RESEARCH
Working papers
Business Groups, Strategic Acquisitions and Innovation - With Carlo Altomonte & Tommaso Sonno (Under review)
We build a novel worldwide database merging information on patent-citations of firms paired with information on firms' affiliation to Business Groups (BGs). We exploit these data to document how BGs appropriate knowledge through standalone firm acquisition. First, we confirm that innovative standalone firms have a higher probability of becoming part of a BG. Second, we document how BGs tend to acquire firms that are on an upward trend in patents and citations. We also show that innovating activity significantly deteriorates post-acquisition, particularly for firms with high-quality, cited patents. Third, we show that such a deterioration in innovation activity is driven by acquired firms patenting within the same technological classes of the acquiring BG, while the latter does not hold for acquired firms patenting in different technologies than the BG's. We also find that acquisitions occurring in environments characterized by higher market concentration and more mature leading firms are associated with a relatively more pronounced reduction in innovation. These results generalize the defensive acquisition narrative, suggesting that BGs leverage these transactions as a strategic manoeuvre to solidify their market position in the face of potential competition.
Trademarks and Expansion in Production Networks - With Nuriye Melisa Bilgin (Submitted)
A wide class of literature shows the importance of branding and trust in final goods consumption, however, the role of trademarks in firm-to-firm relationships has received less attention. This paper focuses on filling this gap by investigating the impact of trademark ownership on the production networks of manufacturing firms. Using a comprehensive firm-to-firm transaction-level dataset in Turkey, we find that companies that apply for and receive trademarks make significant inroads in their position within supply chains. These firms experience, on average, a 13.7% increase in network centrality compared to those whose trademark applications are declined. The effects of branding are not limited to the network; we also document an 11.8% increase in productivity and a 23.9% increase in size within firm, four years after a granted trademark. This evidence suggests that trademarks enhance firms' visibility and credibility, attracting more business partners and expanding market reach. Furthermore, these findings imply that trademarks play a critical role in strengthening domestic production networks and fostering firms' growth.
The effect of FDI liberalization on manufacturing firms’ technology upgrading - With Maria Bas
Foreign direct investment (FDI) liberalization promotes the entrance of multinational firms relying on advanced technologies. This paper studies the effects of FDI liberalization on domestic downstream firms’ technology upgrading through two main mechanisms. Domestic final good producers might benefit from horizontal and vertical FDI technological spillovers. These effects can be unequal across domestic firms depending on their productivity level and on contract enforcement costs. We investigate the effects of FDI reform in India at the beginning of the 1990s on downstream manufacturing firms’ decision to invest in R&D. Relying on a difference-in-differences estimation, we compare firms producing in industries where FDI has been liberalized against those firms producing in non-FDI liberalized industries. Our findings suggest that Indian firms benefited from FDI liberalization to improve their technical-know. These results are concentrated on the most productive firms that upgrade their technology through both horizontal and vertical spillovers. Finally, firms producing in Indian states with weaker contract enforcement (more-congested courts) seem to benefit less from FDI liberalization.
FDI, Imported Inputs and Firm Productivity: Evidence from India
This paper studies whether and how firms’ productivity gains from input trade liberalization are amplified by FDI openness using Indian firm-level data, Prowess, for the period (1989-1997). The empirical strategy relies on an original Difference-in-Differences methodology with variable treatment intensity exploiting exogenous changes in 3-digit industry-level FDI policy in 1991. Findings strongly suggest that most of the productivity gains reaped from input trade liberalization are channeled through FDI openness, and consequently the intensity of exposure to foreign firms. If FDI is completely liberalized, a 10-percentage point decrease in input tariffs increases TFP by 8.6% as opposed to 2.7% if the firm is not exposed to any FDI. Findings also suggest a technical know-how spillover that is stronger for capital-intensive and large firms.
Work in progress
Gravity before Pareto: from Trade Flows to Price Distributions - With Gianmarco Ottaviano and Davide Suverato
Policy papers