Input Specificity, Firm-to-Firm Trade, and Firm Growth (Job Market Paper)
Abstract: This paper develops a Schumpeterian model of firm-to-firm trade dynamics to assess how growth and a sticky input market interact. Firm endogenously chooses whether to produce specific input for an exclusive customer firm at the expense of giving up larger customer base. Consequently, input specificity reduces misallocation at match level but increases the cost of sourcing for inputs in aggregate, which thus deters the entry and lowers the growth. By constructing a novel panel data of supply chain relationships with additional layer of input specificity measure on each linkage across US firms, this paper identifies the foreclosure effect of input specification contracts. Bringing the reduced form results to the equilibrium model indicates input specificity channel is quantitatively important in explaining the inequality among firms' production efficiencies and recent decline in business dynamism.
Input Market, Partnership and Heterogeneous Innovations with Qinshu Xue
Abstract: This paper studies the relationship between partnership and firms’ innovation strategies and its implications for industrial growth. Merging research collaboration relationship with Patent data at firm level, we empirically document that forming partnerships across firms is
associated with more exploitative (incremental) innovations and less exploratory (radical) innovations. Guided by the result, we propose a tractable growth framework where multi-product firms optimally implement either exploitative or exploratory innovations upon their product lines, given their partnership status. Although vertical partnership can leverage synergies through innovations and mitigate misallocation by avoiding frictional input market, it introducing too many over-developed technology-embodied input with limited productivity enhancement. Our framework permits quantitative analysis on how partnership can affect firms’ innovation strategies and the overall industrial growth.
Work in Progress
Protectionist Trade Policies and the College Gender Gap: Evidence from the US Labor Market with Q. Xue
Vintage Capital and Venture Capital Investment Concentration with K. Kuang and Q. Xue