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I argue that this turnover pattern in bankrupt firms could be driven by lack of ability to attract new inventors and to retain the existing inventors. Additionally, I find that bankrupt firms have fewer inventors retained after bankruptcy, compared to that of non-bankrupt firms. Adopting propensity score matching and difference-in-difference approach, I find that bankrupt firms have fewer patent inventors enter during the post-bankruptcy period than that of the pre-bankruptcy period, compared to the inventors’ entry of non-bankrupt firms during the same timespans. Using a novel data set, I compare the skilled human capital turnover patterns within the bankrupt and non-bankrupt firms over a prolonged period. The last essay investigates the effect of bankruptcy on the mobility of a firm’s skilled human capital. By examining how the attributes of the assets affect the gains and losses in profitability, technological performance, and knowledge utilization associated with the divestiture, I extend the current understanding of resource reconfiguration among bankrupt firms. I also find that, while divesting high-value technological assets can improve profitability, divesting noncore ones is associated with worsen technological function and less knowledge utilization in existing and new technological areas. Specifically, I find that high-value or non-core technological assets are more likely to be divested than their counterparties are. As the two attributes contain information about the price of assets when they get liquidated, and the embeddedness of knowledge in the correspondent technological areas respectively, they are naturally connected with a firm’s post-bankruptcy profitability, technological function, and knowledge utilization. I analyze two attributes of the technological assets: whether the assets are of high value, and whether the assets are in a firm’s core technological areas. The second phase relates to the post-bankruptcy period and explores the performance changes and knowledge utilization associated with divestiture. The first phase focuses on the bankruptcy period and analyzes which kinds of technological assets are more likely to be divested. I build a two-phase framework to examine the antecedents and consequences of divesting technological assets. I construct a sample containing large patenting public firms that file for bankruptcy in the United States. The second essay investigates the effect of the divestiture of technological assets on large bankrupt firms to see whether the divestiture strategy will help them to overcome competitive disadvantages, or if the firm will sink into the mud of competitive disadvantages. Together, these findings highlight persistence as an important mechanism that links historical and social relative performance to innovative and market search. Finally, using an industry-level measure of profit persistence, I find that social relative performance has a stronger effect on innovative search in high-persistence industries, compared to its effect in low-persistence industries. On the contrary, historical relative performance does not exhibit this differential pattern. Consistent with the proposed framework, I find that, while a positive social relative performance is associated with a reduction in a firm’s search intensity, a negative social relative performance increases firm search intensity.
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This essay posits that social relative performance is more persistent than historical relative performance as a result, social relative performance has a stronger effect on innovative search, which has a more persistent carryover effect than market search. This framework connects the relative persistence of social and historical relative performance with the relative persistence of the carryover effects of two types of organizational search, innovative and market search. The first essay proposes a persistence-based framework of organizational search. The dissertation consists of three essays. It focuses on three specific aspects of these responses-the intensity of organizational search, and the roles of intangible asset divestitures and human capital. This dissertation investigates how organizations respond to such performance shortfalls, and how those responses affect their subsequent performance. Sometimes, performance shortfalls are so severe that firms are forced into bankruptcy. Firms often face performance shortfalls, either relative to their past performance or relative to their competitors' performance.