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This paper investigates signals that convey positive and negative information at the same time, which leads to psychological tension at the receiver. To decrease tension, receivers of such signals take action or cognitively reorganize. We study how VC investors react to patents protecting radical inventions that offer tremendous profit opportunities, but have a high risk of failure. We use a sample of 362 life science companies that received their first investment from 281 independent VC investors between 2003 and 2015. We show that young companies with radical inventions (i.e. signals with a dark side) are attractive investment targets for reputable investors - but not for non-reputable ones - and that these reputable investors syndicate their investments.
The Differential Effect of Public Scientific Information on Innovation: Evidence from TCGA and Drug Development
This paper examines how public scientific information influences innovation of private-sector. I study the impact of the Cancer Genome Atlas (TCGA), which maps the genetic abnormalities of 33 cancers, on drug development in the pharmaceutical industry. Using a novel dataset from TCGA and drug development, I find that TCGA increases early-stage drug development by 55% and late-stage drug development by 35%. Using public and private company classification, I find that TCGA completion disproportionately increases early-stage drug development by private companies while increasing both stages of drug development by public companies. Finally, I shed light on one potential mechanism through which information increases late-stage development by public companies, namely licensing and acquisitions. These findings suggest that public scientific information has differential effects on drug development.
Reputation for innovation is a distinct resource and an important predictor of market premium. However, our theoretical understanding of reputation for innovation is underdeveloped on several important fronts. First, the origin of reputation for innovation remains a mystery. Furthermore, little is known about the potential downsides of this reputation. The purpose of this paper is to provide a general theory that systematically explores the antecedents, initial effects, and nature of reputation for innovation. By integrating research from corporate reputation and innovation, I unpack several implications for building and maintaining a reputation for innovation. I further conclude that this reputation has a paradoxical nature since it is easy to manipulate but hard to sustain. In doing so, this paper contributes to innovation, entrepreneurship, and reputation literatures.
Theoretical Learning: How Individuals Learn Without Feedback
This study addresses our current lack of theoretical understanding of how individuals learn without unambiguous, timely feedback. I adopt a managerial cognition perspective to build a model of individual learning that accounts for how learning may still occur in contexts where various sources of ambiguity frustrate the feedback learning cycle. Patent termination decisions withing a large ITC firm offers a suitable empirical setting. I observe the decision performance trajectories of 260 IP specialists who evaluate and make termination decisions for a portfolio of over 16,000 patents over 15 years. Access to proprietary archival data and interviews with 15 specialists provide the data to test the study's hypotheses. This work contributes to theories of individual learning and managerial decision-making.