Papers by Christian Catalini
We rely on economic theory to discuss how blockchain technology and cryptocurrencies will influen... more We rely on economic theory to discuss how blockchain technology and cryptocurrencies will influence the rate and direction of innovation. We identify two key costs that are affected by distributed ledger technology: 1) the cost of verification; and 2) the cost of networking. Markets facilitate the voluntary exchange of goods and services between buyers and sellers. For an exchange to be executed, key attributes of a transaction need to be verified by the parties involved at multiple points in time. Blockchain technology, by allowing market participants to perform costless verification, lowers the costs of auditing transaction information, and allows new marketplaces to emerge. Furthermore, when a distributed ledger is combined with a native cryptographic token (as in Bitcoin), marketplaces can be bootstrapped without the need of traditional trusted intermediaries, lowering the cost of networking. This challenges existing revenue models and incumbents's market power, and opens opportunities for novel approaches to regulation, auctions and the provision of public goods, software, identity and reputation systems.
Traditional innovation models assume that ideas are developed as long as their benefit is greater... more Traditional innovation models assume that ideas are developed as long as their benefit is greater than their cost. So, when the opportunity cost of time is lowered, such as during a holiday from work, more projects are developed, but they have a lower expected benefit. We develop a simple theoretical framework that allows innovators to choose the level of effort they apply towards the development of their idea in a context where the returns to effort are greater for higher quality ideas. We also allow for lower team coordination costs during periods when individuals have overlapping slack time. Under these conditions, slack time may lead to not only lower but also higher quality projects. We test the model's predictions using data on 165,410 projects posted on Kickstarter during college breaks. Consistent with the model's predictions, during university breaks more projects are posted and the increase is largest for projects of either very high or very low quality. Furthermore, projects posted during breaks are more complex, with larger teams and more diverse skills.
We test how a reduction in travel cost affects the rate and direction of scientific research. Usi... more We test how a reduction in travel cost affects the rate and direction of scientific research. Using a fine-grained, scientist-level dataset within chemistry (1991-2012), we find that after Southwest Airlines enters a new route, scientific collaboration increases by 30%, an effect that is magnified when weighting output by quality. The benefits from the lower fares, however, are not uniform across scientist types: younger scientists and scientists that are more productive than their local peers respond the most. Thus, cheaper flights, by reducing frictions otherwise induced by geography and allowing for additional face-to-face interactions, seem to enable better matches over distance.
In October 2014, all 4,494 undergraduates at the Massachusetts Institute of Technology were offer... more In October 2014, all 4,494 undergraduates at the Massachusetts Institute of Technology were offered access to Bitcoin, a decentralized digital currency. As a unique feature of the experiment, students who would generally adopt first were placed in a situation where many of their peers received access to the technology before them, and they then had to decide whether to continue to invest in this digital currency or exit. Our results suggest that when natural early adopters are delayed relative to their peers, they are more likely to reject the technology. We present further evidence that this appears to be driven by identity, in that the effect occurs in situations where natural early adopters' delay relative to others is most visible, and in settings where the natural early adopters would have been somewhat unique in their tech-savvy status. We then show not only that natural early adopters are more likely to reject the technology if they are delayed, but that this rejection generates spillovers on adoption by their peers who are not natural early adopters. This suggests that small changes in the initial availability of a technology have a lasting effect on its potential: Seeding a technology while ignoring early adopters' needs for distinctiveness is counterproductive.
Proceedings of the National Academy of Sciences, 2015
Citations to previous literature are extensively used to measure the quality and diffusion of kno... more Citations to previous literature are extensively used to measure the quality and diffusion of knowledge. However, we know little about the different ways in which a study can be cited; in particular, are papers cited to point out their merits or their flaws? We elaborated a methodology to characterize "negative" citations using bibliometric data and natural language processing. We found that negative citations concerned higher-quality papers, were focused on a study's findings rather than theories or methods, and originated from scholars who were closer to the authors of the focal paper in terms of discipline and social distance, but not geographically. Receiving a negative citation was also associated with a slightly faster decline in citations to the paper in the long run.
SSRN Electronic Journal, 2000
2011 7th International Conference on Standardization and Innovation in Information Technology (SIIT), 2011
Journal of Applied Probability - J APPL PROBAB, 2011
Firms often collaborate to produce inter-operability standards so that independently designed pro... more Firms often collaborate to produce inter-operability standards so that independently designed products can work together. When this process takes place in a Standard Setting Organization (SSO), participants are typically required to disclose any intellectual property rights (IP) that would be infringed by a proposed standard, and asked for a commitment to license their essential IP on fair, reasonable and non-discriminatory terms. This paper describes the IP disclosure process, and provides an overview of a publicly available IP disclosure dataset that the authors have compiled using the archives of thirteen major SSOs. We use these new data to illustrate several major trends in standards development, and to show how "declared essential" patents differ from a random sample of patents of the same vintage covering similar technology.
We examine a crowdfunding platform that connects artists with funders. Although the inter- net re... more We examine a crowdfunding platform that connects artists with funders. Although the inter- net reduces many distance-related frictions, local and distant funders exhibit different funding patterns. Local funders appear less responsive to information about the cumulative funds raised by an artist. However, this distance effect appears to proxy for a social effect: it is largely explained by funders who likely have an offline social relationship with the artist (“friends and family”). Yet, this social effect does not persist past the first investment, suggesting that it may be driven by an activity like search but not monitoring. Thus, although the platform seems to diminish many distance-sensitive costs, it does not eliminate all of them. These findings provide a deeper understanding of the abilities and limitations of online markets to facilitate transactions and convey information between buyers and sellers with varying degrees of social connectedness.
The extant literature linking slack time to innovation focuses on how slack time facilitates cre... more The extant literature linking slack time to innovation focuses on how slack time facilitates creative activities such as ideation, experimentation, and prototype development. We turn attention to how slack time may enable activities that are less creative but still important for innovation, namely mundane, execution-oriented tasks. First, we document the main effect: a sharp rise in innovative projects posted on a major crowdfunding platform when colleges are on break. Next, we report timing and project type evidence consistent with the causal interpretation that slack time drives innovation. Finally, we present a series of results consistent with the mundane task mechanism but not with the traditional creativity-related explanations. We do not rule out the possibility that creativity benefits from slack time. Instead, we introduce the idea that mundane, execution-oriented tasks, such as those associated with launching a crowdfunding campaign (e.g., administration, planning, promotion), are an important input to innovation that may benefit significantly from slack time.
Information asymmetry presents a challenge to equity crowdfunding just as in other markets for eq... more Information asymmetry presents a challenge to equity crowdfunding just as in other markets for equity capital. Investors are less likely to finance startups when it is difficult to assess quality. We argue that syndicates reduce market failures caused by information asymmetry by shifting the focal investment activities of the crowd from startups to lead investors. Syndicates align incentives of issuers, lead and follow on investors by providing incentives for lead investors to conduct due diligence, monitor progress, and exploit their reputation. We report preliminary evidence that foreshadows a meaningful role for syndicates in the allocation of capital to early-stage ventures.
It is not surprising that the financing of early-stage creative projects and ventures is typicall... more It is not surprising that the financing of early-stage creative projects and ventures is typically geographically localized since these types of funding decisions are usually predicated on personal relationships and due diligence requiring face-to-face interactions in response to high levels of risk, uncertainty, and information asymmetry. So, to economists, the recent rise of crowdfunding -raising capital from many people through an online platform -which offers little opportunity for careful due diligence and involves not only friends and family but also many strangers from near and far, is initially startling. On the eve of launching equity-based crowdfunding, a new market for early-stage finance in the U.S., we provide a preliminary exploration of its underlying economics. We highlight the extent to which economic theory, in particular transaction costs, reputation, and market design, can explain the rise of non-equity crowdfunding and offer a framework for speculating on how equity-based crowdfunding may unfold. We conclude by articulating open questions related to how crowdfunding may affect social welfare and the rate and direction of innovation.
Research Policy, 2010
The paper provides an exploratory analysis of the research networks linking scientists working in... more The paper provides an exploratory analysis of the research networks linking scientists working in an open science environment, and researchers involved in the private technology domain. The study combines data on scientific co-authorship with data on patent co-invention, at the level of individual researchers, for three science-intensive technology fields, i.e. lasers, semiconductors and biotechnology, in order to assess the extent of the overlap between the two communities and to identify the role of key individuals in the process of knowledge transfer. Our findings reveal that the extent of the connectedness among scientists and inventors is rather large, and that particular individuals, i.e. authors-inventors, who act as gatekeepers and bridge the boundaries between the two domains, are fundamental to ensuring this connectivity. These individuals tend to occupy prominent positions in the scientific and the technological networks. However, our results also show maintaining a very central position in the scientific network may come at the expense of being able to fill a similarly central position in a technological network (and vice versa). Finally, preliminary analysis of the institutional origins of authors-inventors shows that one characteristic, distinctive of Europe compared to the United States, is associated with the relatively lower involvement of corporate scientists at the intersection between the two worlds of science and technology.
... Christian Catalini University of Toronto, Rotman School of Management [email protected] ... more ... Christian Catalini University of Toronto, Rotman School of Management [email protected] ... to keep a window open on new sources of knowledge, thereby mitigating the risk of lock-in that could arise in the context of densely connected cliques (Cowan and Jonard, 2004). ...
We examine the geography of early stage entrepreneurial finance in the context of an internet mar... more We examine the geography of early stage entrepreneurial finance in the context of an internet marketplace for funding new musical artist-entrepreneurs. A large body of research documents that investors in early-stage projects are disproportionately co-located with the entrepreneur. Theory predicts this will be particularly true of artist-entrepreneurs with preliminary-stage projects, difficult-to-contract-for effort, difficult-to-observe creativity, negligible tangible assets, and limited reputations. At the same time, however, observers of the spatial effects of the internet and related technologies report that many economic activities have become much less geographically dependent. At an aggregate level, the internet marketplace we examine does indeed demonstrate a spatial transformation of the entrepreneurial finance process: the average distance between investors and artist-entrepreneurs is 4,831 km. However, geography still matters; investors are disproportionately likely to be local and, conditional on investing, local investors invest more. This apparent role for proximity is strongest before entrepreneurs visibly accumulate capital. Within a single round of financing, local investors are more likely to engage earlier in the funding cycle. However, this difference in the timing of investment is almost entirely explained by a particular type of investor, whom we characterize as "family, friends, and fans." We conjecture that these individuals, who are disproportionately co-located with the entrepreneur, have offline information about the entrepreneur and therefore derive less new information from observing the aggregate financing raised. We speculate that the path-dependent role of this offline network in conveying information to the online community limits the "flat world" potential of these communication technologies.
Perhaps the most striking feature of "crowdfunding" is the broad geographic dispersion of investo... more Perhaps the most striking feature of "crowdfunding" is the broad geographic dispersion of investors in small, early-stage projects. This contrasts with existing theories that predict entrepreneurs and investors will be co-located due to distance-sensitive costs. We examine a crowdfunding setting that connects artist-entrepreneurs with investors over the internet for financing musical projects. The average distance between artists and investors is about 3,000 miles, suggesting a reduced role for spatial proximity. Still, distance does play a role. Within a single round of financing, local investors invest relatively early, and they appear less responsive to decisions by other investors. We show this geography effect is driven by investors who likely have a personal connection with the artist-entrepreneur ("family and friends"). Although the online platform seems to eliminate most distance-related economic frictions such as monitoring progress, providing input, and gathering information, it does not eliminate social-related frictions.
Uploads
Papers by Christian Catalini