Filippo Mezzanotti

Theories of coordination failures in technology adoption have been influential in economics, but empirical evidence on their importance is limited. This paper studies the role of this friction in the adoption of digital payments systems, using data from the largest provider of electronic wallets in India during the 2016 Demonetization. Our empirical strategy exploits variation in the intensity with which Indian districts were exposed to the cash contraction induced by the Demonetization. Consistent with a dynamic technology adoption model with complementarities, we show that the rate of adoption of the technology increased persistently in response to the large but temporary cash contraction. Estimates of the model indicate that the 6-month adoption response would have been 45\% lower absent adoption complementarities. This suggests that large but temporary policy interventions can resolve coordination failures in technology adoption, though we highlight an important limitation of this logic: temporary interventions can also exacerbate initial differences in adoption across regions or markets.

We examine innovation following the Great Depression using data on a century’s worth of U.S. patents and a difference-in-differences design that exploits regional variation in the crisis severity. Harder-hit areas experienced large and persistent declines in independent patenting, mostly reflecting the disruption in access to finance during the crisis. This decline was larger for young and inexperienced inventors and lower-quality patents. In contrast, innovation by large firms increased, especially among young and inexperienced inventors. Overall, the Great Depression contributed to the decline in technological entrepreneurship and accelerated the shift of innovation into larger firms.

Angel investor tax credits are used globally to spur high-growth entrepreneurship. Exploiting their staggered implementation in 31 U.S. states, we find that they increase angel investment yet have no significant impact on entrepreneurial activity. Two mechanisms explain these results: Crowding out of alternative financing and low sensitivity of professional investors to tax credits. With a large-scale survey and a stylized model, we show that low responsiveness among professional angels may reflect the fat-tailed return distributions that characterize high-growth startups. The results contrast with evidence that direct subsidies to firms have positive effects, raising concerns about promoting entrepreneurship with investor subsidies.

Using General William Sherman’s 1864-65 military march through Georgia, South Carolina, and North Carolina during the American Civil War, this paper studies the effect of capital destruction on short- and long-run local economic activity, and the role of financial markets in the recovery process. We match an 1865 US War Department map of Sherman’s march to county level demographic, agricultural, and manufacturing data from 1850-1920 US Censuses. We show that the capital destruction induced by the March led to a large contraction in agricultural investment, farming asset prices, and manufacturing activity. Elements of the decline in agriculture persisted through 1920. Using information on local banks and access to credit, we argue that the underdevelopment of financial markets played a role in weakening the recovery.

I examine how patent enforcement affects corporate R&D, exploiting the legal changes induced by the Supreme Court decision "eBay v. MercExchange." This ruling increased courts' flexibility in remedying patent cases, and effectively lowered the potential costs of patent litigation for defendants. For identification, I compare innovative activity across firms differentially exposed to patent litigation before the ruling. Across several measures, I find that the decision led to a general increase in innovation. This result confirms that the changes in enforcement induced by the ruling reduced some of the distortions caused by patent litigation. Exploring the channels, I show that patent litigation negatively affects investment because it lowers the returns from R&D and exacerbates its financing constraints.

In the context of the European crisis, we show that the security portfolio of banks plays an important role in the propagation of financial shocks across countries. Using Italian loan-level data, we show that the shock to the banks' sovereign portfolio caused by the 2010 Greek bailout was passed on to Italian firms through a credit contraction. This was particularly the case for banks with weaker balance sheet. The contraction in credit was similar for both large and small firms, but it only negatively affected the investment and employment decisions of smaller firms.

Do private equity firms contribute to financial fragility during economic crises? We find that during the 2008 financial crisis, PE-backed companies increased investments relative to their peers, while also experiencing greater equity and debt inflows. The effects are stronger among financially constrained companies and those whose private equity investors had more resources at the onset of the crisis. PE-backed companies consequentially experienced higher asset growth and increased market share during the crisis.

We document a series of stylized facts about how firms seek to protect the rents from innovation, using a large nationally representative survey of U.S. businesses over the period 2008-2015. Just 1.4 percent of firms obtain patents, but these patenting firms account for 87 percent of R&D investment. Firms consider utility patents less important than other forms of IP protection, like trade secrets, trademarks, and copyrights. Firm industry and size are strongly correlated with firms’ use of all types of intellectual property, but firm age is not. Implications for innovation research and policy are discussed.

This paper studies the impact of career concerns on technological change by analyzing the adoption of digital cinematography in the US motion picture industry. This setting allows us to collect rich data on the adoption of this new technology at the project-level (i.e., movie) as well as on the career of the main decision maker (i.e., director). We find that early career directors played a leading role in the adoption of digital technology and that this effect appears to be explained by career concerns, rather than alternative motives we consider and analyze. Technological savvy also plays a role.

U.S. firms have reduced their investment in scientific research (“R”) compared to product development (“D”), raising questions about the returns to each type of investment, and about the reasons for this shift. We use Census data that disaggregates “R” from “D” to study how US firms adjust their innovation investments in response to an external increase in funding cost. Companies with greater demand for refinancing during the 2008 financial crisis, made larger cuts to R&D investment. This reduction in R&D is achieved almost entirely by reducing investment in research. Development remains essentially unchanged. If other firms patenting similar technologies must refinance, however, then Development investment declines. We interpret the latter result as evidence of technological competition: firms are reluctant to cut Development expenditures when that could place them at a disadvantage compared to potential rivals.

Using data on the adoption of mobile payment systems in India, we argue that the age composition of the population can impact the diffusion of new technologies. Evidence from a leading Indian bank shows that younger adults tend to prefer mobile payments over traditional cards. In a model of technology adoption, these age-driven differences in attitudes toward technology create stronger adoption incentives for businesses facing younger consumers. We validate this prediction using store-level data on mobile payment adoption by merchants. Our findings suggest that demographics can pose an obstacle to the diffusion of financial innovation.

Loan modification is increasingly important as advances in lending technology facilitate greater risk-taking. We examine how liquidity constraints and moral hazard shape borrower responses to modifications, and their implications for contracting, using an RCT on vehicle-collateralized debt, unusually rich administrative data on entrepreneurial effort, and an enriched workhorse model. The RCT randomizes the near-universe of a publicly-traded lender’s poorly performing loans to either payment reduction (liquidity relief) or debt reduction (debt overhang relief). The borrowers are small businesses providing minibus taxi services that are essential to the functioning of the South African economy. GPS devices installed to facilitate vehicle repossession also measure borrower effort, in the form of driving activity. Our model accounts for repossession risk and its effects on effort—in contrast to standard models, which define debt overhang assuming full repayment—and predicts that: a) debt reduction will not improve repayment performance or effort for liquidity constrained borrowers; b) payment reduction will generate improvements, for borrowers with sufficient equity in their vehicle; c) payment reduction will often induce payment increases before effort increases. Our results thus far are consistent with these predictions.

Using newly digitized data from the US Censuses of Manufactures, we examine the importance of bank distress in explaining the decline in the economic activity during the Great Depression. Our research design compares the within-MSA behavior of industries that are more or less dependent on external finance across areas that experienced different levels of bank distress between 1929 and 1933. We show that employment, value added, and establishment count contracted relatively more in industries more dependent on external finance than other industries in response to bank distress. Using an instrumental variable design and a set of placebo tests, we confirm the causal interpretation of our results. Lastly, we document that the credit shock appeared to have some persistent effect on industry composition. Our estimates confirm that that disruption in the banking sector had a sizable impact on the manufacturing sector.