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Pirate's Treasure
January 2017
Working Paper Number:
CES-17-51
Do countries that improve their protection of intellectual property rights gain access to new product varieties from technologically advanced countries? We build the first comprehensive matched firm level data set on exports and patents using confidential microdata from the US Census to address this question. Across several different estimation approaches we find evidence that these protections affect where US firms export.
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The Annual Survey of Entrepreneurs: An Update
January 2017
Working Paper Number:
CES-17-46
We provide an update on the Annual Survey of Entrepreneurs (ASE), which is a relatively new Census Bureau business survey. About 290,000 employer firms in the private, non-agricultural U.S. economy are in the ASE sample. Its content is relatively constant over collections, allowing for comparability over time; however, each year there are approximately ten new questions in a changing topical module. Earlier topical modules covered innovation (2014) and management practices (2015). The topical module for reference year 2016 covers business advice and planning, finance, and regulations. The ASE is collected through a partnership of the Census Bureau with the Kauffman Foundation and the Minority Business Development Agency. Qualified researchers on approved projects may request access to the ASE micro data through the Federal Statistical Research Data Center (FSRDC) network.
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Geography in Reduced Form
January 2017
Working Paper Number:
CES-17-10
Geography models have introduced and estimated a set of competing explanations for the persistent relationships between firm and location characteristics, but cannot identify these forces. I introduce a solution method for models in arbitrary geographies that generates reduced-form predictions and tests to identify forces acting through geographic linkages. This theoretical approach creates a new strategy for spatial empirics. Using the correct observables, the model shows that geographic forces can be taken into account without being directly estimated; establishment and employment density emerge as sufficient statistics for all geographic forces. I present two applications. First, the model can be used to evaluate whether geographic linkages matter and when simplified models suffice: the mono-centric model is a good fit for business services firms but cannot capture the geography of manufactures. Second, the model generates reduced-form tests that distinguish between spillovers and firm sorting and finds evidence of sorting.
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Reconciling the Firm Size and Innovation Puzzle
March 2016
Working Paper Number:
CES-16-20RR
There is a prevailing view in both the academic literature and the popular press that firms need to behave more entrepreneurially. This view is reinforced by a stylized fact in the innovation literature that R&D productivity decreases with size. However, there is a second stylized fact in the innovation literature that R&D investment increases with size. Taken together, these stylized facts create a puzzle of seemingly irrational behavior by large firms--they are increasing spending despite decreasing returns. This paper is an effort to resolve that puzzle. We propose and test two alternative resolutions: 1) that it arises from mismeasurement of R&D productivity, and 2) that firm size endogenously drives R&D strategy, and that the returns to R&D strategies depend on scale. We are able to resolve the puzzle under the first tack--using a recent measure of R&D productivity, RQ, we find that both R&D spending and R&D productivity increase with scale. We had less success with the second tack--while firm size affects R&D strategy in the manners expected by theory, there is no strategy whose returns decrease in scale. Taken together, our results are consistent with the Schumpeter view that large firms are the major engine of growth, they both spend more in aggregate than small firms, and are more productive with that spending. Moreover the prescription that firms should behave more entrepreneurially, should be treated with caution--one small firm strategy has lower returns to scale than its large firm counterpart.
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Outsourced R&D and GDP Growth
March 2016
Working Paper Number:
CES-16-19
Endogenous growth theory holds that growth should increase with R&D. However coarse comparison between R&D and US GDP growth over the past forty years indicates that inflation scientific labor increased 2.5 times, while GDP growth was at best stagnant. The leading explanation for the disconnect between theory and the empirical record is that R&D has gotten harder. I develop and test an alternative view that firms have become worse at it. I find no evidence R&D has gotten harder. Instead I find firms' R&D productivity declined 65%, and that the main culprit in the decline is outsourced R&D, which is unproductive for the funding firm. This offers hope firms' R&D productivity and economic growth may be fairly easily restored by bringing outsourced R&D back in-house.
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A Portrait of Firms that Invest in R&D
January 2016
Working Paper Number:
CES-16-41
We focus on the evolution and behavior of firms that invest in research and development (R&D). We build upon the cross-sectional analysis in Foster and Grim (2010) that identified the characteristics of top R&D spending firms and follow up by charting the behavior of these firms over time. Our focus is dynamic in nature as we merge micro-level cross-sectional data from the Survey of Industrial Research and Development (SIRD) and the Business Research & Development and Innovation Survey (BRDIS) with the Longitudinal Business Database (LBD). The result is a panel firm-level data set from 1992 to 2011 that tracks firms' performances as they enter and exit the R&D surveys. Using R&D expenditures to proxy R&D performance, we find the top R&D performing firms in the U.S. across all years to be large, old, multinational enterprises. However, we also find that the composition of R&D performing firms is gradually shifting more towards smaller domestic firms with expenditures being less sensitive to scale effects. We find a high degree of persistence for these firms over time. We chart the history of R&D performing firms and compare them to all firms in the economy and find substantial differences in terms of age, size, firm structure and international activity; these differences persist when looking at future firm outcomes.
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The Management and Organizational Practices Survey (MOPS): An Overview*
January 2016
Working Paper Number:
CES-16-28
Understanding productivity and business dynamics requires measuring production outputs and inputs. Through its surveys and use of administrative data, the Census Bureau collects information on production outputs and inputs including labor, capital, energy, and materials. With the introduction of the Management and Organizational Practices Survey (MOPS), the Census Bureau added information on another component of production: management. It has long been hypothesized that management is an important component of firm success, but until recently the study of management was confined to hypotheses, anecdotes, and case studies. Building upon the work of Bloom and Van Reenen (2007), the first-ever large scale survey of management practices in the United States, the MOPS, was conducted by the Census Bureau for 2010. A second, enhanced version of the MOPS is being conducted for 2015. The enhancement includes two new topics related to management: data and decision making (DDD) and uncertainty. As information technology has expanded plants are increasingly able to utilize data in their decision making. Structured management practices have been found to be complementary to DDD in earlier studies. Uncertainty has policy implications because uncertainty is found to be associated with reduced investment and employment. Uncertainty also plays a role in the targeting component of management.
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Allocation of Company Research and Development Expenditures to Industries Using a Tobit Model
November 2015
Working Paper Number:
CES-15-42
This paper uses Census microdata and a regression-based approach to assign multi-division firms' pre-2008 Research and Development (R&D) expenditures to more than one industry. Since multi-division firms conduct R&D in more than one industry, assigning R&D to corresponding industries provides a more accurate representation of where R&D actually takes place and provides a consistent time-series with the National Science Foundation R&D by line of business information. Firm R&D is allocated to industries on the basis of observed industry payroll, as befits the historic importance of payroll in Census assignments of firms to industry. The results demonstrate that the method of assigning R&D to industries on the basis of payroll works well in earlier years, but becomes less effective over time as firms outsource their manufacturing function.
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The Promise and Potential of Linked Employer-Employee Data for Entrepreneurship Research
September 2015
Working Paper Number:
CES-15-29
In this paper, we highlight the potential for linked employer-employee data to be used in entrepreneurship research, describing new data on business start-ups, their founders and early employees, and providing examples of how they can be used in entrepreneurship research. Linked employer-employee data provides a unique perspective on new business creation by combining information on the business, workforce, and individual. By combining data on both workers and firms, linked data can investigate many questions that owner-level or firm-level data cannot easily answer alone - such as composition of the workforce at start-ups and their role in explaining business dynamics, the flow of workers across new and established firms, and the employment paths of the business owners themselves.
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Job Creation, Small vs. Large vs. Young, and the SBA
September 2015
Working Paper Number:
CES-15-24
Analyzing a list of all Small Business Administration (SBA) loans in 1991 to 2009 linked with annual information on all U.S. employers from 1976 to 2012, we apply detailed matching and regression methods to estimate the variation in SBA loan effects on job creation and firm survival across firm age and size groups. The estimated number of jobs created per million dollars of loans within the small business sector generally increases with size and decreases in age. The results suggest that the growth of small, mature firms is least financially constrained, and that faster growing firms experience the greatest financial constraints to growth. The estimated association between survival and loan amount is larger for younger and smaller firms facing the 'valley of death.'
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