Research

Working Papers

Investments and Innovation with Non-Rival Inputs: Evidence from Chinese Artificial Intelligence Startups (with Kang Zhou), Revise and Resubmit, Review of Economics and Statistics

Abstract: Large technology firms have substantial advantages in data, a key non-rival input for developing AI technology. We argue that investments by large technology firms stimulate innovation by AI startups through the sharing of data, bringing more than money to the startups. We assemble a unique dataset containing (nearly) the universe of AI-inventing firms in China to examine the innovation effects of these investments. Our difference-in-differences estimation shows that, after receiving investments from large technology firms, AI startups increase the number of AI patent applications by 62% and the number of software products by 56%,  relative to their mean values prior to the investments. Using a triple-differences strategy, we further find that the innovation impact of investments by large technology firms is stronger than that of investments by other firms without data advantages. We confirm these findings using an instrumental variables approach based on recent investments by large technology firms in peer startups. Finally, we provide novel evidence that the innovation effect works mainly through sharing non-rival data by leveraging our rich information on non-AI data-related patent applications and data-related online job postings.

Stepping Down from Life-long Posts: Layoffs, Fertility, and Educational Attainment in Urban China (with Junsen Zhang and Kang Zhou), Revise and Resubmit, Journal of Labor Economics

Abstract: We analyze how layoffs affect child quantity and quality, by exploiting the downsizing of China's state-owned enterprises between 1995 and 2004. It induced a layoff of more than 47 million workers who had previously held permanent jobs. Difference-in-differences estimates indicate that layoffs increased birth rates by around 3.6‰, driven mainly by layoffs of female workers. This occurs on two margins: 1) the extensive margin: women's selection into earlier motherhood; and 2) the intensive margin: the increased births of subsequent children. We also find that the layoffs reduced children's educational attainment, driven by two mechanisms: 1) negative parental selection: women with lower socioeconomic status are more likely to increase fertility during layoffs, compared with others; and 2) reduced educational investments during schooling. This evidence suggests that negative income shocks affect both the size and quality of the involved cohorts.

The Cultural Origins of Family Firms (with Song Yuan), Revise and Resubmit, Journal of Comparative Economics

Abstract: What determines the prevalence of family firms? In this project, we investigate the role of historical family culture in the spatial distribution of family firms. Using detailed firm-level data from China, we find that there is a larger share of family firms in regions with a stronger historical family culture, as measured by genealogy density. The results are further confirmed by an instrumental variables approach and a matching approach. Examining mechanisms, we find that entrepreneurs in regions with a stronger historical family culture: i) tend to have family members engage more in firms; ii) are more likely to raise initial capital from family members; iii) are more willing to pass on the firms to their children. Historical family culture predicts better firm performance partly due to a lower leverage ratio.