PUBLICATIONS & RESEARCH PROJECTS
Generative AI and Firm-level Productivity: Evidence from Startup Funding Dynamics
(w/ Dominik Asam) -- Access current draft here.
New general-purpose technologies have the potential to fundamentally change the dynamics of entrepreneurial firms. This paper provides new evidence on the impact of Generative AI on startup productivity: We argue that valuable but non-exclusive technological innovations can be a source of competitive advantage if entrepreneurs leverage them as complementary assets to their existing skill set. To show this, we exploit the release of GitHub Copilot as a quasi-natural experiment affecting software-developing startups. We find a significant reduction in the time-to-initial-funding, an early-stage productivity indicator, by about 20% relative to comparable startups. These effects are strongest for startups whose founders have more technological or managerial experience. Our analysis highlights the considerable implications of GenAI as a new resource available to decision-makers, shaping startup dynamics and productivity.
Inventor Returns and Mobility
CEPR Discussion Paper No. 19681 (w/ Dietmar Harhoff & Paul P. Momtaz) -- Access the current draft here.
We show that firm and industry, rather than inventor and invention factors, explain more than half of the variation in inventor returns in administrative employer-inventor-patent-linked data from Germany. Between-firm variation in inventive rents is strongly associated with inventor mobility. Inventors are more likely to make a move just before a patent is filed than shortly thereafter and benefit from their move through a mobility-related marginal inventor return. Employers that pay inventor returns in excess of the expected return gain a favorable position in the market for inventive labor with subsequent increases in patent quality and quantity. Consistent with theoretical arguments, effect sizes also depend on employer-inventor technological complementarity, degree of competition, and invention quality.
Financial Market Integration and the Effects of Financing Constraints on Innovation
Research Policy (2024), doi.org/10.1016/j.respol.2024.104988; Giorgio Pagliarani Best Paper Award 2024;
Grant recipient of the Academic Research Programme of the European Patent Office (media link)
This paper investigates the effects of financial market integration on firm-level external debt financing and subsequent inventive activities. To this end, I exploit the implementation of the Financial Services Action Plan (FSAP) as a positive exogenous shift integrating European banking markets during the 2000s. My findings show that higher integration relaxes financing constraints, with significant positive effects on firms' use of debt and interest burden, particularly for ex-ante financially constrained firms. Moreover, financial integration spurs innovative activities in terms of patenting of those firms that benefited from the reforms. Considering a variety of qualitative dimensions shows that lifting financing constraints improves patent quality for a subset of previously constrained firms with low ex-ante patenting intensities (entrants) while adversely affecting the inventive output of incumbent patenters in the spirit of a quantity-quality tradeoff. These findings highlight the key function of a conducive financing environment for inventive activities but also reveal unintended limitations of policy-induced improvements in access to financing.
Leveraging Intellectual Property: The Value of Harmonized Enforcement Regimes
Journal of Banking & Finance (2024), doi.org/10.1016/j.jbankfin.2024.107169 -- (w/ Andrej Gill)
Enabling or Accelerating? The Timing of Innovation and the Different Roles of Venture Capitalists
Research Policy (2024), doi.org/10.1016/j.respol.2024.105060 -- (w/ Andrej Gill & Nina A. Michel).
This paper investigates two pivotal roles in how venture capitalists (VCs) affect their targets' innovative activities. To this end, we explore the timing of patenting around initial VC investments using a novel dataset that combines European firm-, patent-, and investment-level information on first-round targets between 1995 and 2015. In matched sample regressions, we find a positive (enabling) effect of VCs on the quantity and quality of patenting activities, i.e., for targets without pre-VC patenting activity. Results apply persistently over time, suggesting that VCs push for commercialization while also driving sustained patenting. We further find a positive (accelerating) effect for targets with pre-VC patenting, but only for a subset of specifically involved, experienced investors. Multiple tests suggest that selection effects do not drive our findings. The findings improve our understanding of VCs' roles in startup innovation processes and emphasize the diverse effects VCs can have on the trajectories of their target firms.
Small and Vulnerable during Crises? Firm Size and Financing Constraints Dynamics
Small Business Economics (forthcoming) -- (w/ Pantelis Karapanagiotis & Øivind Nilsen)
This study analyzes the dynamics of financing constraints under changing economic conditions and the role of firm size in this context. Using administrative data from Germany, we quantify financing constraints expressed as the probability that a firm encounters excess demand or excess supply. On average, small and medium-sized enterprises (SMEs) are indeed more likely than larger firms to face excess demand for loans. Using the Great Financial Crisis as an empirical setting, we show that tightening financing conditions do not affect smaller firms disproportionally, but generally risky borrowers. Importantly, post-crisis trends in debt-ratios, profitability, investments, and employment are similar irrespective of firm size, while smaller firms respond to the economic slowdown by persistently building up cash buffers. Our results urge policymakers to consider specific characteristics of bank-dependent firms to assess their exposure to economic crises - instead of focusing on size as a vulnerability criteria per se.
Intellectual Property as Business Loan collateral: A Taxonomy on Institutional and Economic Determinants
GRUR International (2024), doi.org/10.1093/grurint/ikae043 -- (w/ Leo Leitzinger & Uwe Walz)
As a promising strategy, firms can use their intellectual property rights (IPR) as collateral to secure debt financing. Despite an ongoing shift to a more technology-based economy, the collateralizing of IPR is still trailing behind the use of more traditional asset classes. In this paper, we develop a new taxonomy on the key determinants of using IPR as collateral. The taxonomy defines two pillars that govern the use of IPR collateral that distinguish between institutional and economic determinants. The institutional determinants cover contract law, IPR registries, and banking regulation. The economic determinants constitute the influence of IPR characteristics on the trade-off between the economic costs and benefits of collateralizing IPR. We propose that IPR collateral can have significant advantages regarding signaling, agency issues, and the creation of pledgable income. We apply the derived taxonomy to the legal and economic status quo in several industrialized economies to identify potential impediments to IPR-backed debt financing. Taken together, our taxonomy can be viewed as the foundation for future research on IPR as loan collateral for businesses, both in the fields of law and economics.
Debt Financing in the Knowledge Economy: Evidence from Intellectual Property as Loan Collateral
(w/ Laurie Ciaramella & Leo Leitzinger) -- Access the current draft here.
The evolution towards an increasingly knowledge-based economy impedes traditional asset-based financing and requires firms to reorganize their financing activities. This study provides new evidence on how organizations can use intellectual property (IP) as loan collateral to obtain debt. Investigating an exhaustive set of trademarks, patents, and design rights pledged as collateral in loan agreements allows us to detail the determinants, relevance, and implications of IP assets for secured debt financing. Our analyses disclose that firms deploy distinct IP assets as collateral, mostly trademarks. Granular IP-level analyses show that cash flow attribution is the key determinant for pledgeability irrespective of the IP type. In a quasi-natural experiment, we exploit exogenous variation in the menu of pledgeable assets and to emphasize the importance of IP rights in loan agreements. From an organizational perspective, the findings suggest that IP collateralization is a promising strategy, widening the financing opportunities of financially constrained small firms.
Navigating Change in a Dynamic Venture Capital Landscape
(w/ Maria Veihl) -- Access the current draft here.
The market conditions for entrepreneurial startups are subject to continuous and substantial evolution. This paper examines the implications of transformations in the venture capital financing landscape for startup activities. To this end, we investigate the Seed Boom in the US during the early 2010s, a substantial surge in early-stage VC investments into young, high-risk startups. Contrary to common concerns, we find robust evidence that overall startup performance remained stable in terms of exit rates, follow-on equity funding, and the generation of intellectual property. As an underlying mechanism for this resilience, we show that Seed-backed startups shifted towards more differentiated business strategies that serve as critical resources for their entrepreneurial success. As a key component of this mechanism, investors adopted risk-mitigating strategies in response to the new market conditions by increasing the syndication and staging of their investments. Consistent with theoretical considerations, these findings suggest that early-stage startups and investors need to activate their complementary, value-relevant resources to endure times of change. Overall, our analysis highlights the ability and workings of the venture capital landscape to sustain policy and market-based evolution.
Google Scholar Profile (link)
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Work in progress (selected):
- Empowering to Scale Global: Evidence from the German Accelerator Program (w/ D. Harhoff & D. Kim)
- Inventor Gender Wage Gap (w./ P. Momtaz)
- Debt financing and climate investments: Evidence from German SMEs (w/ J. Block & V. Zimmermann)
- The Reign of the Great Banks: Financial Development, Firm Performance, and Innovation in Imperial Germany (w/ M. Liebald)
- Learning by Watching: Western TV Access and Innovation Activity in the German Democratic Republic (w/ D. Harhoff & K. Wernsdorf)
- Same, Same, but Different: Founder Team Diversity and Startup Success (w/ J. Cho)