Faculty Research Seminar Series

Marshall Van Alstyne - The Role of APIs in Firm Performance

Feb 20, 2017 from 12:00 PM to 01:30 PM

Using proprietary information from a significant fraction of the API tool provision and management industry, we explore the impact of API adoption on firm performance. We use a difference in difference approach centered on the date of first use to show that API adoption measured both as a binary treatment and as a function of the number of calls and amount of data processed is related to increased sales, operating income, and decreased costs. It is especially tightly related to increased market value. In our preferred specification, binary API adoption predicts a 10.3% increase in a firm’s market value. The size of this relationship suggests that timing of API adoption is not exogenous, but rather driven by a latent variable that influences both API adoption and changes in market value. Categorizing APIs by their business function, we find that B2B, B2C, and Internal API calls are heterogeneous in their association with financial outcomes. Firms that distribute more API developer keys see more contemporary API usage. API usage is not related to the number of developer keys issued in previous periods, suggesting that API programming is better modeled as a contemporaneous input rather than as an investment. - Read More

Karthik Kannan - How Q&A capabilities shape online review platforms

Feb 27, 2017 from 12:00 PM to 01:30 PM

This paper uses data from two online shopping platforms to investigate the economic implications of the Q&A system. This research problem becomes increasingly important as many websites start to adopt the Q&A system. Yet, its economic implications have not been discussed in the previous literature. We employ the difference-in-differences analysis to examine the effect of Q&A elements on product sales. We find that question elements negatively affect sales while answer elements have a positive impact. Also, an increase in the number of question is positively correlated with the number of reviews. Meanwhile, an increase in the number of answers reduces the average length of reviews. Our findings suggest that incorporating the Q&A system could be a potential approach to drive sales. However, it is crucially important for managers to develop appropriate policies to gather necessary answers to questions asked on the platform in order to capitalize on such system. - Read More

David E. Weinstein - Big Data and the Measurement or Real Economic Activity

Mar 06, 2017 from 12:00 PM to 01:30 PM

Much of our understanding of welfare depends on the construction of "real" variables that are based on nominal variables divided by a price index. For example, our notions of well being like real wages, real GDP, and income inequality are based on the idea that we know how to deflate nominal variables. Moreover, much of the US economy—e.g., social security benefits, tax brackets, wage contracts—is linked to the consumer price index. One might hope that the measurement of these aggregate prices is a settled issue. This is not true. The measurement of price changes, economic welfare, real output is currently based on three disjoint approaches: macroeconomics, microeconomics, and official measures that differ from either approach. The inconsistencies run so deep that the same assumptions that form the foundation of demand-system estimation can be used to prove that standard price indexes are incorrect, and the assumptions underlying standard exact and superlative price indexes invalidate demand-system estimation. In other words, extant micro and macro welfare estimates are mutually inconsistent, and neither is consistent with the data. It is possible, however, to develop a unified approach to demand and price measurement that exactly rationalizes observed micro data on prices and expenditure shares while permitting exact aggregation and meaningful macro comparisons of welfare over time. In particular, the capacity of statistical agencies to access bar-code data can transform economic measurement and create a better, faster, and cheaper methodology. - Read More

Ariel Dora Stern - Software Growth and Innovation: the Digital Transformation of Medical Technology

Mar 20, 2017 from 12:00 PM to 01:30 PM

There is a longstanding debate about whether technological innovation enables the rise of new entrants, or reinforces incumbent advantages. The ongoing digital transformation of medicine represents a unique opportunity to revisit this debate in the context of health care, an industry that represents nearly 18% of the U.S. economy. Medical technology has become increasingly digitized, as software and networking capability are embedded in new devices. In 2015, nearly 600 medical devices containing software were cleared for marketing by the FDA – almost double the number approved a decade earlier, in 2005. What patterns can be seen in the digital transformation of this industry? Has the digitization of medical devices enabled or deterred the entry of small firms? And has the geographic locus of medical innovation changed to favor areas with a stronger presence in digital business? We use novel data on the contents of new devices, recovered through automated text scraping, to study digital innovation in the medical device industry. Analyzing descriptions of over 30,000 medical devices in the eight most common specialty areas over fourteen years, we first document the growth of software and networking capabilities in medical technology. We find significant heterogeneities across medical specialty areas, where representation of incumbent firms in new product innovation has historically varied across medical specialty areas due to different regulatory requirements. We then use detailed firm data to better understand the characteristics of the firms bringing digital technologies to market. - Read More