Creation and Diffusion of Knowledge in the Multinational Firm

(with Beata Javorcik and Stefan Pauly)

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This study documents new stylized facts on where and how knowledge creation and diffusion take place in multinational firms and shows that differences in time zones between headquarters and subsidiaries matter for knowledge flows beyond the effects of distance. The data show that (i) knowledge creation, as measured by patents, is increasingly conducted in cross-border collaborative teams of inventors within multinationals, (ii) a large share of patenting activity takes place in foreign affiliates, and (iii) inventors have become more mobile over the last three decades. An econometric analysis shows that a higher overlap in business hours is associated with increased cross-border collaboration, more within-firm citations, and greater inventor mobility.

Value Creation in Private Equity

(with Markus Biesinger and Alexander Ljungqvist)
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Featured on: Bloomberg, Harvard Law School Forum on Corporate Governance

We open up the black box of value creation in private equity with the help of confidential information on value creation plans and their execution. Plans are tailored to each portfolio company’s needs and circumstances, have become more hands-on, and vary with deal type, ownership, growth strategy, and geographic focus. Successful execution is subject to resource constraints, economies of specialization, and diminishing returns, and varies systematically across funds. Successful execution is a key driver of investor returns, especially in growth, buyout, and secondary deals. Company operations and profitability improve in ways consistent with successful execution, even beyond PE funds’ exit.

Daylight Saving All Year Round? Evidence from a National Experiment

(with Elisa Wirsching)
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Featured on: ERF

We study the effects of staying on daylight saving time (DST) permanently on electricity consumption, generation, and emissions. In October 2016, Turkey chose to stay on DST all year round. Employing alternative identification methods, we find a negligible overall impact on consumption. However, the policy has a strong intra-day distributional effect, increasing consumption in the early morning and reducing it in the late afternoon. This change in the load shape reduced generation by dirtier fossil fuel plants and increased it by cleaner renewable sources that can more easily satisfy peak load generation. Emissions from generation decreased as a result.

Optimal Degree of Foreign Ownership under Uncertainty

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We construct a dynamic model of foreign direct investment with incomplete contracts and uncertainty to analyse equity ownership. The productivity of a multinational parent and its supplier is unknown initially and revealed only after joint production. This kind of match-specific learning implies a dynamic market for corporate equity with considerable impact on reallocation within narrowly dened industries. We identify heterogeneity in productivity to be the key determinant of foreign equity shares, which in turn determine the intensive margin in firm imports and business survival. We test the model implications with plant-level data on ownership shares and find empirical support.

Foreign Direct Investment and Wages: Does the Level of Ownership Matter?

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This study hypothesises that the level of foreign equity participation is a key determinant of the multinational wage premium. In particular, the breakdown of equity in a foreign investment project determines the extent to which a multinational parent company transfers proprietary assets to its affiliate, directly impacting worker productivity. Moreover, it indicates multinationals’ desire to restrict labour turnover and preserve human capital in light of organisational changes and training. Using detailed plant-level data from Turkey, the study finds strong support for these mechanisms. The results show that up to 15 percentage points of the multinational wage premium can be explained by the level of foreign ownership per se . They also indicate that greater foreign equity participation leads to greater transfer of both tangible and intangible assets and thus higher wage premia, especially for skilled workers. This relationship is better approximated as linear rather than binary in contrast to previous literature.