Anandhi Bharadwaj

The United States is in the midst of a drug overdose epidemic. Although the online availability of drugs has been a growing concern with considerable speculation that digital platforms are contributing to this epidemic, empirical assessments have been lacking. To quantify this impact, we rely on the phased rollout of Craigslist, a major online platform, as an experimental setup. Applying a difference-in-differences approach on a national panel data set for all counties in the United States from 1997 to 2008, we find a 14.9% increase in drug abuse treatment admissions, a 5.7% increase in drug abuse violations, and a 6.0% increase in drug overdose deaths after Craigslist’s entry. The impacts of Craigslist’s entry are larger among women, whites, Asians, and the more educated. Further, the unintended consequences of Craigslist are more likely to accrue in larger, wealthier areas with initially low levels of drug abuse. These findings raise the possibility that the marked growth in U.S. drug abuse may have partially stemmed from the wider availability of illicit drugs online at the very beginning of its evolution.

In what kinds of business method innovation do firms in the manufacturing and trade sectors engage? Does engaging in business method innovation create value for these firms? The present paper answers these questions using empirical evidence.

Using text analysis of business method patents, we show that business method innovation in the U.S. manufacturing and trade sectors is aimed primarily at improving the business operations that support the sales of tangible products—that is, how the firm targets customers, manages product delivery, or enhances the product through service offerings. We then evaluate the effect of having business method innovation, as evidenced by patents, on a firm’s value. Leveraging the exogenous shock of the State Street ruling, which first recognized business methods as a patentable category of innovation, we identify a set of firms that possess business method patents and a matched set of comparable firms without such patents. Then, using a difference-in-differences with firm fixed effects model on the matched sample, we show that the valuation of the former set of firms increased by 9% after State Street, as measured by Tobin’s q. We further show that (1) business method innovators in the manufacturing sector gained a 7% increase, whereas business method innovators in the trade sectors gained a 25% increase; and (2) only firms with broader innovation scope—that is, business method innovations covering the range of customer targeting, product delivery, and service support of products—experienced a significant (18%) value bump.

This research provides evidence that business method innovation in the manufacturing and trade sectors primarily involves innovating in business operations that support product sales. Our work also provides empirical support for the proposition that engaging in business method innovation drives manufacturing and trade firms’ market performance.