nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2019‒07‒08
twelve papers chosen by
João José de Matos Ferreira
Universidade da Beira Interior

  1. Cooperating in R&D and Advertising By Parisa Pourkarmi; Gamal Atallah
  2. Beyond the Obvious: Understanding and Integrating Producer-led and User-led Innovation Paradigms from New Perspectives By Lukoschek, Carmen Sabrina
  3. The emergence of an innovation ecosystem in a low innovation region: Disrupting inertia by a young university By Elisa Villani; Christian Lechner
  4. The Rise of Global Innovation by US Multinationals Poses Risks and Opportunities By Lee G. Branstetter; Britta Glennon; J. Bradford Jensen
  5. On the effects of sanctions on trade and welfare: New evidence based on structural gravity and a new database By Felbermayr, Gabriel; Syropoulos, Constantinos; Yalcin, Erdal; Yotov, Yoto V.
  6. Innovation and FDI: Does the Target of Intellectual Property Rights Matter? By Chen, Hung-Ju
  7. Catch-Up Growth and Inter-Industry Productivity Spillovers By Bolhuis, Marijn
  9. The Role of Relationship Lending on Employment Decisions in Firms’ Bad Times By Pierluigi Murro; Tommaso Oliviero; Alberto Zazzaro
  10. Impacts of industry 4.0 investments on firm performance: Evidence from Italy By Marco Bettiol; Mauro Capestro; Eleonora Di Maria; Andrea Furlan
  11. Competition and the role of group identity By Francesca Cornaglia; Michalis Drouvelis; Paolo Masella
  12. The Impact of Trade Openness, Foreign Direct Investment and Domestic Investment on Economic Growth: New Evidence from Asian Developing Countries By Bakari, Sayef; Sofien, Tiba

  1. By: Parisa Pourkarmi (Department of Economics, Carleton University, Ottawa, ON); Gamal Atallah (Department of Economics, University of Ottawa, Ottawa, ON)
    Abstract: This paper studies the impact of cooperative R&D and advertising on innovation and welfare in a duopolistic industry. The model incorporates two symmetric firms producing differentiated products. Firms invest in R&D and advertising in the presence of R&D spillovers and advertising spillovers. Advertising spillovers may be positive or negative. Four cooperative structures are studied: no cooperation, R&D cooperation, advertising cooperation, R&D and advertising cooperation. R&D spillovers and advertising spillovers always increase innovation and welfare if products are highly differentiated and/or spillovers are sufficiently high. The ranking of cooperation settings in terms of R&D, profits and welfare depends on product differentiation, R&D spillovers and advertising externalities. Firms always prefer cooperation on both dimensions, which is socially beneficial only when advertising and R&D spillovers are sufficiently high.
    Keywords: R&D, Advertising, Cooperation, Spillovers, Product differentiation, Innovation, Marketing.
    JEL: D43 L13 O32
    Date: 2019
  2. By: Lukoschek, Carmen Sabrina
    Abstract: Innovation is key to ensuring sustained performance, generating economic growth, and driving progress – not only for individual organizations but also for societies as a whole. Yet, globalization, rapid technological change, and advances in information and communication technologies have turned innovation from an exclusive province of producers into a multilayered sphere that equally encompasses established manufacturing firms and entrepreneurs, as well as open collaboration communities and innovating end users. Hence, the traditional producer-led innovation paradigm is increasingly complemented and contested by a user-led counterpart. To understand the intricacies of this paradigm shift and successfully manage innovation efforts, both, from an organizational and a national level, management and policy makers are in dire need of new perspectives and differentiated insights into the two innovation paradigms, and especially their key drivers. Scientific research has greatly contributed to this quest by extensive investigations of internal and external drivers of organizational innovation, as well as person-related drivers of user innovation. But findings of central drivers are inconclusive and key areas for drivers, for example user innovators’ work environment, remain largely unexplored. Building on the conceptual distinction between producer-led and user-led innovation that frames today’s scientific and managerial discourse, this thesis is dedicated to the identification of central innovation drivers and the investigation of potentially arising interactions between the two paradigms. Specifically, to follow up on research gaps and provide new insights, organizational-level and individual-level resource-based theories are employed and two empirical studies on selected drivers of producer- and user-led innovation are conducted. Both studies extend traditional views on innovation in the two innovation paradigms and advance research by introducing new perspectives that explore beyond the obvious. First, study 1 investigates leadership as a key driver of innovation in the producer-led innovation paradigm by adopting a cross-dimensional perspective that combines innovation and efficiency performance dimensions. The study theoretically introduces and empirically analyzes newly developed scales of dual innovation leadership, a new leadership approach tailored to the unique requirements of the innovation process. Results of structural equation modeling with data from 194 executives of organizational units collected at two points in time empirically substantiate evidence that dual innovation leaders ensure sustainable organizational performance, and hence advance producer-led innovation. With regard to the user-led innovation paradigm, study 2 identifies user innovators’ work environment as a key driver of innovation and adopts a cross-domain perspective that bridges user innovators’ home and work sphere. Specifically, study 2 advances research by investigating a largely unexplored area and corroborating the notion of resource spillovers between different domains. Based on data of 147 work-inspired consumer innovators and three independent raters, results of structural equation modeling show that consumer innovators build job-related resources from their work environment that enhance the outcome of their household sector innovation efforts in terms of novelty, general use value, and technical feasibility. Second, innovation is a resource-intense undertaking and resources are increasingly in short supply. Thus, resource-protecting and mutually beneficial interactions may offer a sustainable approach to manage innovation in the new era of ‘dual paradigms’. Combining insights from study 1 and study 2, the thesis therefore illuminates the potential for interactions between the producer and user innovation sphere by elaborating how producer innovators may indirectly support user innovators. Moreover, the thesis exemplarily illustrates how (dual innovation) leadership targeted to producer-led innovation can foster cross-fertilization between the two paradigms by equally enhancing user-led innovation. To this end, an integrative perspective on the two paradigms is introduced. With these comprehensive, yet differentiated insights on key drivers and their interactions in producer- and user-led innovation, the thesis extends the scientific state of knowledge and suggests important implications for future research. Moreover, the thesis provides management and policy makers with a valuable guiding framework that may support innovation initiatives targeted to the successful realization of innovation endeavors and, hence, the fostering of economic, as well as societal progress.
    Date: 2019
  3. By: Elisa Villani (University of Bologna, Italy); Christian Lechner (Free University of Bolzano, Italy)
    Abstract: Innovation ecosystems are characterised by a variety of complementary actors and relationships among them. Universities are considered a key player in innovation ecosystems for their ability of generating knowledge and qualified expertise for entrepreneurial innovation. While much attention has been paid to mature ecosystems characterised by cutting-edge technologies, the role of less established universities in less innovative regions, characterised by a lack of relationships, familyowned firms, difficult university-industry collaborations, but great potential, has remained very much underexplored. Based on a longitudinal case study of a young university in Italy, this paper aims at contributing to existing literature by looking at the role of the university in defining actors’ positions and relationships in establishing an innovation ecosystem. In doing so, we contribute to existing literature in several ways. First, we highlight that the formation of an innovation ecosystem in a small area highly depends on the university’s potential of disrupting established relationships, creating new ones and, thus, playing an active role in designing the ecosystem. Second, we provide a process-based view for understanding the establishment of an innovation ecosystem through the evolution of interactions, roles and activities. Finally, we describe the micro-dynamics characterising innovation ecosystem emergence and institutionalisation and we show that bottomup approaches are possible as well.
    Keywords: Ecosystems, university, university-industry collaboration, innovation, longitudinal case study
    JEL: M10
    Date: 2019–06
  4. By: Lee G. Branstetter (Peterson Institute for International Economics); Britta Glennon (Wharton School, University of Pennsylvania); J. Bradford Jensen (Peterson Institute for International Economics)
    Abstract: For decades, US multinational corporations (MNCs) conducted nearly all their research and development (R&D) within the United States. Their focus on R&D at home helped establish the United States as the unrivaled leader of innovation and technology advances in the world economy. Since the late 1990s, however, the amount of R&D conducted overseas by US MNCs has grown nearly fourfold and its geographic distribution has expanded from a few advanced industrial countries to many parts of the developing world, creating an innovation system that spans the globe. Like many aspects of globalization, including the offshoring of manufacturing over recent decades, the globalization of R&D raises concerns about US competitiveness and loss of technological leadership. At the same time, the spreading geographic location of innovation presents opportunities for US-based companies if the right policies are adopted to seize them. The research presented in this Policy Brief demonstrates that US innovators continue to remain involved in important ways in US MNCs' global R&D activities, and fears of a hollowing out of US capacity to innovate—based probably on previous fears about the hollowing out of US-based manufacturing—may be overstated. Indeed, the large and growing pool of highly educated scientists and engineers in the developing world could increase the rate of global productivity growth, to the advantage of US-based companies and the world in general. The authors conclude that a productive way to capitalize on the globalization of MNC R&D is not to oppose it but to combine emerging-market talent with MNC experience so that innovation can flourish to improve global living standards and fuel economic progress.
    Date: 2019–06
  5. By: Felbermayr, Gabriel; Syropoulos, Constantinos; Yalcin, Erdal; Yotov, Yoto V.
    Abstract: Using a new, global data base covering the years 1950 to 2015, we study the impact of sanctions on international trade and welfare. We make use of the rich dimensionality of our data and of the latest developments in the structural gravity literature. Starting with a broad evaluation by sanction type, we carefully investigate the case of Iran. Effects are significant but also widely heterogeneous across sanctioning countries. Moreover, they depend on the direction of trade. We also perform a counterfactual analysis which translates our partial equilibrium sanction estimates into heterogeneous but intuitive general equilibrium effects within the same framework.
    Keywords: Sanctions,Effectiveness of Sanctions,Structural Gravity
    JEL: F1 F13 F14 F5 F51 H5 N4
    Date: 2019
  6. By: Chen, Hung-Ju
    Abstract: This paper develops a North-South product-cycle model with innovation and foreign direct investment (FDI) to analyze the influences from strengthening intellectual property rights (IPR) protection. Innovation occurs in the North while imitation happens in the South. Southern firms can imitate either goods produced in the North or goods produced by multinationals in the South. We find that if the target of strengthening IPR protection is Northern-produced goods, then such a policy change reduces the innovation rate and raises the North-South relative wage in the long run. However, the effects on the long-run innovation rate and the North-South relative wage reverse if its target is Southern-produced goods by multinationals. As for the pattern of production, strengthening IPR protection raises the long-run extents of FDI and Southern production imitating goods produced by multinationals while reducing the long-run extents of Northern production and Southern production imitating goods produced in the North, regardless of the target of stronger IPR protection. In addition to examining the long-run effects of strengthening IPR protection, we also analyze its effects during the transitional dynamics. The quantitative analysis indicates that the two strengthening-IPR-protection policies cause welfare losses for both Northern and Southern consumers if we consider the accumulated effects during the transitional dynamics.
    Keywords: FDI; Imitation; Innovation; IPR; R&D.
    JEL: E52 F23 O31
    Date: 2019–06–25
  7. By: Bolhuis, Marijn
    Abstract: Developing economies tend to export more skill-intensive products as they become more productive. This paper provides a new tractable, quantitative framework to examine the role of inter-industry productivity spillovers in this development process. I start by documenting that a country’s comparative advantage tends to increase in industries that employ occupations that are used most intensively in current exports. In the model, productivity growth is driven by occupation-specific dynamic scale economies, which generate productivity spillovers between occupationally similar sectors. By exploiting cross-sector heterogeneity in foreign demand shocks, I find that dynamic scale economies are substantial in high-skilled production but negligible in low-skilled production. As a result, inter-industry productivity spillovers are larger in richer countries, and access to foreign markets allows developing countries to shift labor into sectors that contribute more to aggregate productivity growth. The model can account for a substantial share of the variation in aggregate and industry-level labor productivity growth across developing economies. Counterfactual exercises suggest that inter-industry spillovers play a quantitatively substantial role in accounting for slow cross-country convergence. Moreover, spillovers increase the gains from trade, especially in developing economies with a comparative advantage in manufacturing.
    Keywords: Productivity; Convergence; Spillovers; Dynamic scale economies; Comparative advantage; Exports
    JEL: F1 F4 O1 O3 O4
    Date: 2019–06–16
  8. By: Tenzin Phuntsho; Karma Yezer
    Abstract: Small enterprises play a vital role in economic development as they can provide the economy with efficiency, innovation, competition and employment. Entrepreneurs are responsible for the success of their businesses and have to face up with definite challenges in doing so. The four factors have been pre-determined based on review of the literatures. The four factors selected for the study were: Collateral/Security requirement, Interest rate, Literacy level, and the Credit Process. To know which factors affect access to credit among small business, survey was conducted in selected towns of Chukha district. Data was collected using structured questionnaires from 59 randomly selected respondents of Tsimasham, Chukha and Gedu towns. The statistical tools like correlation, mean and percentage were used for data analysis. Analyzed data is presented in tabular form, graph and chart. Key Words: Access to Credit, Business Credit and Small Enterprises Policy
    Date: 2019–06
  9. By: Pierluigi Murro (LUISS-Guido Carli University.); Tommaso Oliviero (Università di Napoli Federico II and CSEF); Alberto Zazzaro (University of Naples Federico II, CSEF and MoFiR.)
    Abstract: Using firm-level survey information, we study if relationship lending affects companies’ employment decisions when they face adverse conditions. Our empirical analysis reveals that firms with durable lending relationships show a significantly lower degree of sensitivity of internal workforce variation to shocks in sales. This result is robust to different measures of the shocks in sales and to an instrumental variable strategy. We also show that the result is stronger for younger, smaller and more innovative firms, confirming that relationship lending provides insurance against adverse conditions for companies whose internal labor force is arguably more valuable.
    Keywords: Employment, relationship banking, insurance
    JEL: G32 G38 H53 J65
    Date: 2019–06–26
  10. By: Marco Bettiol (Department of Economics and Management, University of Padova); Mauro Capestro (Department of Economics and Management, University of Padova); Eleonora Di Maria (Department of Economics and Management, University of Padova); Andrea Furlan (Department of Economics and Management, University of Padova)
    Abstract: The adoption of industry 4.0 technologies is assumed to bring superior competitive advantage for adopting firms as drivers of efficiency, differentiation as well as support to innovation. However, no studies capture the impacts of industry 4.0 technologies on firm’s financial performance. The paper explores the relationship between investments in digital technologies and firm performances, by also examining which are the technologies more likely to be associated with superior performance and eventually the cumulative effect of technologies on performance. Based on unique data gathered in 2017 on a sample of 1,149 Italian firms, results show the positive impacts on adopters’ performance and the role of robotics and laser cutting in this relationship. No cumulative effect (i.e. adopting more than one or two technologies) is instead observed.
    Keywords: digital technologies, performance, strategy, industry 4.0
    Date: 2019–06
  11. By: Francesca Cornaglia; Michalis Drouvelis; Paolo Masella
    Abstract: The emergence of competition is a defining aspect of human nature and characterizes many important social environments. However, its relationship with how social groups are formed has received little attention. We design an experiment to analyze how individuals’ willingness to compete is affected by group identity. We find that individuals display substantially stronger competitiveness in within group (ingroup) matchings than in between group (outgroup) matchings or in a control setting where no group identity is induced. We also find that the effect of group identity is stronger for subjects who participated more actively in the team-building task.
    Keywords: competition, social distance, group identity, laboratory experiment
    JEL: C92 D03
    Date: 2019
  12. By: Bakari, Sayef; Sofien, Tiba
    Abstract: The objective of this paper is to examine the impact of openness, foreign investment inflows, and domestic investment on economic growth for the case of 24 Asian economies over the time span 2002-2017 through the use of the fixed and random effect models. Our empirical results pointed out that domestic investment positively influences economic growth. However, we found that foreign direct investment and exports are negatively affecting the growth path. Also, the population, imports, and final consumption expenditure have no real impact on economic growth. Due to the importance of the positive externalities linked to the trade openness and foreign direct investments inflow, in terms of technology transfer bias, financial capacities, human expertise, large markets size, and spillover effect added to the domestic capacities and the national investment, the pace of the phenomenal economic performance of the Asian economies is very well justified.
    Keywords: Trade openness, FDI, Domestic Investment, Economic Growth.
    JEL: E22 F13 F14 F15 O11 O16 O47 O53
    Date: 2019–01

This nep-cse issue is ©2019 by João José de Matos Ferreira. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.