The Annual Business Survey (ABS) as the replacement for the Survey of Business Owners (SBO) serves as the principal data source for investigating business ownership of minorities, women, and immigrants. As a combination of SBO, the innovation questions formerly collected in the Business R&D and Innovation Survey (BRDIS), and an R&D module for microbusinesses with fewer than 10 employees, ABS opens new research opportunities investigating how ownership demographics are associated with innovation. One critical issue that ABS is uniquely able to investigate is the role that diversity among ownership teams plays in facilitating innovation or intermediate innovation outcomes in R&D-performing microbusinesses. Earlier research using ABS identified both demographic and disciplinary diversity as strong correlates to new-to-market innovation. This research investigates the extent to which the various forms of diversity also impact tangible innovation related intermediate outcomes such as the awarding of patents or securing venture capital financing for R&D. The other major difference with the earlier work is the focus on R&D-performing microbusinesses that are an essential input to radical innovation through the division of innovative labor. Evidence that disciplinary and/or demographic diversity affect the likelihood of receiving a patent or securing venture capital financing by small, high-tech start-ups may have implications for higher education, affirmative action, and immigration policy.
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Registered Report: Exploratory Analysis of Ownership Diversity and Innovation in the Annual Business Survey
March 2023
Working Paper Number:
CES-23-11
A lack of transparency in specification testing is a major contributor to the replicability crisis that has eroded the credibility of findings for informing policy. How diversity is associated with outcomes of interest is particularly susceptible to the production of nonreplicable findings given the very large number of alternative measures applied to several policy relevant attributes such as race, ethnicity, gender, or foreign-born status. The very large number of alternative measures substantially increases the probability of false discovery where nominally significant parameter estimates'selected through numerous though unreported specification tests'may not be representative of true associations in the population. The purpose of this registered report is to: 1) select a single measure of ownership diversity that satisfies explicit, requisite axioms; 2) split the Annual Business Survey (ABS) into an exploratory sample (35%) used in this analysis and a confirmatory sample (65%) that will be accessed only after the publication of this report; 3) regress self-reported new-to-market innovation on the diversity measure along with industry and firm-size controls; 4) pass through those variables meeting precision and magnitude criteria for hypothesis testing using the confirmatory sample; and 5) document the full set of hypotheses to be tested in the final analysis along with a discussion of the false discovery and family-wise error rate corrections to be applied. The discussion concludes with the added value of implementing split sample designs within the Federal Statistical Research Data Center system where access to data is strictly controlled.
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Are Immigrants More Innovative? Evidence from Entrepreneurs
November 2023
Working Paper Number:
CES-23-56
We evaluate the contributions of immigrant entrepreneurs to innovation in the U.S. using linked survey-administrative data on 199,000 firms with a rich set of innovation measures and other firm and owner characteristics. We find that not only are immigrants more likely than natives to own businesses, but on average their firms display more innovation activities and outcomes. Immigrant owned firms are particularly more likely to create completely new products, improve previous products, use new processes, and engage in both basic and applied R&D, and their efforts are reflected in substantially higher levels of patents and productivity. Immigrant owners are slightly less likely than natives to imitate products of others and to hire more employees. Delving into potential explanations of the immigrant-native differences, we study other characteristics of entrepreneurs, access to finance, choice of industry, immigrant self-selection, and effects of diversity. We find that the immigrant innovation advantage is robust to controlling for detailed characteristics of firms and owners, it holds in both high-tech and non-high-tech industries and, with the exception of productivity, it tends to be even stronger in firms owned by diverse immigrant-native teams and by diverse immigrants from different countries. The evidence from nearly all measures that immigrants tend to operate more innovative and productive firms, together with the higher share of business ownership by immigrants, implies large contributions to U.S. innovation and growth.
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IMMIGRANT ENTREPRENEURS AND INNOVATION IN THE U.S. HIGH-TECH SECTOR
February 2019
Working Paper Number:
CES-19-06
We estimate differences in innovation behavior between foreign versus U.S.-born entrepreneurs in high-tech industries. Our data come from the Annual Survey of Entrepreneurs, a random sample of firms with detailed information on owner characteristics and innovation activities. We find uniformly higher rates of innovation in immigrant-owned firms for 15 of 16 different innovation measures; the only exception is for copyright/trademark. The immigrant advantage holds for older firms as well as for recent start-ups and for every level of the entrepreneur's education. The size of the estimated immigrant-native differences in product and process innovation activities rises with detailed controls for demographic and human capital characteristics but falls for R&D and patenting. Controlling for finance, motivations, and industry reduces all coefficients, but for most measures and specifications immigrants are estimated to have a sizable advantage in innovation.
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An Examination of the Informational Value of Self-Reported Innovation Questions
October 2022
Working Paper Number:
CES-22-46
Self-reported innovation measures provide an alternative means for examining the economic performance of firms or regions. While European researchers have been exploiting the data from the Community Innovation Survey for over two decades, uptake of US innovation data has been much slower. This paper uses a restricted innovation survey designed to differentiate incremental innovators from more far-ranging innovators and compares it to responses in the Annual Survey of Entrepreneurs (ASE) and the Business R&D and Innovation Survey (BRDIS) to examine the informational value of these positive innovation measures. The analysis begins by examining the association between the incremental innovation measure in the Rural Establishment Innovation Survey (REIS) and a measure of the inter-industry buying and selling complexity. A parallel analysis using BRDIS and ASE reveals such an association may vary among surveys, providing additional insight on the informational value of various innovation profiles available in self-reported innovation surveys.
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Investigating the Effect of Innovation Activities of Firms on Innovation Performance: Does Firm Size Matter?
January 2025
Working Paper Number:
CES-25-04
Understanding the relationship between a firm's innovation activities and its performance has been of great interest to management scholars. While the literature on innovation activities is vast, there is a dearth of studies investigating the effect of key innovation activities of the firm on innovation outcomes in a single study, and whether their effects are dependent on the nature of firms, specifically firm size. Drawing from a longitudinal dataset from the Business Research & Development and Innovation Survey (BRDIS), and informed by contingency theory and resource orchestration theory, we examine the relationship between a firm's innovation activities - including its Research & Development (R&D) investment, securing patents, collaborative R&D, R&D toward new business areas, and grants for R&D - and its product innovation and process innovation. We also investigate whether these relationships are contingent on firm size. Consistent with contingency theory, we find a significant difference between large firms and small firms regarding how they enhance product innovation and process innovation. Large firms can improve product innovation by securing patents through applications and issuances, coupled with active participation in collaborative R&D efforts. Conversely, smaller firms concentrate their efforts on the number of patents applied for, directing R&D efforts toward new business areas, and often leveraging grants for R&D efforts. To achieve process innovation, a similar dichotomy emerges. Larger firms demonstrate a commitment to securing patents, engage in R&D efforts tailored to new business areas, and actively collaborate with external entities on R&D efforts. In contrast, smaller firms primarily focus on securing patents and channel their R&D efforts toward new business pursuits. This nuanced exploration highlights the varied strategies employed by large and small firms in navigating the intricate landscape of both product and process innovation. The results shed light on specific innovation activities as antecedents of innovation outcomes and demonstrate how the effectiveness of such assets is contingent upon firm size.
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An Anatomy of U.S. Firms Seeking Trademark Registration
April 2018
Working Paper Number:
CES-18-22
This paper reports on the construction of a new dataset that combines data on trademark applications and registrations from the U.S. Patent and Trademark Office with data on firms from the U.S. Census Bureau. The resulting dataset allows tracking of various activity related to trademark use and protection over the life-cycle of firms, such as the first application for a trademark registration, the first use of a trademark, and the renewal, assignment, and cancellation of trademark registrations. Facts about firm-level trademark activity are documented, including the incidence and timing of trademark registration filings over the firm life-cycle and the connection between firm characteristics and trademark applications. We also explore the relation of trademark application filing to firm employment and revenue growth, and to firm innovative activity as measured by R&D and patents.
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The Metamorphosis of Women Business Owners: A Focus on Age
November 2024
Working Paper Number:
CES-24-71
Due to their growth, increasing performance, and significant contributions to the United States economy, women-owned businesses have spurred the interest of policymakers, researchers, and advocacy groups. Using various data products from the Census Bureau's Business Demographics Program, this study examines how women business ownership changes over time by age. We find that young owners experienced growth in ownership between 2012 and 2020 and that younger employer businesses were mostly owned by women under the age of 35 in 2021. We show that among women aged 45 to 54 and those aged 55 to 64 ownership rates declined 5.5% and 4.8% between 2012 and 2020, implying an acceleration in the drop out of entrepreneurship for mid to late career age groups. We also show that older owners operate most businesses in capital-intensive industries, had more prior businesses, and higher rates of selling their most recently started businesses. Finally, we find that age groups often characterized as childbearing ages found balancing work and family as key drivers of their decision to start a business.
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The Location of Industrial Innovation: Does Manufacturing Matter?
March 2013
Working Paper Number:
CES-13-09
What explains the location of industrial innovation? Economists have traditionally attempted to answer this question by studying firm-external knowledge spillovers. This paper shows that firm-internal linkages between production and R&D play an equally important role. I estimate an R&D location choice model that predicts patents by a firm in a location from R&D productivity and costs. Focusing on large R&D-performing firms in the chemical industry, an average-sized plant raises the firm's R&D productivity in the metropolitan area by about 2.5 times. The elasticity of R&D productivity with respect to the firm's production workers is almost as large as the elasticity with respect to total patents in the MSA, while proximity to academic R&D has no significant effect on R&D productivity in this sample. Other manufacturing industries exhibit similar results. My results cast doubt on the frequently-held view that a country can divest itself of manufacturing and specialize in innovation alone.
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Grassroots Design Meets Grassroots Innovation: Rural Design Orientation and Firm Performance
March 2024
Working Paper Number:
CES-24-17
The study of grassroots design'applying structured, creative processes to the usability or aesthetics of a product without input from professional design consultancies'remains under investigated. If design comprises a mediation between people and technology whereby technologies are made more accessible or more likely to delight, then the process by which new grassroots inventions are transformed into innovations valued in markets cannot be fully understood. This paper uses U.S. data on the design orientation of respondents in the 2014 Rural Establishment Innovation Survey linked to longitudinal data on the same firms to examine the association between design, innovation, and employment and payroll growth. Findings from the research will inform questions to be investigated in the recently collected 2022 Annual Business Survey (ABS) that for the first time contains a Design module.
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What Happens When Firms Patent? New Evidence from U.S. Economic Census Data
January 2008
Working Paper Number:
CES-08-03
In this study, we present novel statistics on the patenting in US manufacturing and new evidence on the question of what happens when firms patent. We do so by creating a comprehensive firm-patent matched dataset that links the NBER patent data (covering the universe of patents) to firm data from the US Census Bureau (which covers the universe of all firms with paid employees). Our linked dataset covers more than 48,000 unique assignees (compared to about 4,100 assignees covered by the Compustat-NBER link), representing almost two-thirds of all non-individual, non-university, non-government assignees from 1975 to 1997. We use the data to present some basic but novel statistics on the role of patenting in US manufacturing, including strong evidence confirming the highly skewed nature of patenting activity. Next, we examine what happens when firms patent by looking at a large sample of first time patentees. We find that while there are significant cross-sectional differences in size and total factor productivity between patentee firms and non-patentee firms, changes in patentownership status within firms is associated with a contemporaneous and substantial increase in firm size, but little to no change in total factor productivity. This evidence suggests that patenting is associated with firm growth through new product innovations (firm scope) rather than through reduction in the cost of producing existing products (firm productivity). Consistent with this explanation, we find that when firms patent, there is a contemporaneous increase in the number of products that the firms produce. Estimates of (within-firm) elasticity of firm characteristics to patent stock confirm our results. Our findings are robust to alternative measures of size and productivity, and to various sample selection criteria.
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