We first document that, despite potential legal issues, overlapping directors are surprisingly prevalent among direct competitors. Using panel data regressions and plausibly exogenous shocks, we find that competing firms in markets with dense overlapping-director networks experience innovation herding, lose product differentiation, and, ultimately, perform poorly. Novel text-based network propagation tests of technologies show that intellectual property leakage plays a role as firms with dense overlapping director networks experience faster propagation of technologies to competitors. Our findings suggest a coordination problem where industry participants cannot stop rivals from earning small gains from leakage despite much larger industry-wide negative externalities

Wealth Management Products (WMPs) have become a major source of bank funding over the past decade. Using a unique WMP transactions dataset from China covering 99,893 transactions during 2010-2020, this study examines whether greater reliance on WMPs as a type of funding innovation increases bank systemic risk. We find that higher WMP dependence significantly elevates systemic risk, with the effects concentrated among smaller banks. Exploiting the 2018 Asset Management Regulation as an exogenous shock, we establish causality using a difference-in-differences approach. Our channel analysis shows that maturity mismatch amplifies WMP-related systemic risk, while higher WMP yields further increase fragility through funding cost pressures. Overall, these results call for a regulatory approach that moves beyond aggregate balance-sheet metrics and instead targets funding composition, maturity structure, and pricing behaviour-dimensions in which WMPs materially increase systemic vulnerability

For many technologies and behaviours, an agent’s benefit from adopting depends on his contacts adopting, and the benefit to his contacts of adopting depends on their contacts adopting. This paper examines how the architecture of these connections shapes the success or failure of the diffusion of innovations. We start with a standard model of diffusion with the key addition that some agents can coordinate their decisions. This captures the idea that people often talk and make decisions together with friends or family to adopt technologies. We show that insularity of connections, that is, the extent to which agents tend to concentrate their connections to a narrow set of other agents, determines contagion. However, whether insularity helps or hinders depends on the technology being diffused. For technologies that are valuable even without many contacts adopting, we find insular connections hinder adoption, but for technologies that are valuable only when many contacts adopt, insular connections facilitate adoption

This paper provides the first systematic evidence on a recent industry innovation: money market funds offering multiple intraday NAV strikes and redemption windows. Emerging after the 2016 floating-NAV reforms, these multistrike funds hold safer, more liquid assets than traditional single-strike funds offering end-of-day redemptions, yet face substantially larger outflows during periods of market stress. Our findings point to a structural concentration of liquidity-sensitive investors in multistrike funds, revealing how fund microstructure influences run dynamics among sophisticated institutions. Despite evolving liquidity requirements, the core behavioral and structural differences we identify remain highly relevant for evaluating ongoing and future regulatory reforms

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How does the increased use of data technologies, like machine learning, by financial intermediaries affect the allocation of capital towards innovation? I study this question in the context of startup financing by venture capitalists (VCs). While VCs adopting data technologies become better at screening startups similar to those in historical data, they tilt their investments towards this pool and become concurrently less likely to finance innovative startups that achieve rare major success. Plausibly exogenous variations in VCs’ screening automation suggest that these effects are causal. These findings highlight how investors’ adoption of data technologies can have real effects through innovation financing

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

Policy uncertainty can undermine the power of government subsidies to stimulate environmentally friendly research and development. We show that Chinese firms’ green R&D falls as the uncertainty of environmental subsidies rises: Exogenous, weather-driven air pollution variability induces subsidies to fluctuate, and firms in areas with high weather-driven subsidy variability undertake less green R&D and hire fewer technical employees, controlling for the average level of subsidies. Heavy emitters and environmental technology firms are more affected. The results also illustrate how policy uncertainty can arise when policymakers are influenced by conditions that are salient but with causes that are difficult to disentangle.