Essays on Digitization and the Market for Intangibles: Evidence from Creative and Technology Settings

This thesis examines the impact of intellectual property (IP) on firm-level performance outcomes in the market for intangibles. While the market for intangibles plays an expanding role in economic growth, it is often susceptible to market failure. In particular, digitization adds additional challenges to how firms shape their IP strategies by significantly lowering the cost of copying and sharing digital content, and thereby impacting firm appropriability in many settings. The first chapter analyzes the impact of a firm-level IP strategy commonly used by media industries to combat piracy - digital rights management (DRM) - on music sales. To do this, I exploit a natural experiment, where different record labels remove DRM from their entire catalogue of music at different times, to examine whether relaxing an album's sharing restrictions increases sales. Specifically, I compare sales of similar albums with and without DRM before and after DRM removal, and I find that removing DRM increases digital music sales. However, relaxing sharing restrictions does not impact all albums equally; it increases the sales of lower-selling albums (i.e., the ``long tail'') significantly but does not benefit top-selling albums. My results are consistent with theory that shows lowering search costs can facilitate the discovery of niche products, and suggest that the optimal strength of IP in creative industries depend on the distribution of products (e.g., mainstream vs. niche) within the firms' portfolio. My second and third chapters examine whether structural features of the market for intangibles, impact firm-level outcomes in technology-oriented industries. My second chapter reports the first empirical evidence linking the three main sources of failure emphasized in the market design literature (lack of market thickness, congestion, lack of market safety) to deal outcomes using novel survey data on technology licensing. This chapter disaggregates the licensing process into three stages and finds variation in the salience of market features. In the final chapter, I document the rated importance of different forms of IP and explore the extent to which firm and industry factors influence organizations' motivations for developing IP assets.Ph.D