Research

Tolerance for Failure: Evidence from Patent Examination

Working Paper (joint work with Minrui Gong, University of Mannheim)
Presentations: Labor and Finance Group Spring Conference (Vanderbilt University), Fourth BCFM PhD Conference (Cologne), World Finance Conference

We introduce a novel firm-level measure of failure tolerance based on firms patenting histories. Specifically, we quantify failure tolerance as the worst patent examination outcome that is nevertheless followed by continued innovation along the same trajectory. Our results show that firms with greater failure tolerance tend to produce patents that are more valuable, more cited, more complex, yet also more likely to fail. At the same time, they file fewer patents and employ fewer inventors. Because higher quality comes at the expense of lower quantity, failure tolerance has little effect on firms overall innovation output. Exploiting inventor job switches, we provide causal evidence that higher failure tolerance increases inventor productivity. Taken together, our findings establish failure tolerance as a powerful incentive mechanism while also highlighting its overlooked costs.

Pre-IPO Liquidity Events and Talent Allocation

Working paper. Draft available upon request.

This paper studies how pre-IPO liquidity events affect employee retention, incentives, and talent allocation in high-growth startups. Using data on U.S. firms whose shares become tradable on private secondary market platforms, matched with inventor-level patent information, I examine the impact of liquidity provision before an initial public offering. I find that pre-IPO liquidity does not increase overall employee turnover. High performing employees with partially or fully vested options are more likely to stay, while lower-performing employees are more likely to leave following secondary market listing. I find no evidence of reduced innovative productivity among remaining employees, while firms become more likely to attract high-quality talent. Overall, pre-IPO liquidity events facilitate human capital reallocation without undermining innovative incentives.

Board Connections and Inventor Productivity

Work in progress.