+ **Non-competes, Business Dynamism, and Concentration: Evidence from a Florida Case Study**.
*Journal of Economics & Management Strategy* 29(3): 663-685. 2020. Kang, H. & Fleming, L.
Most research on non‐competes has focused on employees; here we study how non‐competes affect firm location choice, growth, and consequent regional concentration, using Florida's 1996 legislative change that eased restrictions on their enforcement. Difference‐in‐differences models show that following the change, establishments of large firms were more likely to enter Florida; they also created a greater proportion of jobs and increased their share of employment in the state. Entrepreneurs or establishments of small firms, in contrast, were less likely to enter Florida following the law change; they also created a smaller proportion of new jobs and decreased their share of employment. Consistent with these location and job creation dynamics, regional business concentration increased following the law change in Florida. Nationwide cross‐sections demonstrate consistent correlations between state‐level non‐compete enforcement and the location, employment, and concentration dynamics illustrated in Florida.
+ **Blending Talents for Innovation: Team Composition for Cross-border R&D Collaboration Within Multinational Corporations**.
*Journal of International Business Studies* 51: 851-885. 2020. Seo, E., Kang, H., & Song, J.
Despite the upsurge in cross-border R&D collaboration within multinational corporations (MNCs), firms often fail to realize the full potential of cross-border R&D teams. We examine under what conditions geographic diversity might lead to higher or lower innovation performance by focusing on the moderating roles of team composition. We first demonstrate that the geographic diversity of an MNC’s research team has a curvilinear (inverted U-shaped) relationship with the team’s innovation performance. Building upon group learning theory, we further claim that this non-linear relationship is strengthened by the technical experience heterogeneity of researchers but weakened by repeated collaboration among researchers. Our analyses on the top 25 multinational pharmaceutical companies and their 59,998 patents registered from 1981 to 2012 provide strong support for our hypotheses. When geographic diversity is relatively low, teams with different levels of technical experience and more fresh collaborators improve performance by amplifying the benefits of sourcing diverse knowledge. With high geographic dispersion, on the other hand, minimal experience heterogeneity and more instances of past collaboration lead to better performance by facilitating the integration of diverse knowledge. The results shed light on the importance of technical and social relationships among researchers in sourcing and integrating location-specific knowledge and ultimately enhancing team performance.
+ **Innovation and recurring shifts in industrial leadership: Three phases of change and persistence in the camera industry**.
*Research Policy* 46(2): 376-387. 2017. Kang, H. & Song, J.
This study examines factors underlying three phases of change or persistence in industrial leadership in the sector of interchangeable-lens cameras over the past century. During this period there were two major phases of leadership change, both associated with the emergence of innovations involving major discontinuities in the industry’s core technologies. First, Japan won market leadership from Germany in the mid-1960s after commercializing the single-lens reflex (SLR) camera that replaced the previously dominant German rangefinder camera. Second, in the late-2000s, Japanese latecomer firms and a Korean firm developed Mirrorless cameras, which allowed them to capture the majority of market share from the incumbent Japanese leaders. We also examine the long period (about 60 years) between these two phases of change, during which leading Japanese firms were able to sustain their market leadership despite the digital revolution from the 1980s to 1990s. This paper explores the factors influencing these contrasting experiences of change and persistence in industry leadership. The analysis integrates several aspects of sectoral innovation systems – i.e., windows of opportunity associated with technology, demand, and institution – as well as the strategies of incumbents and latecomer firms. The conclusions highlight the complex and diverse combinations and importance of the factors that help explain the patterns of shifts in leadership.
# Working Papers
+ **How Does Price Competition Affect Innovation? Evidence from US Antitrust Cases**.
*Revise and Resubmit (R&R)*. 2021. Kang, H.
SSRNPDF (Paper)PDF (Appendix)Abstract +
This paper examines how price competition in the product market affects the intensity and breadth of innovation. I assemble a unique data set comprising all 461 prosecuted collusion cases in the United States from 1975 through 2016, where I match 1,818 collusive firms to firm-level data on innovation. Empirical results from a difference-in-differences methodology show a negative causal relationship between price competition and innovation. When collusion suppressed price competition, colluded firms increased patent filings by 20.5 percent and top-quality patents by 16 percent. A significant portion of these patents are attributable to fundamental innovation activities since innovation inputs—R&D investment and the number of unique patenting inventors—increased in tandem by 15.2 percent and 22.9 percent, respectively. Furthermore, firms broadened their scope of innovation by exploring new technological areas; the number of patented technology classes increased by 11.9 percent. When competition was restored by collusion breakup, the increased and broadened innovation activities reverted to their previous levels. The effects were greater for collusion that was stronger and in fast-growing industries. I shed light on market profitability and firm financial constraints as key economic mechanisms driving the trade-off between price competition and innovation growth.
+ **How Innovating Firms Manage Knowledge Leakage: A Natural Experiment on the Threat of Worker Departure**.
*Revise and Resubmit (R&R)*. 2021. Kang, H. & Lee, Y.
SSRNPDF (Paper)PDF (Appendix)Abstract +
Innovating firms face a risk of knowledge leakage as their workers can join competitors. We study the threat of worker departure as the key mechanism through which firms decide on knowledge protection strategies. Our empirical analysis exploits a milestone court decision in 1998 whereby the California Court of Appeal ruled that out-of-state noncompetes are not enforceable in California. Consequently, non-California firms faced a loophole in the enforcement of noncompetes for their workers. When facing a higher threat of worker departure, firms strategically increase patent filings as a means of knowledge protection. The effects are magnified for large-sized firms and those in complex product industries. Further tests on the possession of trade secrets, physical proximity, migration rate, and industry dissimilarity to California support our theoretical account.
+ **How Does AI Improve Human Decision-Making? Evidence from the AI-Powered Go Program**.
Working paper. 2021. Choi, S., Kim, N., Kim, J., & Kang, H.
How does AI improve human decision-making? Answering this question is challenging because it is difficult to assess the quality of each decision and to disentangle AI’s influence on decisions. We study professional Go games, which provide a unique opportunity to overcome such challenges. In 2016 an AI-powered Go program (APG) unexpectedly beat the best human player, surpassing the best human knowledge and skills accumulated over thousands of years. To investigate the impact of APGs, we compare human moves to AI’s superior solutions, before and after the initial public release of an APG. Our analysis of 750,990 moves in 25,033 games by 1,242 professional players reveals that APGs significantly improved the quality of the players’ moves as measured by the changes in winning probability with each move. We also show that the key mechanisms are reductions in the number of human errors and in the magnitude of the most critical mistake during the game. Interestingly, the improvement is most prominent in the early stage of a game when uncertainty is higher. Further, young players—who are more open to and better able to utilize APG—benefit more than senior players, suggesting generational inequality in AI adoption and utilization.
+ **The Close Relationship Between Management Practices and Corporate Culture**.
Working paper. 2019. Sull, D., Kang, H., & Thompson, N.
A growing body of literature finds that a healthy corporate culture is associated with superior financial performance. A separate stream of research has found that a firm’s adoption of management “best practices” is correlated with higher efficiency and productivity. To date, the cultural and management practices literatures have proceeded in parallel, with few studies considering the relationship between an organization’s processes and its culture. This paper uses data from a carefully-designed survey of 370 organizations and nearly ten thousand managers to simultaneously measure corporate culture and management practices. Our key finding is that the quality of a company’s management practices and health of its corporate culture are highly correlated. This implies that studies which measure either culture or processes in isolation are likely to overstate their impact on performance. We also provide suggestive evidence that management practices may cause changes in corporate culture, or at least that this effect is stronger than the reverse.
+ **Tradeoffs in Firm Culture? Nope, You Can Have It All**.
Working paper. 2018. Sull, D., Kang, H., & Thompson, N.
A firm can exhibit many “good” cultural values, for example collaboration, integrity, or ambition. Influential theories of corporate culture claim that firms must choose which cultural values to foster because of inherent trade-offs between them. This paper tests this proposition using a new survey of managers (370 firms, averaging 27 respondents each). We find no evidence of trade-offs. To the contrary, we find that firms that score higher on one cultural value also tend to score higher on others. Our findings suggest that any inherent trade-offs are outweighed by the ability of good management practices to help a firm excel across many cultural values.
+ **How Did the Terms of Protection Affect Patenting and Innovation Activities?**
Work in progress (draft available upon request). 2019. Kang, H.