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William R. Kerr

Assistant Professor of Business Administration

Contact (617) 496-7021
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Published Papers

Ellison, Glenn D., Edward L. Glaeser, and William R. Kerr. "What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns." The American Economic Review (forthcoming). (Previous version released as NBER WP 13068, HBS WP 07-064, and CES WP 07-13.) Abstract

Why do firms cluster near one another? We test Marshall's theories of industrial agglomeration by examining which industries locate near one another, or coagglomerate. We construct pairwise coagglomeration indices for U.S. manufacturing industries from the Economic Census. We then relate coagglomeration levels to the degree to which industry pairs share goods, labor, or ideas. To reduce reverse causality, where co-location drives input-output linkages or hiring patterns, we use data from U.K. industries and from U.S. areas where the two industries are not co-located. All three of Marshall's theories of agglomeration are supported, with input-output linkages particularly important.
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Kerr, William R., and Ramana Nanda. "Banking Deregulations, Financing Constraints and Firm Entry Size." Journal of the European Economic Association (forthcoming). Abstract

We examine the effect of US branch banking deregulations on the entry size of new firms using micro-data from the US Census Bureau. We find that the average entry size for startups did not change following the deregulations. However, among firms that survived at least four years, a greater proportion of firms entered either at their maximum size or closer to the maximum size in the first year. The magnitude of these effects were small compared to the much larger changes in entry rates of small firms following the reforms. Our results highlight that this large-scale entry at the extensive margin can obscure the more subtle intensive margin effects of changes in financing constraints.


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Kerr, William R. "Breakthrough Inventions and Migrating Clusters of Innovation." Journal of Urban Economics (forthcoming). (HBS WP 10-020.) Abstract

We investigate the speed at which clusters of invention for a technology migrate spatially following breakthrough inventions. We identify breakthrough inventions as the top one percent of U.S. inventions for a technology during 1975-1984 in terms of subsequent citations. Patenting growth is significantly higher in cities and technologies where breakthrough inventions occur after 1984 relative to peer locations that do not experience breakthrough inventions. This growth differential in turn depends on the mobility of the technology's labor force, which we model through the extent that technologies depend upon immigrant scientists and engineers. Spatial adjustments are faster for technologies that depend heavily on immigrant inventors. The results qualitatively confirm the mechanism of industry migration proposed in models like Duranton (2007).


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Glaeser, Edward L., William R. Kerr, and Giacomo A.M. Ponzetto. "Clusters of Entrepreneurship." Journal of Urban Economics (forthcoming). (HBS WP 10-019.) Abstract

Employment growth is strongly predicted by smaller average establishment size, both across cities and across industries within cities, but there is little consensus on why this relationship exists. Traditional economic explanations emphasize factors that reduce entry costs or raise entrepreneurial returns, thereby increasing net returns and attracting entrepreneurs. A second class of theories hypothesizes that some places are endowed with a greater supply of entrepreneurship. Evidence on sales per worker does not support the higher returns for entrepreneurship rationale. Our evidence suggests that entrepreneurship is higher when fixed costs are lower and when there are more entrepreneurial people.
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Kerr, William R., and Ramana Nanda. "Democratizing Entry: Banking Deregulations, Financing Constraints, and Entrepreneurship." Journal of Financial Economics 94 (October 2009): 124-149. (HBS WP 07-033, CES WP 07-33.) Abstract

We examine entrepreneurship and creative destruction following US banking deregulations using Census Bureau data.  US banking reforms brought about exceptional growth in both entrepreneurship and business closures.  Most of the closures, however, were the new ventures themselves.  Although we do find evidence for the standard story of creative destruction, the most pronounced impact was a massive increase in churning among new entrants.  We argue that creative destruction requires many business failures along with the few great successes.  The successes are very difficult to identify ex ante, which is why democratizing entry is an important trait of well-functioning capital markets.
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Glaeser, Edward L., and William R. Kerr. "Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?" Journal of Economics and Management Strategy 18, no. 3 (fall 2009): 623–663. (NBER WP 14407, HBS WP 09-055, CES WP 08-37.) Abstract

Why are some places more entrepreneurial than others? We use Census Bureau data to study local determinants of manufacturing startups across cities and industries. Demographics have limited explanatory power. Overall levels of local customers and suppliers are only modestly important, but new entrants seem particularly drawn to areas with many smaller suppliers, as suggested by Chinitz (1961). Abundant workers in relevant occupations also strongly predict entry. These forces plus city and industry fixed effects explain between sixty and eighty percent of manufacturing entry. We use spatial distributions of natural cost advantages to address partially endogeneity concerns.
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Kerr, William R. "Ethnic Scientific Communities and International Technology Diffusion." The Review of Economics and Statistics 90, no. 3 (August 2008): 518-537. (HBS WP 06-022, Appendix.) Abstract

This study explores the importance of knowledge transfer for international technology diffusion by examining ethnic scientific and entrepreneurial communities in the US and their ties to their home countries.  US ethnic research communities are quantified by applying an ethnic-name database to individual patent records.  International patent citations confirm knowledge diffuses through ethnic networks, and manufacturing output in foreign countries increases with an elasticity of 0.1-0.3 to stronger scientific integration with the US frontier.  To address reverse-causality concerns, reduced-form specifications exploit exogenous changes in US immigration quotas.  Consistent with a model of sector reallocation, output growth in less developed economies is facilitated by employment gains, while more advanced economies experience sharper increases in labor productivity.  The ethnic transfer mechanism is especially strong in high-tech industries and among Chinese economies.  The findings suggest channels for transferring codified and tacit knowledge partly shape the effective technology frontiers of developing and emerging economies.
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Kerr, William R., and Shihe Fu. "The Survey of Industrial R&D—Patent Database Link Project." Journal of Technology Transfer 33, no. 2 (April 2008): 173-186. (Previous version released as HBS WP 07-031, CES WP 06-28.) Abstract

This paper details the construction of a firm-year panel dataset combining the NBER Patent Dataset with the Survey of Industrial R&D conducted by the Census Bureau and National Science Foundation.  The dataset constitutes a platform that offers an unprecedented view of the R&D-to-patenting innovation process and a close analysis of the strengths and limitations of the R&D survey.  The files are linked through a name-matching algorithm customized for uniting the firm names to which patents are assigned with the firm names in Census Bureau’s SSEL business registry.  Through the Census Bureau’s file structure, R&D can be linked to the operating performances of each firm’s establishments, further facilitating innovation-to-productivity studies.
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Acs, Zoltan J., Edward L. Glaeser, Robert E. Litan, Lee Fleming, Stephan J. Goetz, William R. Kerr, Steven Klepper, Stuart S. Rosenthal, Olav Sorenson, and William C. Strange. "Entrepreneurship and Urban Success: Toward a Policy Consensus." Kauffman Foundation Policy Report (January 2008). Abstract

Like all politics, all entrepreneurship is local. Individuals launch firms and, if successful, expand their enterprises to other locations. But new firms must start somewhere, even if their businesses are conducted largely or exclusively on the Internet. Likewise, policymakers at local and state levels increasingly recognize that entrepreneurship is the key to building and sustaining their economies' growth. Although this is a seemingly obvious proposition, it represents something of a departure from past thinking about how local, state, or regional economies grow. Historically, state and local policymakers have put their energies into trying to attract existing firms from somewhere else, either to relocate to a particular area or to build new facilities there. Such smokestack chasing - or, in this cleaner era, simply firm chasing - often has degenerated into what is essentially a zero-sum game for the national economy. When one city or state offers tax breaks or other financial inducements to encourage firms to locate new plants or headquarters, and succeeds, some other city or state loses out in the process. Local, state, and regional economic development centered on entrepreneurship, however, is a fundamentally different phenomenon. The formation and growth of new firms, especially those built around new products or ways of doing things, wherever this occurs, is clearly a positive sum game, not just for the locality, but for the nation as a whole. This essay provides a guide to policymakers and citizens to what is known about the effects of various local and state policies aimed at fostering entrepreneurially driven growth. There is also much we do not know; thus, the essay identifies subjects that require further research.
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Autor, David H., William R. Kerr, and Adriana D. Kugler. "Does Employment Protection Reduce Productivity? Evidence from U.S. States." Economic Journal 117, no. 521 (June 2007): 189-217. (NBER WP 12680, HBS WP 07-048, CES WP 07-04.) Abstract

Theory predicts that mandated employment protections may reduce productivity by distorting production choices. Firms facing (non-Coasean) worker dismissal costs will curtail hiring below efficient levels and retain unproductive workers, both of which should affect productivity. These theoretical predictions have rarely been tested. We use the adoption of wrongful-discharge protections by U.S. state courts over the last three decades to evaluate the link between dismissal costs and productivity. Drawing on establishment-level data from the Annual Survey of Manufacturers and the Longitudinal Business Database, our estimates suggest that wrongful-discharge protections reduce employment flows and firm entry rates. Moreover, analysis of plant-level data provides evidence of capital deepening and a decline in total factor productivity following the introduction of wrongful-discharge protections. This last result is potentially quite important, suggesting that mandated employment protections reduce productive efficiency as theory would suggest. However, our analysis also presents some puzzles including, most significantly, evidence of strong employment growth following adoption of dismissal protections. In light of these puzzles, we read our findings as suggestive but tentative.
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Kerr, William R., and Robert G. King. "Limits on Interest Rate Rules in the IS Model." Federal Reserve Bank of Richmond Economic Quarterly 82, no. 2 (1996): 47-75. Abstract

There has been a substantial amount of research on interest rate rules.  This literature finds that the feasibility and desirability of interest rate rules depends on the structure of the model used to approximate macroeconomic reality.  We employ a series of macroeconomic models to shed light on how aspects of model structure influence the limits on interest rate rules.  In particular, we show that a simple respecification of the IS schedule, which we call the expectational IS schedule, makes the textbook model generate the same limits on interest rate rules as the fully articulated models.  We then use this simple model to study the design of interest rate rules with nominal anchors.  If the monetary authority adjusts the interest rate in response to deviations of the price level from a target path, then there is a unique equilibrium under a wide range of parameter choices: all that is required is that the authority raise the nominal rate when the price level is above the target path and lower it when the price level is below the target path.  By contrast, if the monetary authority responds to deviations of the inflation rate from a target path, then a much more aggressive pattern is needed: the monetary authority must make the nominal rate rise by more than one-for-one with the inflation rate.  Our results on interest rate rules with nominal anchors are preserved when we further extend the model to include the influence of expectations on aggregate supply.
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Book Chapters

Kerr, William R. and Ramana Nanda. "Financing Constraints and Entrepreneurship." In Handbook on Research on Innovation and Entrepreneurship, edited by David Audretsch, Oliver Falck and Stephan Heblich. Cheltenham, UK: Edward Elgar Publishing, Inc., forthcoming.

Kerr, William R. "The Agglomeration of U.S. Ethnic Inventors." In Economics of Agglomeration, edited by Edward Glaeser. Chicago, IL: University of Chicago Press, forthcoming. (Harvard Business School Working Paper, No. 09-003, July 2008.) Abstract

The ethnic composition of US inventors is undergoing a significant transformation - with deep impacts for the overall agglomeration of US innovation. This study applies an ethnic-name database to individual US patent records to explore these trends with greater detail. The contributions of Chinese and Indian scientists and engineers to US technology formation increase dramatically in the 1990s. At the same time, these ethnic inventors became more spatially concentrated across US cities. The combination of these two factors helps stop and reverse long-term declines in overall inventor agglomeration evident in the 1970s and 1980s. The heightened ethnic agglomeration is particularly evident in industry patents for high-tech sectors, and similar trends are not found in institutions constrained from agglomerating (e.g., universities, government).
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Bozkaya, Ant and William R. Kerr. "Labor Market Regulations and European Venture Capital Investment." In European Productivity Conference Proceedings, edited by Pekka Malmberg, 165-172. Helsinki, Finland: Paintek Oy, 2007.

Bozkaya, Ant and William R. Kerr. "The Rationales and Performance of Public Venturing: Survey Evidence from Belgium and Finland." In Essays in Entrepreneurial Finance, 105-150. Universite Libre de Bruxelles, 2007.

Kerr, William R. "U.S. Ethnic Scientists and Entrepreneurs." In Cleveland Federal Reserve Board Commentary, 1-4, 2007.

Other Papers

Kerr, William R. "Heterogeneous Technology Diffusion and Ricardian Trade Patterns." 2009. Abstract

This study tests the importance of Ricardian technology differences for international trade.  The developed panel includes both emerging and advanced economies, and particular attention is devoted to the variation exploited in empirical tests.  The elasticity of export growth on the intensive margin to the exporter's output development is 0.3 in preferred specifications.  The elasticity for trade entry is 0.02.  To provide greater empirical traction, specifications exploit uneven technology diffusion from the US through ethnic scientific networks to model Ricardian advantages.  The intensive margin elasticity of exports to stronger US scientific integration is 0.15; the extensive margin elasticity is 0.01.


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Kerr, William R., and William F. Lincoln. "The Supply Side of Innovation: H-1B Visa Reforms and U.S. Ethnic Invention." Harvard Business School Working Paper, No. 09-005, December 2008. (FAQ on paper, Appendix, under revision for Journal of Labor Economics.) Abstract

This study evaluates the impact of high-skilled immigrants on US technology formation. Specifically, we use reduced-form specifications that exploit large changes in the H-1B visa program. Fluctuations in H-1B admissions levels significantly influence the rate of Indian and Chinese patenting in cities and firms dependent upon the program relative to their peers. Most specifications find weak crowding-in effects or no effect at all for native patenting. Total invention increases with higher admission levels primarily through the direct contributions of ethnic inventors.


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Pekkala Kerr, Sari, and William R. Kerr. "Economic Impacts of Immigration: A Survey." Harvard Business School Working Paper, No. 09-013, July 2008. (Under review.) Abstract

This paper surveys recent empirical studies on the economic impacts of immigration. Particular emphasis is given to the experiences of Northern Europe and Scandinavia. The survey first examines the magnitude of immigration as an economic phenomenon in various host countries. The second part deals with the assimilation of immigrant workers in host-country labor markets and the use of social benefits by immigrants. The survey then considers the effect of immigration on the labor market outcomes of natives. The paper concludes with studies of immigration's impact for the public sector of host countries.


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Bozkaya, Ant, and William R. Kerr. "Labor Regulations and European Industrial Specialization: Evidence from Private Equity Investments." 2007. (HBS WP 08-043, under review.) Abstract

European nations empirically substitute between employment protection regulations and labor market expenditures like unemployment insurance benefits in the provision of labor market insurance to workers.  While perhaps substitutes from a worker's perspective, employment regulations more directly tax firms making frequent labor force adjustments.  These labor adjustments are especially important for the portfolio companies of both venture capital and buy-out investors.  European nations providing worker insurance through labor market expenditures developed stronger domestic private equity markets over the 1990-2004 period than those nations favoring employment protection.  These patterns are further evident in US-sourced private equity investments into Europe.  Moreover, tests for industry specialization suggest that countries with more flexible labor markets tend to specialize in sectors characterized by high labor volatility.  These results are relevant to the literatures examining the impact of labor market regulations on entrepreneurship and productivity growth due to reallocations across firms and sectors.
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Kerr, William R. "The Ethnic Composition of U.S. Inventors." Harvard Business School Working Paper, No. 08-006, May 2007. (Permanent working paper describing ethnic-name patenting data, revised December 2008.) Abstract

The ethnic composition of US scientists and engineers is undergoing a significant transformation.  This study applies an ethnic-name database to individual patent records granted by the United States Patent and Trademark Office to document these trends with greater detail than previously available.  Most notably, the contributions of Chinese and Indian scientists to US technology formation increase dramatically in the 1990s, before noticeably leveling off after 2000 and declining in the case of India.  Growth in ethnic innovation is concentrated in high-tech sectors; the institutional and geographic dimensions are further characterized.
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Kerr, William R. "Income Inequality and Social Norms for Compensation Differentials and Government-Led Redistribution." 2007. (under revision for Journal of Public Economics.) Abstract

In cross-sectional studies, countries with greater income inequality typically exhibit less support for government-led redistribution and greater acceptance of wage inequality (e.g., United States versus Western Europe).  If individual nations evolve along this pattern, a vicious cycle could form with reduced social concern amplifying primal increases in inequality due to forces like skill-biased technical change.  Exploring movements around these long-term levels, however, this study finds increases in inequality are met with greater, not less, support for redistribution.  Larger compensation differentials are accepted as inequality grows, but of a smaller magnitude than the actual increase.  These findings suggest short-run responses in social norms do not amplify inequality shocks.
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Kerr, William R. "The Role of Immigrant Scientists and Entrepreneurs in International Technology Transfer." Ph.D. diss., MIT, 2005.

Kerr, William R. "Limits on Interest Rate Rules in Macroeconomic Models Governed by Price Stickiness and Rational Expectations." University of Virginia, 1996.

HBS Course Materials

Kerr, William R. "Cherrypicks." Harvard Business School Case 807-106.

Kerr, William R. "Cherrypicks (TN)." Harvard Business School Teaching Note 808-065.

Kerr, William R., Daniel J. Isenberg, and Ant Bozkaya. "TA Energy (Turkey): A Bundle of International Partnerships." Harvard Business School Case 807-175. (This case replaces "Bundling the Contracts: TA-Energy", Harvard Business School Case 807-075, by Kerr and Bozkaya.)

Kerr, William R. "TA Energy (Turkey): A Bundle of International Partnerships (TN)." Harvard Business School Teaching Note 809-131.

Kerr, William R., and Daniel J. Isenberg. "Take Advantage of Your Diaspora Network." Harvard Business School Note 808-029. (Featured in a 2008 Harvard Business Review write-up.)