Capacity Investment under Demand Uncertainty: The Role of Imports in the US Cement Industry.with Guy Meunier and Jean-Pierre Ponssard. 2016. Journal of Economics and Management Strategy, 2(25), 455-486.
Demand uncertainty is thought to influence irreversible capacity decisions. Suppose that local demand can be sourced from domestic (rigid) production or from (flexible) imports. This paper shows that the optimal domestic capacity is either increasing or decreasing with demand uncertainty, depending on the relative level of the costs of domestic production and imports. We test this relationship with data from the U.S. cement industry, in which the difference in marginal cost between domestic production and imports varies across local U.S. markets because cement is costly to transport over land. Industry data for 1999 to 2010 are consistent with the predictions of the model. The introduction of two technologies to the production set—one rigid and one flexible—is crucial to understanding the relationship between capacity choice and uncertainty in this industry because there is no relationship between these two variables in aggregated U.S. data. Our analysis reveals that the relationship is negative in coastal districts, and significantly more positive in landlocked districts.
Innovation and Foreign Ownership.
with Maria Guadalupe and Olga Kuzmina. 2012. American Economic Review, 102(7), 2594-3627.
This paper uses a rich panel dataset of Spanish manufacturing firms (1990-2006) and a propensity score reweighting estimator to show that multinational firms acquire the most productive domestic firms, which, on acquisition, conduct more product and process innovation (simultaneously adopting new machines and organizational practices) and adopt foreign technologies, leading to higher productivity. We propose a model of endogenous selection and innovation in heterogeneous firms that jointly explains the observed selection process and the innovation decisions. Further, we show in the data that innovation on acquisition is associated with the increased market scale provided by the parent firm.
Too Many Products: A Study of the Interaction of Multinational Corporations
with Heterogeneous Consumers. 2011. American Economic Journal: Microeconomics, 3(1), 280-306.
I analyze country-level product ranges offered by multinational laundry detergent manufacturers in Western Europe. Observed product range variation across countries exceeds the optimal firm-level response to differences in consumer preferences and retail environments. Counterfactual analysis reveals that increased product range standardization would reduce firm costs and increase profits. These findings are consistent with theory models of local agency, where decentralized decision making can be the constrained optimal organizational form despite the resulting lack of coordination across divisions. My analysis suggests that organizational structure affects product market outcomes and firm performance.
Strategic Interaction across Countries and Multinational Agglomeration: An Application to the Cement Industry.
with Pankaj Ghemawat. 2008. Management Science, 54, 1980-1996.
Agglomeration in foreign direct investment (FDI) is typically attributed to location-specific characteristics such as natural resource advantages or production-related spillovers between multinational firms. The increasing collocation of the largest global firms in the cement industry since the 1980s is not easily attributed to either of these explanations. This paper draws on theories of multimarket contact to test whether strategic interaction across national markets has influenced the successive market entry decisions generating the observed agglomeration. We first establish that there is indeed nonrandom agglomeration of the six largest cement firms. We next show that preexisting cross-market interaction with current incumbents helps predict which firm will enter a given market and also the choice of market a given firm enters. The association does not appear to be caused by strategic convergence or mimicry of recent entry events and cannot be explained by production side effects, which depend only on local conditions. The findings are consistent with multimarket contact models where collocation allows firms to sustain higher prices in all markets. This latter inference is also supported by evidence of an association between global firm market share and local cement price. The paper suggests that pricing spillovers can serve as an alternative motivation for FDI agglomeration.
In-House and Arm’s Length: Productivity Heterogeneity and Variation in Organizational Form.
with Stephen F. Lin and Arturs Kalnins. 2020. Journal of Law, Economics, and Organization, 36(3).
This paper analyzes firm boundaries in the U.S. hotel industry. Hotel properties of a given brand are often managed either by a chain employee or by a franchisee. We document that brand properties with the lowest and the highest occupancy rates are more likely to be managed at arm’s length by franchisees. Variation in organizational form is consistent with a model in which the incentives embodied in management contracts vary with property-level productivity. We infer that most hotel chains franchise low-productivity relationships to keep property-level fixed costs low and franchise the most productive relationships to create high-powered incentives for franchisees. Franchisees of high-productivity properties work harder than the managers of both chain-managed properties and low-productivity franchises because the performance incentives in franchise contracts are proportional to hotel revenues and complement the incentives from franchisees’ property control rights.
Landing the First Job: The Value of Intermediaries in Online Hiring.
with Christopher Stanton. 2016. The Review of Economic Studies, 83(2), 810-854.
Online markets for remote labour services allow workers and firms to contract with each other directly. Despite this, intermediaries—called outsourcing agencies—have emerged in these markets. This article shows that agencies signal to employers that inexperienced workers are high quality. Workers affiliated with an agency have substantially higher job-finding probabilities and wages at the beginning of their careers compared to similar workers without an agency affiliation. This advantage declines after high-quality non-affiliated workers receive good public feedback scores. The results indicate that intermediaries have arisen endogenously to permit a more efficient allocation of workers to jobs.
Synchronicity and Firm Interlocks in an Emerging Economy.
with Tarun Khanna. 2009. Journal of Financial Economics, 92(2), 182-204.
Stock price synchronicity has been attributed to poor corporate governance and a lack of firm-level transparency. This paper investigates the association between different kinds of firm interlocks, control groups, and synchronicity in Chile. A unique dataset containing equity cross-holdings, common individual owners, and director interlocks is used to map out firm ties and control groups. While there is a correlation between synchronicity and share ownership and equity ties, synchronicity is more strongly correlated with interlocking directorates. The presence of shared directors is associated with either reduced firm-level transparency or increased correlation in firm fundamentals – due, for example, to joint resource allocation across the firms.
Book Chapters and Other Writings
Multinational Firms' Market Entry and Expansion, with Evidence from Eastern Europe.
with Andrew B. Bernard. 2020. Volume chapter in Brookings Volume on Global Goliaths: Multinational Corporations in the 21st Century Economyed. C. Fritz Foley, Jim Hines, and David Wessel.
UK Trade and FDI: A post-Brexit perspective.
with Swati Dhingra, Gianmarco Ottaviano, Veronica Rappoport, and Thomas Sampson. 2018. Papers in Regional Science, 97(1), 9-24.
Online Labor Markets
The Gig Economy Beyond Local Services and Transportation.
with Christopher Stanton. 2020. CESifo Forum, 21(3), pp. 21-26. InstitutfürWirtschaftsforschung (Ifo), 2020.
Information in Online Labour Markets.
with Adeline Pelletier. 2018. Oxford Review of Economic Policy, 34(3), 376-392.
International Economics for Research Students, PhD Course. LSE. 2017 – 2019.
Strategy, Organization, and Innovation. MSc Course. LSE. 2015 – 2016.
Topics in International Trade, PhD Course. Columbia Economics Department. 2014.
Strategic Management. Undergraduate Summer School. LSE. 2013 – 2017.
Research in Multinationals. PhD Course, INSEAD. 2012.
What’s next for South Africa? MBA Elective. Columbia Business School. 2010.
Managerial Economics. MBA and Executive MBA Core Curricula. Columbia Business School. 2007 – 2012.
Quantitative Methods, International Trade and Investment, Regulation and Antitrust, Social Analysis 10, Harvard College and Harvard Business School, Teaching Assistant. 2001 – 2006.