Papers

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How does digital piracy affect innovation? Evidence from software firms

Bradley, W. A., & Kolev, J. (2023). How does digital piracy affect innovation? Evidence from software firms. Research Policy, 52(3), 104701.

Despite digital piracy's well-documented impact on firm revenue, the relationship between piracy and firm innovation, including the creation of new intellectual property (IP) rights, is not well-understood. To fill this gap, this paper estimates the impact of piracy on innovation through a quasi-experimental design and explores the mechanisms driving this relationship using data on software firms. Leveraging a 2001 technological shock that suddenly enabled rising software piracy, we find increases in subsequent R&D spending, copyrights, trademarks, and patents for large, incumbent software firms. Furthermore, firms with large patent portfolios appear to disproportionately increase copyrights and trademarks following the piracy shock. After considering alternatives, our analysis suggests that impacted firms perceive piracy as a form of product-market competition that causes them to increase innovation and balance their IP portfolios. [Link to Paper]

Gender and entrepreneurial intention in low-income countries: The relative roles played by anticipated financial returns versus perceived barriers for university students in Sierra Leone

Bradley, W. A. & Fry, C. (2024). Gender and entrepreneurial intention in low-income countries: The relative roles played by anticipated financial returns versus perceived barriers for university students in Sierra Leone. International Journal of Entrepreneurial Behavior and Research. Vol. 30 No. 7, pp. 1750-1778. https://doi.org/10.1108/IJEBR-11-2022-0980

We conduct a field survey in Sierra Leone to investigate the extent to which female and male university students express different entrepreneurial intentions, and whether students’ perceptions of the anticipated financial returns to occupational choices and perceptions of the barriers to entrepreneurship drive a gender gap in entrepreneurial intentions (EI). We report three main findings. First, in contrast to findings in high-income countries, we find that female students express higher intentions to become entrepreneurs than male students. Second, we find no evidence that the relationship between gender and EI operates through the mediator of barriers to entrepreneurship, a commonly studied antecedent to EI. Third, we find that the relationship between gender and entrepreneurial intentions operates through the mediator of the perceived gap in financial returns to entrepreneurship versus salaried employment. Our theoretical framework conceptualizes this trade-off and contributes to calls for the contextualization of entrepreneurship research. By studying STEM- and business-trained university students in Sierra Leone, the population most likely to contribute to technological innovation and economic growth in Africa, this paper provides implications for policy and practice.

Cross-border venture capital investments: what is the role of public policy?

Bradley, W. A., Duruflé, G., Hellmann, T. F., & Wilson, K. E. (2019). Cross-border venture capital investments: what is the role of public policy? Journal of Risk and Financial Management, 12(3), 112.

Cross-border venture capital (VC) investments play an important role in the scaling up of high-growth companies. However, policymakers worry that foreign VC investments transfer the majority of economic activity to the investor country. On the one hand, start-ups welcome the foreign capital, expertise, and networks that accompany cross-border investments. On the other hand, policymakers are concerned that cross-border investments predominantly benefit foreign economies and fail to develop the local entrepreneurial ecosystem. This paper describes a framework for how policymakers can develop a set of policies toward cross-border VC investments. (2) Methods: The paper examines available data and trends about the role of cross-border investing, focusing on Europe, Israel, and Canada. Then, the paper explains the underlying economic challenges and develops a policy framework. (3) Results: The analysis shows that in addition to policies that aim to attract foreign investors, there are also important policies for the development of the domestic VC market. The analysis encompasses policies that are both financial and non-financial in nature. (4) Conclusions: A core insight for policymakers is to retain a balance of initiatives, attracting foreign investors while simultaneously making sure to strengthen the country’s domestic VC industry and innovation ecosystem. The mix of policies will adjust as the domestic ecosystem matures.

Competitive Dynamism in Nascent Markets: Trademarks and Superstar Firm Entry in the Metaverse

Bradley, W. A., & Kolev, J. (2024). Competitive dynamism in nascent markets: trademarks and superstar firm entry in the metaverse. Industry and Innovation, 1–41. https://doi.org/10.1080/13662716.2024.2419599

Does entry by a superstar firm change the competitive dynamics of nascent industries? Using USPTO trademark data and a quasi-experimental design, we explore this question by analysing the development of new products and services in the metaverse. We develop a theoretical framework of heterogeneous strategies for market entry under uncertainty, contrasting competition in digital vs. physical industries. Empirically, we show that firm size has a strong positive correlation with metaverse participation among US-based trademarking firms, and that this effect is amplified for born-digital and global, physical-goods firms. However, following Facebook’s entry in 2014, we document a 10% decline in metaverse engagement; decomposing this average effect, larger and born-digital firms were minimally impacted, while globalized physical-goods firms experienced the largest declines. These results suggest that physical-goods firms are much more sensitive to superstar entry than digital-goods firms in nascent markets. Our analysis contributes to the understanding of intangible assets as key drivers of firms’ competitive advantage in the global, digital economy.

Avengers Assemble! When Digital Piracy Increases Box Office Demand

with Ackermann, K. & Cameron, J. F. (forthcoming)

Applying process virtualization theory to the film industry, we show how the content of information goods changes the substitutability or complementarity effects of copyright infringement. Leveraging the quasi-random timing of the appearance of a high-quality pirated movie after its release in-theaters, alongside an instrumental-variables approach, we find for “spectacle”-oriented films, where the value of the good is linked to in-theater viewing, piracy complements box-office revenue. For “story”-oriented films, where the value of the good is inherent—unenhanced by in-theater viewing—piracy displaces sales. Our findings suggest the value of creative content is linked to its distribution context, with relevance for commercialization strategies of digital goods in creative industries with experience-goods properties.

Pooling For Power: Cumulative Innovation & Competition In Markets for Technology Governed By Patent Pools

Working Paper.

This study examines the impact of modern patent pools on the adoption of technology standards and cumulative innovation based on pooled standards. Using proprietary data provided by MPEG-LA, this paper analyzes eight modern patent pools and finds that the formation of a patent pool increases the forward citations to pooled technology by outsider firms by an average of 57 percent compared to a set of matched control SEP patents. Given these results, the paper tentatively concludes that patent pool formation drives firms outside the pool to change the direction of their innovation toward the pool’s technical standard. This paper opens avenues for future research in competition policy to determine the extent to which investment in a technology protected by patent pools reduces or replaces innovation in substitute, rival, and potentially superior technology standards.

Paying For Nothing: The Value to Society Of Evergreening In Patent Pools

Working paper.

Modern patent pools persist long after their founding patents expire. Patent pools are able to charge royalties so long as one patent in the pool is valid and its intellectual property rights (IPR) enforceable. It begs the question, what is the value to society of rules that allow firms to extend the life of a patent pool by adding patents to it over time? Using newly collected data on eight modern patent pools, this analysis finds that the addition of patents to pools by founding firms that extend the life of the pool changes the direction of innovation efforts of outsider firms toward pool technology, possibly reducing citations to alternative technologies. Surprisingly, there is no evidence for a positive relationship between patent additions that extend the life of a pool and adoption rates for pool technology in terms of licensing. Therefore, while patents of founding firms may gain in technological and economic importance in the long term after the addition of patents to pools that extend the life of the pool; in the short term, founding firms gain no rents through new licenses to the technology as a result. In the end, as one pool gains in dominance in the market via increased forward citations, market inefficiencies drive a winner-takes-all industry where more expensive, inferior technology takes the lead.