nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2017‒08‒13
fifteen papers chosen by
João José de Matos Ferreira
Universidade da Beira Interior

  1. Creative and science oriented employees and firm innovation : a key for smarter cities? By Brunow, Stephan; Birkeneder, Antonia; Rodriguez-Pose, Andrés
  2. Foreign Investment and Domestic Productivity: Identifying Knowledge Spillovers and Competition Effects By Christian Fons-Rosen; Sebnem Kalemli-Ozcan; Bent E. Sorensen; Carolina Villegas-Sanchez; Vadym Volosovych
  3. Ethnic diversity in start-ups and its impact on innovation By Brixy, Udo; Brunow, Stephan; D''Ambrosio, Anna
  4. Input and Output Additionality of R&D Subsidies By Dirk Czarnitzki; Katrin Hussinger
  5. R&D and Product Dynamics By MIYAGAWA Tsutomu; EDAMURA Kazuma; KAWAKAMI Atsushi
  6. Digital technologies and learning outcomes of students from low socio-economic background: An Analysis of PISA 2015 By Margarida Rodrigues; Federico Biagi
  7. Innovation pathways and trajectories in India's auto component industry By Tiwari, Rajnish; Kalogerakis, Katharina
  8. Effects of globalization on peace and stability: Implications for governance and the knowledge economy of African countries By Amavilah, Voxi; Asongu, Simplice; Andrés, Antonio
  9. To Support R&D or Linkages? Seeking a better policy mix for SME support By SUZUKI Jun
  10. The Role of Regional Context on Innovation Persistency of Firms By Tavassoli, Sam; Karlsson, Charlie
  12. Technology and Business Cycles: A Schumpeterian Investigation for the USA By Konstantakis, Konstantinos N.; Michaelides, Panayotis G.
  13. National Differentiation and Industry-Wide Scale Effects By Ahmad Lashkaripour; Volodymyr Lugovskyy
  14. Government Financing of R&D: A Mechanism Design Approach By Lach, Saul; Neeman, Zvika; Schankerman, Mark
  15. Investment-Horizon Spillovers By Alexander M. Chinco; Mao Ye

  1. By: Brunow, Stephan (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Birkeneder, Antonia; Rodriguez-Pose, Andrés
    Abstract: "This paper examines the link between the endowment of creative and science based STEM - Science, Technology, Engineering and Mathematics - workers and the level of the firm and firm- and city-/regional-level innovation in Germany. It also looks into whether the presence of these two groups of workers has greater benefits for larger cities than smaller locations, thus justifying policies to attract these workers in order to make German cities 'smarter'. The empirical analysis is based on a probit estimation, covering 115,000 plant-level observations between 1998 and 2015. The results highlight that firms that employ creative and STEM workers are more innovative than those that do not. However, the positive connection of creative workers to innovation is limited to the boundaries of the firm, whereas that of STEM workers is as associated to the generation of considerable innovation spillovers. Hence, attracting STEM workers is more likely to end up making German cities smarter than focusing exclusively on creative workers." (Author's abstract, IAB-Doku) ((en))
    Date: 2017–08–02
  2. By: Christian Fons-Rosen; Sebnem Kalemli-Ozcan; Bent E. Sorensen; Carolina Villegas-Sanchez; Vadym Volosovych
    Abstract: We study the impact of foreign direct investment (FDI) on total factor productivity (TFP) of domestic firms using a new, representative firm-level data set spanning six countries. A novel finding is that firm-level spillovers from foreign firms to domestic companies can be significantly positive, non-existent, or even negative, depending on which sectors receive FDI. When foreign firms produce in the same narrow sector as domestic firms, the latter are negatively affected by increasing competition and positively affected by knowledge spillovers. We find that the positive spillovers dominate if foreign firms enter sectors where firms are “technologically close,” controlling for the endogeneity of their entry decision into such sectors. Positive technology spillovers also affect firms in other sectors, if those sectors are technologically close to the sectors receiving FDI. Increasing FDI in sectors that are technologically close to other sectors boosts TFP of domestic firms by twice as much as increasing FDI by the same amount across all sectors.
    JEL: E32 F15 F36
    Date: 2017–08
  3. By: Brixy, Udo (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Brunow, Stephan (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); D''Ambrosio, Anna
    Abstract: "The study analyses the impact of different ethnic compositions of start-ups in Germany on the innovativeness of the new businesses. We are able to distinguish between the ethnicity of the founders and that of the early employees following new results that demonstrate the importance of including all new firms' stakeholders for the firm's success. We make use of a measure introduced by Ruef (2002) and Ruef et al. (2003) which not only takes into account the number of different ethnicities involved, but also includes the unusualness of the ethnic compositions. Our results first reveal that foreigners are an important source of both entrepreneurs and employers. Second, we can show that only really rare combinations, of the founders and employees together, lead to more innovative businesses whereas the more common minorities are even found to have a negative impact on firms' innovativeness." (Author's abstract, IAB-Doku) ((en))
    JEL: J15 J21 L26 M13 M14
    Date: 2017–08–03
  4. By: Dirk Czarnitzki (KU Leuven, Belgium); Katrin Hussinger (CREA, Université du Luxembourg)
    Abstract: This paper analyzes the effects of public R&D subsidies on R&D input and output of German firms. We distinguish between the direct impact of subsidies on R&D investments and the indirect effect on innovation output measured by patent applications. We disentangle the productivity of purely privately financed R&D and additional R&D investment induced by the public incentive scheme. For this, a treatment effect analysis is conducted in a first step. The results are implemented into the estimation of a patent production function in a second step. It turns out that both purely privately financed R&D and publicly induced R&D show a positive effect on patent outcome.
    Keywords: R&D, Subsidies, Patents, Treatment Effects
    JEL: C14 C30 H23 O31 O38
    Date: 2017
  5. By: MIYAGAWA Tsutomu; EDAMURA Kazuma; KAWAKAMI Atsushi
    Abstract: In endogenous growth models and mid-term business cycles as seen in the works of Romer (1987) and Comin and Gertler (2006), it is assumed that there are positive effects of product variety. Using product-firm level data, we examine these effects empirically. Using data from the Census of Manufacture, the Survey of Research and Development (R&D), and the Basic Survey of Japanese Business Structure and Activities, we construct a database that includes number of products, R&D expenditures, and data on firm performance. We find that the number of products in R&D firms is higher than that of non-R&D firms, and that R&D firms are more sensitive than non-R&D firms for product dynamics. In the Poisson regression model, we also observe positive effects of R&D activities on product dynamics in empirical studies. As the increase in product variety contributes to productivity growth, our empirical results support the government's policies for enhancing R&D activities.
    Date: 2017–07
  6. By: Margarida Rodrigues (European Commission - JRC); Federico Biagi (European Commission - JRC)
    Abstract: The use of digital technologies for learning is high on the policy agenda and is believed to benefit disadvantaged groups of students especially. This study assesses the extent to which the association between learning outcomes and the use of digital technologies differs systematically between students with different socio-economic statuses. We start by summarizing the existing evidence on the causal effects of digital technologies on learning outcomes. We highlight the relative lack of evidence on the pedagogical use of digital technologies on disadvantaged students when compared to the general student population. The overall consensus emerging from the literature is that the causal effect of digital technologies is mixed. While it is unclear whether disadvantaged students are differently affected by them, the available evidence does not suggest that digital technologies contribute to further disparities in students' learning outcomes. Using data from PISA 2015, we document that students from low socio-economic backgrounds start using digital devices later in life, have slightly less access to ICT at home and tend to use ICT less intensively especially in out-of-school activities than their counterparts. In the multivariate analysis, we find a positive association between disadvantaged students' achievement and the use of ICT for some purposes, but only among those students who use ICT less intensively. However, we find no evidence that this association is systematically different from that of students from higher socio-economic backgrounds. The exception is the use of ICT outside of school for general purposes by low-intensity users: in this case, disadvantaged students would particularly benefit from using ICT more intensively. Furthermore, we also find that - among low-intensity users of ICT - the probability of being a resilient student is positively correlated with the use of ICT at school for educational purposes and at home for schoolwork and general purposes. More generally, our research suggests that low-intensity users of ICT are likely to be using ICT sub-optimally, both at home and at school, and would benefit (in terms of PISA scores) from using ICT more intensively. However, the fact that medium and high-intensity users of ICT typically would not gain from additional ICT use is consistent with the hypothesis that the relationship between use of ICT and learning outcomes is inversely U-shaped.
    Keywords: Digital technologies, Low socio-economic status, Students' Achievement, PISA
    JEL: I21 I24 I29
    Date: 2017–07
  7. By: Tiwari, Rajnish; Kalogerakis, Katharina
    Abstract: India's automotive sector has grown tremendously in the post-liberalization period. The growing domestic market, increased export opportunities and greater emphasis of vehicle manufacturers on high-quality, innovative solutions have created a context for component suppliers to ramp up their innovation capabilities as well. For about past 20 years the auto component industry has consistently acted as a key enabler of various frugal vehicles launched in India. Our multi-level and multi-approach study, making use of firm and sector-level data while combining case studies with expert interviews, seeks to investigate the prevalent innovation pathways and trajectories in India's Auto Component Industry. The results indicate that firms often engage in designing and developing components making use of modern, digital technologies, and manage to reach very high levels of process and resource efficiency. The huge domestic market, and the rising global demand, for affordable, high quality products provide good incentives for investments and openness for external knowledge. Cooperation between Indian and global companies as well as mergers and acquisitions have accelerated the development of innovation capabilities in India. The focused approach on developing concrete applications within requisite parameters gives rise to "appropriate solutions" that balance economic, ecological and technological performance. The study discovered a remarkable set of innovation pathways that makes use of collaborative development, avoids over-engineering and is often driven by economies of scale. All this is also stimulated by the state that developed into a key promoter of innovations.
    Keywords: Innovation Pathways,Innovation Trajectories,Automotive,Auto-Components,India
    Date: 2017
  8. By: Amavilah, Voxi; Asongu, Simplice; Andrés, Antonio
    Abstract: We argue that there exists an indirect link between globalization and the knowledge economy of African countries in which globalization influences ‘peace and stability’ and peace and stability affects governance, and through governance the knowledge economy. We model the link as a three-stage process in four testable hypotheses, which permits an empirical analysis without sacrificing economic relevance for statistical significance. The results indicate that the impacts on governance of peace and stability from globalization defined as trade are stronger than those of peace and stability resulting from globalization taken to be foreign direct investment. We conclude that foreign direct investment is not a powerful mechanism for stimulating and sustaining the African knowledge. However, since the effects of globalization on peace and stability can influence governance both positively and negatively, we also conclude that the prospect for the knowledge economy in African countries may be realistic and attainable, as long as these countries continue to engage in the kind of globalization that enhances peace and stability.
    Keywords: Globalization; peace and stability; Governance; knowledge economy, African countries
    JEL: I20 I28 K42 O10 O55
    Date: 2017–01
  9. By: SUZUKI Jun
    Abstract: The innovation policy mix is reported to be increasingly targeted and demand side-oriented in recent years. In this context, an important question for policy makers, scholars, and analysts in Japan as well as in other nations is how to provide policy support to small- and medium-sized enterprises (SMEs). In this study, the effects of the new generation of policy mix supporting SMEs by the Ministry of Economy, Trade and Industry (METI) in Japan, the Sapo-In program, has been analyzed using patent data from the viewpoint of the effectiveness of financial support to firms (research and development (R&D) subsidy) and the support to build linkages (soft support) on both the supply- and demand-side (matching, brokering, and consulting). The results suggest that soft support has wider impacts in terms of patenting and internal and external network formation while financial support has very limited effects. Based on these results combined with information from the report on the follow-up monitoring survey of Sapo-In projects conducted by METI, the possibility of a better policy mix is discussed.
    Date: 2017–07
  10. By: Tavassoli, Sam (RMIT University); Karlsson, Charlie (KTH)
    Abstract: This paper analyses the role of regional context on innovation persistency of firms. Using five waves of the Community Innovation Survey in Sweden, we have traced firms’ innovative behaviour from 2002 to 2012, in terms of four Schumpeterian types of innovation: product, process, organizational, and marketing. Employing transition probability matrix and dynamic Probit model and controlling for an extensive set of firm-level characteristics, we find that certain regional characteristics matter for innovation persistency of firms. In particular, those firms located in regions with (i) thicker labour market or (ii) higher extent of knowledge spillover exhibit higher probability of being persistent innovators up to 14 percentage points. Such higher persistency is mostly pronounced for product innovators.
    Keywords: location; innovation; persistence; product innovations; process innovations; market innovations; organizational innovations; firms; Community Inno¬vation Survey
    JEL: D22 L20 O31 O32
    Date: 2017–08–06
  11. By: Pierre Van Der Eng
    Abstract: How do multinational enterprises (MNE) respond to the ‘liability of foreignness’ (LoF) they experience in foreign markets? The case study in this paper demonstrates that firms develop dynamic, interactive strategies to minimise the LoF risks they perceive. The Australian subsidiary of Dutch MNE Philips Electronics experienced a significant LoF during 1939-1943, when it came close to being nationalised. In response, Philips Australia set out to build ‘FDI legitimacy’ after 1945 in order to maximise both its ‘national embeddedness’ in the host country and its influence on government policy that guided the rapid development of Australia’s postwar electronics industry. This strategy aimed to minimise risk and maximise commercial opportunities for the firm. Philips Australia localised senior management, maximised local procurement and local manufacturing, took a leading role in industry associations, engaged politically influential board members and used marketing tools to build a strong brand and a positive public profile in Australia. The firm became aware of the limitations of this strategy in 1973, when a new Labor government reduced trade protection. Increasing competition from Japanese electronics firms forced Philips Australia to restructure and downsize its production operations. Despite increasing reliance on imports from the parent company’s regional supply centres and efforts to specialise production on high- value added products, the firm saw its profitability and market share in Australia decrease. The case demonstrates that the success of strategic responses to minimise LoF and maximise ‘FDI legitimacy’ is highly context-dependent.
    Keywords: liability of foreignness, FDI legitimacy, Philips, Australia, electronics industry
    JEL: F23 L68 M16 N87
    Date: 2017–06
  12. By: Konstantakis, Konstantinos N.; Michaelides, Panayotis G.
    Abstract: The purpose of this paper is to deal with questions of instability and economic crisis, deriving theoretical arguments from Schumpeter’s works and presenting relevant empirical evidence for the case of the US economy by sector of economic activity in the time period 1957-2006, just before the first signs of the global recession made their appearance. More precisely, we make an attempt to interpret the economic fluctuations in the US economy by sector of economic activity and find causal relationships between the crucial variables dictated by Schumpeterian theory. In this context, a number of relevant techniques have been used, such as cointegration analysis, periodograms, Granger causality tests as well as stepwise bi-directional causality test a la Dufour and Renault. Our findings seem to give credit to certain aspects of the Schumpeterian theory of business cycles. The results are discussed in a broader context, related to the US sectoral economy.
    Keywords: Economic Crisis, US Sectoral Economy, Schumpeter, Business Cycles.
    JEL: C01 N0 O3 O4
    Date: 2017
  13. By: Ahmad Lashkaripour (Indiana University); Volodymyr Lugovskyy (Indiana University)
    Abstract: In a large class of trade models, trading patterns and the corresponding welfare gains depend on the scale elasticity—a deep parameter that governs industry-wide returns to scale. Noting that the scale elasticity depends on the extent to which technologies or products are nationally differentiated, we develop an empirical strategy to structurally estimate the scale elasticity across various industries. A trade model that features our estimated scale elasticity captures the negative relationship between population size and real income, which eludes standard trade models. Furthermore, we find that scale elasticities display considerable inter-industry variation. Accounting for these previously overlooked variations greatly modifies the estimated gains from trade.
    Date: 2017–04
  14. By: Lach, Saul; Neeman, Zvika; Schankerman, Mark
    Abstract: We study the design of a government loan program for risky R&D projects that generate positive externalities, undertaken by entrepreneurs in a competitive capital market environment. With adverse selection, the optimal contract requires a high interest rate but nearly zero co-financing by the entrepreneur. This contrasts sharply with observed policies, typified by a low interest rate and high co-finanacing requirement. When we add moral hazard (endogenous success), the optimal policy consists of a menu of at most two contracts, one with high interest/zero self-finanacing and a second with a lower interest but also a co-finanacing requirement. Calibrated simulations compare the optimal policy and observed program designs in terms of innovation and welfare.
    Keywords: additionality; entrepreneurship; government nance; innovation; mechanism design; R&D; start-ups
    JEL: D61 D82 O32 O38
    Date: 2017–08
  15. By: Alexander M. Chinco; Mao Ye
    Abstract: This paper uses wavelets to decompose each stock’s trading-volume variance into frequency-specific components. We find that stocks dominated by short-run fluctuations in trading volume have abnormal returns that are 1% per month higher than otherwise similar stocks where short-run fluctuations in volume are less important—i.e., stocks with less of a short-run tilt. And, we document that a stock’s short-run tilt can change rapidly from month to month, suggesting that these abnormal returns are not due to some persistent firm characteristic that’s simultaneously adding both short-run fluctuations and long-term risk.
    JEL: C58 G12 G14
    Date: 2017–08

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