Assistant Professor of Business Administration
Hong Luo is an Assistant Professor of Business Administration in the Strategy Unit. She teaches the Strategy course in the MBA required curriculum.
Professor Luo’s research explores how innovators develop and commercialize their ideas, with an emphasis on how far an entrepreneur should develop an idea before selling it. Her findings have strategic implications both for the entrepreneurs and for the firms or investors who acquire their ideas.
Professor Luo received her Ph.D. in Economics from Stern School of Business, New York University, where she was a recipient of the Kauffman Dissertation Fellowship in Entrepreneurship Research. A native of China, she earned an MA in Economics from Beijing University and a BA in Finance from Renmin University of China.
Imperfect Information, Patent Publication, and the Market for Ideas
In this study, we investigate the role of an important information-disclosure mechanism—patent publication—in facilitating transactions in the market for ideas. We do so by analyzing the effects of the American Inventor's Protection Act (AIPA) of 1999, which required, as of November 29, 2000, that U.S. patent applications be published 18 months after their filing rather than at the time of patent grant. We develop a simple theoretical framework that yields predictions about the effects of AIPA on the timing of licensing. We then test the predictions using a sample of 339 licenses of biomedical inventions protected by patent applications filed between 1995 and 2005. Consistent with the predictions, we find that post-AIPA patent applications experience a sharp increase in the probability of licensing after 18-month publication, and, on average, are 18 percentage points less likely than pre-AIPA patent applications to wait until allowance to be licensed. Even for patent applications that are not licensed until allowance, 18-month publication shortens the time to licensing. Overall, for inventors that choose to license, 18-month publication accelerates licensing by 8.5 months on average. We conclude that information disclosure through patent publications plays an important role in facilitating transactions in the market for ideas.
Keywords: Market Transactions;
Innovation and Invention;
Invest in It or Wing It? The Value of Informed Pricing in the Secondary Market
This paper studies the managerial problem of dynamic pricing in the secondary durable-goods market, where sellers typically have limited information about item-specific heterogeneity. It develops a structural model of dynamic pricing that features the seller learning about item-specific demand through initial assessment and active learning in the sale process. The model is estimated using novel panel data of a leading used-car dealership. Policy experiments are conducted to quantify the value of the dealer's initial information about item-specific demand and of lowering the price-adjustment cost. With the dealer's average net profit per car in the estimation sample being around $740, the initial information about item-specific demand worth roughly $243, and cutting the dealer's price-adjustment cost by half would increase its profit by about $103.
Demand and Consumers;
Goods and Commodities;
When to Sell Your Idea: Theory and Evidence from the Movie Industry
When to sell a novel idea is a difficult decision for many innovators. Selling early has financial benefits. But a later-stage sale of a more fully developed idea may attract greater buyer interest and allow the innovator to better protect his idea. I study the decision in a model that features a seller with private information and costly buyer participation. The empirical context of the study is the market for original movie ideas. Consistent with the theory, I find that inexperienced writers are excluded from selling early-stage ideas, restricting their choice to developing the idea fully or abandoning it. By contrast, writers who can attract buyers at any stage sell worse ideas earlier and better ideas later. The results have interesting implications not only for the timing of the sale of ideas, but also for the role of intellectual property protection and the value of intermediaries in the market for ideas.
Keywords: Decision Choices and Conditions;
Innovation and Invention;
Motion Pictures and Video Industry;