We show a negative effect of opioid prescriptions on subsequent individual employment among employers in our sample using doctor-opioid-prescribing propensity as our instrument. This finding has implications for firms that must now contend with lower local labor supply. We find a negative relationship between opioid prescriptions and subsequent establishment growth. However, firms respond to labor shortages by investing more in technology, replacing the relatively scarcer labor with capital, especially when they are not financially constrained. We find positive abnormal returns, upon the passage of state laws intended to limit opioid prescriptions, that are driven by firms more reliant on labor.

This paper examines the effect of policy uncertainty on venture capital (VC) investment. Relying on plausibly exogenous variation in policy uncertainty caused by closely contested U.S. gubernatorial elections, we find that policy uncertainty negatively affects VC investment. The effect is more pronounced if VC investment is subject to higher illiquidity. However, some distinctive features of VCs (strategic motives, intensive post-investment monitoring, and preferences for early-stage and high-tech ventures) mitigate the effect of policy uncertainty, distinguishing the effect of policy uncertainty on VC investments (in private markets) from that in public markets. Our findings shed new light on the real effects of policy uncertainty in private markets.

This study examines how passive institutional investors reshape corporate venture capital (CVC) investment decisions. We find that increases in passive institutional ownership lead firms to cut back CVC investments in non-core, high-risk, and low-quality ventures, with the reduction being more pronounced among firms subject to more severe managerial agency problems. Futhermore, the reduction of CVC investments leads to higher short-term announcement returns and improved long-term operating and innovation performance. The findings suggest that passive institutional investors mitigate managerial agency problems and improve innovation by disciplining CVC investment decisions.