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.
How Does Competition Affect Innovation? Evidence from U.S. Antitrust Cases. Revise and Resubmit (R&R). 2020. Kang, H.
This paper examines how market competition affects the intensity and breadth of innovation. I assembled a unique dataset comprising all 461 prosecuted collusion cases in the U.S. from 1975-2016, where I match 1,818 collusive firms to firm-level data on innovation. Empirical results from a difference-in-difference methodology show a negative causal relationship between price competition and innovation. When collusion suppressed price competition, colluding firms increased patent filings by 48% and top-quality patents by 33%. A significant portion of these patents are attributable to fundamental innovation activities as innovation inputs measured by R&D investment and patenting inventors increased in tandem by 18% and 57%, respectively. Furthermore, firms broadened the scope of innovation by exploring new technological areas; the number of patented technology classes increased by 30%. When competition was restored by collusion breakdown, the increased and broadened innovation activities reverted back to previous levels. I shed light on financial constraints and industry growth rate as key economic mechanisms behind the trade-off between price competition and innovation growth.
How Innovating Firms Manage Knowledge Leakage: A Natural Experiment on Worker Mobility. Revise and Resubmit (R&R). 2020. Kang, H. & Lee, Y.
Innovating firms face a risk of knowledge leakage as their workers can exit employment to join competitors. We study worker mobility as the key mechanism through which firms decide on strategies to protect innovation outputs. Our empirical analysis exploits a 1998 court case decision whereby the California Courts of Appeal ruled that out-of-state non-compete agreements are not enforceable in California. Consequently, non-California firms faced a loophole in the enforcement of non-competes for their previously bound workers. When facing the higher mobility of existing workers, firms strategically increase patent filings as a means of knowledge protection. Further tests support our theoretical account that worker mobility plays a crucial role in patenting decisions. The importance of worker mobility and leakage-by-leaving problem has significant scholarly and managerial implications.
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.