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Resource partitioning revisited: Evidence from Italian television broadcasting

April 26th, 2012 | Posted by admin in Forthcoming - (0 Comments)

Samira Reis, Giacomo Negro, Olav Sorenson, Fabrizio Perretti and Alessandro Lomi

The theory of resource partitioning proposes that competition among generalists in the center of a market can trigger a process of resource release that engenders a proliferation of specialist producers outside the center. Previous research has generally examined the relationship between this proliferation and market concentration – a correlate of competitive intensity in the center of the market. In this paper, we extend the theory by arguing that resource release also occurs as the degree of competitive overlap among producers in the center intensifies, even when concentration or other structural features do not vary; we expand its implications by demonstrating that increased competitive overlap in the market center should enhance the viability of producers positioned near the center more than those in the periphery; and we enrich and complete it by specifying the additional assumptions needed to extend the theory of resource partitioning to entry processes. Consistent with our expectations, an empirical examination of the Italian broadcast television industry, from 1992 to 2003, finds that the failure rates of both near-center and peripheral organizations decline in response to increasing competitive overlap in the programming of the national broadcasters, with the failure rates of the near-center organizations falling more than those of peripheral organizations. Increasing competitive overlap similarly stimulates the entry of near-center organizations more than peripheral ones.

Industrial and Corporate Change, forthcoming

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Home sweet home: Entrepreneurs’ location choices and the performance of their ventures

March 20th, 2012 | Posted by admin in Forthcoming - (0 Comments)

Michael S. Dahl and Olav Sorenson

Entrepreneurs, even more than employees, tend to locate in regions in which they have deep roots. Here, we examine the performance implications of these choices. Whereas one might expect entrepreneurs with deep roots to perform better because of their richer endowments of social capital, they might also perform worse if their location choices rather reflect a preference for spending time with family and friends. We examine this question using comprehensive data on the Danish population. Entrepreneurs’ ventures perform better – survive longer and generate greater cash flows and cumulative profits – when they locate in regions in which they have deep roots (“home” regions). This effect appears substantial, similar in magnitude to the value of having prior experience in the industry entered (i.e. specific human capital).

Management Science, available through Articles in Advance

 

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Geography, joint choices and the reproduction of gender inequality

December 6th, 2011 | Posted by admin in Working paper - (0 Comments)

Olav Sorenson and Michael S. Dahl

We examine the extent to which the gender wage gap may depend on the fact that dual-earner couples jointly choose places to live and work. If couples systematically locate in places better suited for the advancement of the husband’s career than to the wife’s, those choices would then tend to depress the wages of married women relative to married men. Examining data from Denmark, our results suggest (i) that Danish couples tend to move to places that offer greater potential wage gains to the husband than to the wife, (ii) that these location choices may account for as much as 36% of the gender wage gap in Denmark, and (iii) that, ultimately, these biases appear to reflect gender roles, to a large extent inherited from the wife’ parents. We therefore demonstrate that the allocation of people to places contributes to gender inequality.

SSRN working paper

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The ratings game: Asymmetry in classification

May 23rd, 2011 | Posted by admin in 2011 - (1 Comments)

David M. Waguespack and Olav Sorenson

Categorization processes are generally treated as consistent mappings of the underlying characteristics that they group. Yet, in many cases, the identities of actors influence these processes. When identity matters, high status actors often obtain more favorable classifications. We examine these processes in the context of the Motion Picture Association of America’s parental guidance classifications of movies (G, PG, R, NC-17). We find that, conditional on a given level of content, films distributed by MPAA members, and those that involve more central producers and directors, receive more lenient classifications than those carried by independent distributors and involving more peripheral personnel. Conversely, and again conditional on content, films involving directors with a history of producing R rated features receive more restrictive ratings. We discuss the mechanisms that might account for these effects. Regardless of the mechanism, however, since ratings influence revenue and consequently profitability, the movie certification system in the United States places independent distributors and peripheral individuals at a disadvantage relative to their larger and more central rivals.

Organization Science, 22 (2011): 541-553

Ratings data and do files

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Non-compete covenants: Incentives to innovate or impediments to growth

March 18th, 2011 | Posted by admin in 2011 - (0 Comments)

Sampsa Samila and Olav Sorenson

We find that the enforcement of non-compete clauses significantly impedes entrepreneurship and regional growth. Based on a panel of metropolitan areas in the United States from 1993 to 2002, our results indicate that, relative to regions in states that enforce non-compete covenants, an increase in the local supply of venture capital in states that restrict them has significantly stronger positive effects on (i) the number of patents, (ii) the number of firm starts, and (iii) employment. We address potential endogeneity issues in the supply of venture capital by using endowment returns as an instrumental variable. Our results point to a strong interaction between financial intermediation and the legal regime in promoting entrepreneurship and growth.

Management Science, 57 (2011): 425-438

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Venture capital, entrepreneurship, and economic growth

January 22nd, 2011 | Posted by admin in 2011 - (0 Comments)

Sampsa Samila and Olav Sorenson

Using a panel of U.S. metropolitan areas from 1993 to 2002, we find that an increase in the local supply of venture capital (VC) positively affects (i) the number of firm starts, (ii) employment, and (iii) aggregate income. Our results remain robust to a wide variety of specifications, including ones that address potential endogeneity in the supply of venture capital. The magnitudes of the effects, moreover, imply that venture capital stimulates the creation of more firms than it directly funds. That result appears consistent with either of two mechanisms: One, would-be entrepreneurs that anticipate a future need for financing more likely start firms when the supply of capital expands. Two, companies funded by venture capital may transfer tacit knowledge to their employees thereby enabling spinoffs, and may encourage both their own employees and others to become entrepreneurs through demonstration effects.

Review of Economics and Statistics, 93 (2011): 338-349

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The social attachment to place

January 4th, 2011 | Posted by admin in 2010 - (0 Comments)

Michael S. Dahl and Olav Sorenson

Many theories either implicitly or explicitly assume that individuals readily move to locations that improve their financial well being. Other forces, however, offset these tendencies; for example, people often wish to remain close to family and friends. We introduce a methodology for determining how individuals weight these countervailing forces, and estimate how both financial incentives and social factors influence the probability of geographic mobility in the Danish population from 2002 to 2003. Our results suggest that individuals respond to opportunities for higher pay elsewhere, but that their sensitivity to this factor pales in comparison to their preferences for living near family and friends.

Social Forces, 89 (2010): 633-658

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Venture capital as a catalyst to commercialization

November 6th, 2010 | Posted by admin in 2010 - (0 Comments)

Sampsa Samila and Olav Sorenson

We find that public research funding and venture capital have a complementary relationship in fostering innovation and the creation of new firms. Based on a panel of metropolitan areas in the United States from 1993 to 2002, we find that the positive relationships between government research grants and the rates of patenting and firm formation in a region become more pronounced as the supply of venture capital in that region increases. Our results remain robust to estimation with an instrumental variable to address potential endogeneity in the provision of venture capital. Consistent with perspectives that emphasize the importance of an innovation ecosystem, our results therefore point to a strong interaction between private financial intermediation and public research funding in promoting entrepreneurship and growth.

Research Policy, 39 (2010): 1348-1360

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Intra-organizational provincialism

February 15th, 2010 | Posted by admin in Forthcoming - (0 Comments)

Markus Reitzig and Olav Sorenson

In contrast to prior studies, which have generally argued that the failure of innovations to diffuse within an organization stems from informational or motivational difficulties, we propose that the failure to adopt an innovation can also arise from a form of organizational provincialism. Individuals identify with their subunits within the organization and therefore tend to have biased perceptions against ideas that emerge from other parts of the organization. To explore this idea, this study uses data on innovations inside a large, multinational consumer goods firm to analyze the effects of evaluator and innovator identities on the probability that the evaluator considered the idea of high potential. The results reveal that evaluators are biased in favor of ideas submitted by individuals that work in the same division and facility as they do. The strength of this bias, moreover, decreases with the size of the evaluator’s subunit and with the size and status of the submitter’s subunit.

The migration of technical workers

December 4th, 2009 | Posted by admin in 2010 - (0 Comments)

Michael S. Dahl and Olav Sorenson

Using panel data on the Danish population, we estimated the revealed preferences of scientists and engineers for the places in which they choose to work. Our results indicate that these technical workers exhibit substantial sensitivity to differences in wages but that they have even stronger preferences for living close to family and friends. The magnitude of these preferences, moreover, suggests that the greater geographic mobility of scientists and engineers, relative to the population as a whole, stems from more pronounced variation across regions in the wages that they can expect. These results remain robust to estimation on a sample of individuals who must select new places of work for reasons unrelated to their preferences—those who had been employed at establishments that discontinued operations.

Journal of Urban Economics, 67 (2010): 33-45

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