Events

The Digital Services Act (DSA) sets out numerous “due diligence” obligations for intermediaries concerning any type of illegal information. Copyright infringing content arguably is illegal content under the DSA, and accounts empirically for most take-down decisions by intermediaries. New rules on notice-and-action (Art. 14), statement of reasons (Art. 15), trusted flaggers (Art. 19), and measures and protection against misuse (Art. 20) add a level of specificity not found in the e-Commerce Directive (ECD), nor in the lex specialis of the Copyright in the Digital Single Market Directive (Art. 17, CDSM). The UK chose not to implement the CDSM Directive, nor is the infringement of intellectual property rights a relevant offence that triggers new “duty of care” obligations under the Online Safety Bill published on 17 March 2022 (section 52(8)). However, the Bill also abandons the (Art. 15, ECD) prohibition of “general monitoring”, endorsing “proactive technology” and instituting a new regulatory system based on “codes of practice”. Codes of practice are essentially terms of service negotiated between “high-risk, high-reach” platforms and the regulator Ofcom, with significant executive powers for the Secretary of State. In contrast the proposed EU Digital Services Act only includes vague references to such self- and co-regulatory agreements under Art. 35 (“The Commission and the Board shall encourage and facilitate the drawing up of codes of conduct at Union level to contribute to the proper application of this Regulation”, with a focus on tackling “different types of illegal content and systemic risks”) and under Art. 36 (relating to online advertising). This talk will discuss opportunities and potential pitfalls for Copyright policy from these emerging Codes. Codes of practice and Codes of conduct imply ongoing revision and flexibility, which makes them a potentially attractive regulatory tool for fast developing industries and markets. Unlike statutes, Codes do not involve a complex legislative procedure. They can be more responsive to changing circumstances. On the other hand, a Code’s legal standing and enforcement conditions are often uncertain. State functions may be delegated to private firms without democratic scrutiny and appropriate procedural safeguards.

Contact: Marina Chugunova

Prior research, primarily based on lab experiments, suggests that females might be more averse to competition than males and could be more inclined towards collaboration, instead. Were these findings to generalize to adults across the workforce, there could be profound implications for organizational theory and practice. This paper reports on a field experiment in which adults from a wide range of fields and ages were invited to join a product development opportunity. Individuals were randomly assigned to treatments framing the opportunity as either involving competitive or collaborative interactions with other participants. Among those outside of science, technology, engineering, and math fields (STEM), we find significant gender differences in willingness to participate under competition. Among those in STEM fields, we detect no statistical gender differences. These results and broader patterns documented in the study are consistent with significant heterogeneity in competitiveness across both men and women, with field and career sorting resulting in differences (in gender differences) across fields.

Contact: Rainer Widmann

Innovation for social progress (ISP) – innovation that addresses society’s greatest challenges, like climate change, education, and healthcare – is characterized by a unique double-externality challenge. Imperfect appropriability, which generates knowledge spillovers and applies to innovation of all types, but also production and consumption externalities, which lead to prices not fully reflecting the costs and benefits to society. In this paper, we posit that these two market failures are interdependent and show how this changes the expected effects of each on ISP relative to when they are considered in silos. We then test the theoretical predictions by estimating the effects of knowledge spillovers and carbon pricing – capturing the two market failures and their interactions – on green and dirty innovation in the United Kingdom’s energy, transportation, and manufacturing sectors. Using instrumental variable and difference-in-discontinuities approaches, we find that, while carbon pricing generally increases green innovation, knowledge spillovers attenuate this effect. Technology-neutral R&D tax credits aiming to address the appropriability challenge do as well. Our findings highlight the importance of considering market failure interdependence when designing policy that aims to steer the direction of innovation.

Contact: Cristina Rujan

This paper develops a novel procedure for proxying economic activity with daytime satellite imagery across time periods and spatial units, for which reliable data on economic activity are otherwise not available. In developing this unique proxy, we apply machine-learning techniques to a historical time series of daytime satellite imagery dating back to 1984. Compared to satellite data on night light intensity, another increasingly used economic proxy, our proxy more precisely predicts economic activity at smaller regional levels and over longer time horizons. We demonstrate our measure's usefulness for the example of Germany, where data on economic activity are unavailable for detailed regional levels and historical time series. This is especially true for areas of East Germany before reunification. Our procedure is generalizable to other settings, and yields great potential for analyzing historical economic developments, evaluating local policy reforms, and controlling for economic activity at highly disaggregated regional levels in econometric applications.

Contact: Michael E. Rose

Do VCs Help to Overcome Information Asymmetry due to Cultural Distance in Potential Acquisitions
Presenter: Gresa Latifi (TUM) (joint work with M. Colombo, J. Henkel, and B. Montanaro)
Discussant: Giulia Solinas (ISTO)

Government funding of innovation can have a significant impact not only on the rate of technical change, but also on its direction. In this paper, we examine the role that government grants and government departments played in the development of artificial intelligence (AI), an emergent general-purpose technology with the potential to revolutionize many aspects of the economy and society. We analyze all AI patents filed at the US Patent and Trademark Office and develop network measures that capture each patent’s influence on all possible sequences of follow-on innovation. By identifying the effect of patents on technological trajectories, we are able to account for the long-term cumulative impact of new knowledge not captured by standard patent citation measures. We show that patents funded by government grants, but above all patents filed by federal agencies and state departments, profoundly influenced the development of AI. These long-term effects were especially significant in early phases, and weakened over time as private incentives took over. The results hold controlling for endogeneity, and are robust to alternative specifications.

Contact: Rainer Widmann

The question of who gains from high-quality entrepreneurship is crucial to understanding whether investments in incubating potentially innovative start-up firms will produce socially beneficial outcomes. We attempt to bring new evidence to this question by combining new aggregate measures of local area income inequality and income mobility with measures of entrepreneurship from Guzman and Stern (2020). Our new aggregate measures are generated by linking American Community Survey data with the universe of IRS 1040 tax returns. In both fixed effects and IV models using a Bartik-style instrument, we find that entrepreneurship increases income inequality. Further, we find that this increase in income inequality arises due to the fact that almost all of the individual gains associated with increased entrepreneurship accrue to the top 10 percent of the income distribution. While we find mixed evidence for small positive effects of entrepreneurship lower on the income distribution, we find little if any evidence that entrepreneurship increases income mobility. (Joint work with John Voorheis)

Contact: Fabian Gaessler

We investigate how firms adapt to trademark protection, an extensively used but underexamined form of IP protection, by exploring a historical precedent: China’s trademark law of 1923 ‒ an unanticipated and disapproved response to end foreign privileges in China. By exploiting a unique, newly digitized firm-employee-level dataset from Shanghai in 1872-1941, we show that the trademark law shaped firm dynamics on all sides of trademark conflicts. The law spurred growth and brand investment among Western firms with greater dependence on trademark protection. In contrast, Japanese businesses, which had frequently been accused of counterfeiting, experienced contractions while attempting to build their own brands after the law. The trademark law also led to new linkages with domestic agents, both within and outside the boundaries of Western firms, and the growth of Chinese intermediaries. At the aggregate level, trademark-intensive industries witnessed a net growth in employment and the number of product categories. A comparison with previous attempts by foreign powers ‒ such as extraterritorial rights, bilateral treaties, and an unenforced trademark code ‒ shows that those alternative institutions were ultimately unsuccessful.

Contact: Klaus Keller

Innovators’ personal experience and social networks may affect their familiarity with customer needs, and in turn the types of products they bring to market. Consistent with this channel, we document that innovators create products that are more likely to be purchased by customers similar to them along observable dimensions including gender, age, and socio-economic status. With scanner data and a new phone applications database, we find that these homophily patterns hold even within detailed industries. Using quasi-random assignment of individuals to dorms during military service, we provide causal evidence that being exposed to peers from a lower income group increases an entrepreneur’s propensity to create necessity products. The finding is similar with an alternative research design leveraging idiosyncratic within-school variation in peer composition across classes and cohorts. Because innovators are predominantly men from privileged backgrounds, the social push channel implies that the gains from innovation are unequally distributed across customer groups, which we quantify in a growth model. (Joint work with Elias Einiö and Xavier Jaravel)

Contact: Fabian Gaessler

Efficient access to existing knowledge is essential to technical advance, yet little is known about how access-enhancing institutions shape intertemporal knowledge spillovers. In this paper, I investigate the cumulative technological impact of the CNIDR AIDS Database, the first, disease-targeted, online repository of electronic patent documents, launched in 1994. Tracing references from subsequent patents, I find that the marginal impact of the repository was largest (+30%) among patents for which the established disease-link was previously non-obvious to detect through standard bibliographic search, in line with predictions of stronger reduction of search costs. Further findings suggest that increased visibility and attention to more “hidden” prior art particularly benefited private sector HIV researchers, and was reflected in enhanced diffusion of technological knowledge across scientific community and geographic boundaries.

Contact: Fabian Gaessler