction in cash -- caused a permanent increase in the adoption of electronic payment systems by retailers. The researchers show that these dynamics are consistent with a technology choice model with positive externalities in adoption. A number of distinct predictions of the model -- in particular, history-dependence in adoption and the importance of spillovers between neighboring firms -- receive strong support in the data. Furthermore, evidence on the impact of the demonetization on household consumption suggests that this rise in adoption played an important role in limiting the costs of the shock. The results support the view that, when coordination problems slow down the diffusion of technology, aggregate shocks can act as coordination devices and shape adoption dynamics.
Achyuta Adhvaryu, University of Michigan and NBER; Anant Nyshadham, Boston College and NBER; and Jorge A. Tamayo, Harvard University
Managerial Quality and Productivity Dynamics
Which managerial skills, traits, and practices matter most for productivity? How does the observability of these features affect how appropriately they are priced into wages? Combining two years of daily, line-level production data from a large Indian garment firm with rich survey data on line managers, Adhvaryu, Nyshadham, and Tamayo find that several key dimensions of managerial quality, like attention, autonomy, and control, are important for learning-by-doing as well as for overall productivity, but are not commensurately rewarded in pay. Counterfactual simulations of the structural model show large gains from screening potential hires via psychometric measurement and training to improve managerial practices.
George P. Ball, Indiana University; Jeffrey Macher, Georgetown University; and Ariel Dora Stern, Harvard University
Recalls, Innovation, and Competitor Response: Evidence from Medical Device Firms
Innovation and new product development are the lifeblood of firms in R&D-intensive industries, yet malfunctioning products can cause immense damage. Product failures thus create managerial challenges and opportunities for focal firms and their competitors. Focal firm failures often result in sales decreases and cost increases associated with remedial public relations and manufacturing activities. Competitor firm failures, however, can create market opportunities and elicit strategic responses by focal firms. Ball, Macher, and Stern develop theory and provide empirical evidence of how innovative activity changes in response to product recalls in the U.S. medical device industry. Focal firm recalls slow incremental innovation while competitor firm recalls accelerate incremental and major innovation. Recall prevention and remediation efforts are thus more important than previously suggested, due to significant competitor responses.