nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2021‒06‒21
six papers chosen by
João José de Matos Ferreira
Universidade da Beira Interior

  1. How does market competition affect firm innovation incentives in emerging countries? Evidence from Latin American firms. By Benavente, Jose Miguel; Zuniga, Pluvia
  2. From Imitation to Innovation: Where Is all that Chinese R&D Going? By König, Michael; Song, Zheng; Storesletten, Kjetil; Zilibotti, Fabrizio
  3. Knowledge co-creation in the 21st century: A cross-country experience-based policy report By Laura Kreiling; Caroline Paunov
  4. Digital “is” Strategy: The Role of Digital Technology Adoption in Strategy Renewal By Nicolas van Zeebroeck; Tobias Kretschmer; Jacques Bughin
  5. Organisation Capital, Knowledge Spillover and Firm Performance: Evidence from Chinese Manufacturing Sector By Qing Li; Yanrui Wu
  6. Are Applying for and Receiving Subsidy Worth for Small Enterprises? Evidence from the Government Support Program in Japan By HASHIMOTO Yuki; TAKAHASHI Kohei

  1. By: Benavente, Jose Miguel (Inter-American Development Bank (IADB)); Zuniga, Pluvia (UNU-MERIT)
    Abstract: The role of market competition on firm innovation remains a controversial policy question, especially in the context of developing countries. This paper presents new empirical evidence about the impact of market competition on firm innovation engagement in Colombian and Chilean manufacturing industries. We correct for the endogeneity of market competition using instruments proxying entry costs and policy interventions (i.e. competition decisions and entry law reforms), our results are like those of developed countries. Market competition increases firm propensity to invest in innovation in manufacturing enterprises and this relationship is linear in Chilean while in Colombian industries it takes the form of an inversed-U shape relation. The impact of competition is decreasing with the level of sector asymmetry -as preconised in the literature, while the impact of firm distance to the frontier affects firm innovation engagement differently in the two countries. In Chile, competition raises innovation incentives for the third and fourth productivity quartiles while no impact is found for firms in the first (bottom) two quartiles. In contrast, in Colombia market competition raises innovation engagement across regardless their firm productivity position but effects are stronger in the medium range (second and third quartiles). Our main results are robust to controlling for past innovation engagement, import competition and business dynamics.
    Keywords: Market Competition, Innovation, Technology Purchasing, Productivity, Latin American Firms
    JEL: O32 D41 O47 D24
    Date: 2021–05–19
  2. By: König, Michael; Song, Zheng; Storesletten, Kjetil; Zilibotti, Fabrizio
    Abstract: We construct a model of firm dynamics with heterogenous productivity and distortions. The productivity distribution evolves endogenously as the result of the decisions of firms seeking to upgrade their productivity over time. Firms can adopt two strategies toward that end: imitation and innovation. The theory bears predictions about the evolution of the productivity distribution. We structurally estimate the stationary state of the dynamic model targeting moments of the empirical distribution of R&D and TFP growth in China during the period 2007-2012. The estimated model fits the Chinese data well. We compare the estimates with those obtained using data for Taiwan and find the results to be robust. We perform counterfactuals to study the effect of alternative policies. We find large effects of R&D misallocation on long-run growth.
    Keywords: China; Imitation; Innovation; Misallocation; productivity; R&D; Subsidies; Taiwan; TFP growth; Traveling Wave
    JEL: O31 O33 O47
    Date: 2020–06
  3. By: Laura Kreiling (OECD); Caroline Paunov (OECD)
    Abstract: The importance of knowledge co-creation – the joint production of innovation between industry, research and possibly other stakeholders, such as civil society – has been increasingly acknowledged. This paper builds on 13 cross-country case studies and co-creation experiences during the COVID-19 pandemic to characterise the diversity of knowledge co-creation initiatives and identify lessons for policy. The paper identifies a strong rationale for policy to support knowledge co-creation because the benefits of successful co-creation initiatives outweigh the initial co-ordination costs. Moreover, knowledge co-creation initiatives can contribute to democratising innovation. Successful initiatives engage all stakeholders and have effective governance and management structures. They also have clearly defined ownership and use rights of the collaborations’ outcomes and benefit from favourable conditions to operate, including temporary staff mobility and institutional set-ups that facilitate collaboration and effective communication among participants.
    Keywords: case studies, collaborative innovation, COVID-19 pandemic, industry-science linkages, knowledge co-creation, OECD countries, policy recommendation
    JEL: O31 O32 O35
    Date: 2021–06–16
  4. By: Nicolas van Zeebroeck; Tobias Kretschmer; Jacques Bughin
    Abstract: As digital technologies emerge and improve rapidly, firms face changing tradeoffs in terms of their technology infrastructure and strategic direction. Hence, many of them adopt new digital technology and develop new business models and strategies. The literature on strategic alignment of IT suggests that firms need to synchronize these different domains of choice. We therefore, ask how far firms renew their strategy as they adopt new technologies. In this article, we study this question empirically by assessing if the adoption of new digital technologies is associated with, or even leads to, changes to firm strategy using a detailed survey-based dataset on firms’ strategy renewal and their adoption of digital technologies. We observe a strong positive association between the extent of strategy change and the stage of adoption of advanced digital technologies overall, suggesting a tight coupling between (technological) structure and strategy. Further, using instrumental variable regressions to disentangle the two effects, we find that the adoption of new technologies may lead to a large and robust effect on strategy change: the more extensive the adoption, the larger the change in strategy. This result is robust to various specifications and across industries. However, we notice substantial differences across technologies, potentially pointing at heterogeneity in their strategic nature or maturity level.
    Date: 2021–06–11
  5. By: Qing Li (Qing Li, SHU-UTS SILC Business School, Shanghai University); Yanrui Wu (Business School, The University of Western Australia)
    Abstract: This study explores organisation capital and its spillover effects among Chinese manufacturing firms. By linking patent data with China’s annual survey of industrial enterprises database, we examine technological proximity as one potential channel for organisational spillover but find weak evidence. This result is consistent with previous findings from developed countries. In contrast, organisation capital is found to generate positive spillover in China when geographical proximity is considered. In other words, it is found that spillover from organisation capital is likely among Chinese firms due to geographical proximity rather than technological proximity.
    Keywords: Organisation capital; knowledge spillover; intangible capital; patent portfolio; Chinese firms
    JEL: D21 D24 L22
    Date: 2021
    Abstract: This paper examines the effects of the Business Sustainable Subsidy (BSS) on small enterprises' productivity. The BSS aims productivity improvement and sustainable development of small enterprises by aiding a part of expenses for their business activities. We use rich firm data which contains the attributes and the accounting information of both applied and non-applied firms and examine the effects of receiving and applying for the subsidies. We employ sharp regression discontinuity design for the effects of reception and difference in differences design for that of application. Our empirical results show that significant differences in small enterprises' performance improvement were not evident between receiving the subsidies and not. On the other hand, we found that applicant small enterprises perform higher productivity and sales growth than not-applicant firms. We also robustly obtain the positive results of application impacts by difference in differences model with propensity score matching, controlling for preintervention levels and trends in the outcome. Our findings imply that application in itself promotes firms' voluntarily activities to their own business issues through external support, and leads to improve their productivity.
    Date: 2021–05

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