“The Impact of Institutions on Innovation”

with Alexander Donges and Rui C. Silva, Minor Revision, Management Science

Inclusive institutions are a first-order determinant of innovation.

Grants and stipends:
-Deloitte Institute for Innovation and Entrepreneurship research grant
-Deloitte Institute for Innovation and Entrepreneurship stipend

Abstract:  We study the impact of inclusive institutions on innovation using novel, hand-collected, county-level data for Imperial Germany. We use the timing and geography of the French occupation of different German regions after the French Revolution of 1789 as an instrument for institutional quality. We find that the number of patents per capita was more than twice as high in counties with the longest occupation as in unoccupied counties. Among the institutional changes brought by the French, the introduction of a civil code, ensuring equality before the law, and the promotion of commercial freedom through the abolition of guilds and trade licenses have a stronger effect on innovation than a reform that increased labor market mobility and an agricultural reform that broke up the power of rural oligarchs. We also document that the effect of institutions on innovation is particularly pronounced for high-tech innovation and that the increase in patenting activity due to better institutions translates into higher economic growth. Our findings highlight inclusive institutions as a first order determinant of innovation.

“The Bright Side of Fire Sales”

with Henri Servaes, 2019, Review of Financial Studies, 32(11), 4228–4270.    
SSRN version is identical to RFS version except for formatting and copy editing. 

Fire sales are not as bad as widely thought since buyers gain substantially from them and the externalities of fire sales for other stakeholders are limited. 

Abstract: Firms that buy assets in fire sales earn excess returns that are two percentage points higher than in regular acquisitions. The mechanism behind this result is the reduced bargaining power of the seller. We find no difference in real effects or in the combined returns for buyers and sellers between fire sales and regular acquisitions, suggesting that the quality of the match is similar in both types of transactions. The externalities of fire sales for other stakeholders are limited. These results indicate that the welfare losses associated with fire sales are smaller than previously thought.