Essays on Strategic Information Disclosure, Innovation, and Human Capital

I am interested in studying innovation management strategies by firms. Specifically, in the context of public firms, I investigate: (1) How do firms strategically use vague language in documents such as patents to protect their innovation efforts? and (2) How do agency conflicts shape these strategies? In my research, I use a combination of Python algorithms and empirical approaches such as instrumental variables and difference-in-differences. My research is necessary because the financial and strategic implications of language are becoming increasingly prominent in business settings such as (patent) lawsuits; however, until recently, this has been relatively under-theorized in management studies. In particular, firms scrutinize rivals’ documents for understanding rivals innovation and competitive efforts. By strategically manipulating language, firms can maintain competitive advantage over their rivals. In the first chapter, we investigate how firms capture value from CEOs’ human capital. We argue that mobility constraints of CEOs (e.g. founder status and proximity to retirement) shape this dynamic in firms. We test our predictions on public firms in the US. Our paper contributes to strategic human capital literature and to the discussion on how labor market imperfections can be a source of competitive advantage for firms. In the second chapter, we examine how conflicts between shareholders and CEOs determine vagueness in innovation-related documents (patents). On the one hand, institutional investors want patents to be less vague because they promote transparency and want to avoid future litigation risk; on the other hand, CEOs want patents to be vaguer because of competitive pressures. We focus on patents owned by US public firms and find that institutional ownership promotes transparency in patents. This relationship is stronger when misalignment between the long-termism of institutional investors and CEOs increases. Our results show that institutional investors are not only involved in innovation activities but also in how firms craft and disseminate information about these activities. Our assessment is central to understanding the drafting of patents from a strategic perspective. In the third chapter, we explore the role of firm status in negative interactions and their financial impact on firms. Status literature has typically explored the benefits of high-status. We argue that high-status also induces competitive pressure among firms and that firms strategically use their status to harm their high-status rivals. Our context is patent litigations in the US. Our findings contribute to status literature in particular on strategic use and negative implications of high-status.