Work in Progress
Unpublished papers and links. Many of these can be found on REPEC
Do capital incentives distort technology diffusion? Evidence on Cloud, Big Data and AI
(with Tim DeStefano, Nick Johnstone and Jonathan Timmis)
The arrival of cloud computing provides firms a new way to access digital technologies as digital services. Yet, capital incentive policies present in every OECD country are still targeted towards investments in information technology (IT) capital. If cloud services are partial substitutes for IT investments, the presence of capital incentive policies may unintentionally discourage the adoption of cloud and technologies that rely on the cloud, such as artificial intelligence (AI) and big data analytics. This paper exploits a tax incentive in the UK for capital investment as a quasi-natural experiment
to examine the impact on firm adoption of cloud computing, big data analytics and AI. The empirical results find that the policy increased investment in IT capital as would be expected; but it slowed firm adoption of cloud, big data and AI. Matched employer-employee data shows that the policy also led firms to reduce their demand for workers that perform data analytics, but not other types of workers.
Information constraints and technology efficiency: Field experiments benchmarking firms website performance
This study examines the influence of information constraints on firms’ efficiency in using digital technologies. For this we focus on a digital technology that is widely used, business websites. Through two natural field experiments in the UK, we provide firms with benchmarked performance information on their websites. The experimental designs enable us to assess the salience of the information provided and heterogeneity linked to prior experience and catch-up potential. Our results indicate that performance gaps are not primarily driven by information constraints, as the treatment demonstrates a limited overall impact on motivating firms to improve, with a short-lived effect during the Covid-19 lockdowns. We further support these conclusions using data on website-building software and the number of page views.
Is Acquisition FDI During a Economic Crisis Determinantal for Domestic Innovation? (with Maria Garcia-Vega and Apoorva Gupta)
This paper examines how acquisition-FDI during a financial crisis, or fire-sale FDI, affects the R&D investments of target firms. We compare these effects with acquisitions that occur during periods of strong economic growth. Using a panel of Spanish firms from 2004 to 2014, we find that irrespective of when in the business cycle the acquisition occurs, the best domestic firms are cherry-picked by foreign multinationals. Using propensity score matching and difference-in-difference regressions, we find that firms acquired during crises experience smaller declines in domestic R&D than firms acquired during periods of robust growth. To explain why fire-sale FDI does not result in large declines in R&D in target firms, we rely on the macroeconomic literature on the opportunity cost of R&D over the business cycle. Consistent with this theory, we find that firms acquired during crises search for new markets and technologies by becoming more exploratory in their innovation than firms acquired during non-crisis periods.
Cloud Computing and Firm Growth (with Tim DeStefano and Jonathan Timmis) Review of Economics and Statistics (forthcoming)
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. This paper uses 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 fibre availability and expected speeds. We 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 we 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 fibre broadband.