【Brownbag】Limitation of Firm Fixed Effects Models and the Missing R&D-Patent Relation: New Methods and Evidence
2024/11/29
研討會日期 : 2024-11-29
時間 : 12:10
主講人 : Professor Jui-Chung Yang (楊睿中)
地點 : Conference Room B110
演講者簡介 : Professor Jui-Chung Yang received his PhD from Texas A&M University in 2014. He is an Associate Professor at National Taiwan University. His research fields are Span Econometrics and Environmental Economics.
演講摘要 : The common practice to include firm fixed effects in corporate finance research may eliminate the explanatory power of important economic factors that are persistent. To illustrate this point, we review the intuitive R&D-patent relation in recent studies and surprisingly find that R&D input does not always positively explain patent output. This "missing link" can be attributed to the persistence of R&D and patents that causes the between-firm variation to be absorbed by firm fixed effects. We use advanced machine learning methods to select individual firm dummies that have explanatory power for patent output, and find that most firm dummies are not infomrative for–and may even bias–the identification. Machine learning-based models use only a small set of firm dummies and restore the positive R&D-patent relation. These methods thus offer a “second opinion” for empirical researchers working with explanatory variables that strongly correlate with between-individual unobservables.
