Research and teaching
Header

Markus Reitzig and Olav Sorenson

We propose that the failure to adopt an idea or innovation can arise from an in-group bias among employees within an organizational subunit that leads the subunit’s members to undervalue systematically ideas associated with members of the organization outside their subunit. Such biases in internal selection processes can stymie organizational adaptation and therefore depress the performance of the firm. Analyzing data on innovation proposals inside a large, multinational consumer goods firm, we find that evaluators are biased in favor of ideas submitted by individuals that work in the same division and facility as they do, particularly when they belong to small or high-status subunits.

Strategic Management Journal, 34 (2013): 782-799

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, 22 (2013): 459-487

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, 58 (2012):1059-1071

 

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

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

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

The social attachment to place

January 4th, 2011

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

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

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

The embedded entrepreneur

December 1st, 2009

Michael S. Dahl and Olav Sorenson

Using comprehensive data on the Danish population, this paper examines the determinants of entrepreneurs’ choices of where to locate their newventures. Our findings suggest that entrepreneurs place much more emphasis on being close to family and friends than on regional characteristics that might influence the performance of their ventures when deciding where to locate those businesses. Two factors could explain our findings: On the one hand, entrepreneurs may simply value proximity to family and friends. On the other hand, these relationships may help them to assemble the assets and to recruit the personnel that they need to succeed in their ventures. Our results suggest that the former plays the greater role in entrepreneurs’ location choices.

European Management Review, 6 (2009): 172-181