@article{NOVA,title={Text-Based Interpretation of Innovation: The Causes and Consequences},author={He, Sherry Xinyao and Zhang, Bohui and Zhao, Xiaofeng},journal={Working Project},year={2026}}
A substantial fraction of firms do not report R&D expenditures, posing significant challenges for accurately measuring innovation capital. To address this issue, we employ various machine learning techniques to estimate missing R&D investments. Using a novel out-of-sample validation—firms that report R&D for the first time—we observe that neural networks provide the most accurate estimates of missing R&D. These ML-estimates reliably predict both the quantity and value of future patents for non-R&D-reporting firms. Moreover, we find that the Q-theory holds for uncovered missing R&D investments, thereby resolving a significant portion of the empirical gap in the investment-Q relationship caused by missing data. Our findings carry important implications: over time, the magnitude and economic impact of estimated missing R&D may rival or even surpass those of reported R&D itself.
@article{MLRD,title={Uncovering Missing R&D: Machine Learning Insights into Innovation and Q-Theory},author={He, Sherry Xinyao and Kang, Jun-Koo and Zhang, Hong},journal={Working Paper},year={2025}}
15th Financial Markets and Corporate Governance Conference
The global supply chain encompasses not only good production but also the byproduct of waste. Do firms exploit this property to benefit domestic production? Utilizing China’s Solid Waste Import Ban (CSWIB) as a regulatory shock, we observe that the Producer Price Index (PPI) for U.S. waste-generating industries rose by 2.94% due to increased production costs post-CSWIB. Furthermore, firms within waste-generating sectors also exhibit a 6.49% drop in Tobin’s Q. Our findings suggest that global waste management significantly affects inflation and firm valuation in the U.S., which carry important normative implications for global green transitions.
@article{CSWIB,title={Ripple Through Garbage: The Impact of China's Solid Waste Import Ban on U.S. Firms},author={Chen, Tao and He, Sherry Xinyao and Sun, Stephen Teng and Zhang, Hong},journal={Working Paper},year={2024},doi={10.2139/ssrn.5494686},}