nep-cse New Economics Papers
on Economics of Strategic Management
Issue of 2022‒09‒26
six papers chosen by
João José de Matos Ferreira
Universidade da Beira Interior

  1. Innovation union:Costs and benefits of innovation policy coordination By Teodora Borota Milicevic; Fabrice Defever; Giammario Impullitti; Adam Hal Spencer
  2. Is it all the same? Types of innovation and their relationship with direct control, technical control and algorithmic management across European firms By Marta Fana; Davide Villani
  3. Credit constraints and open innovation strategies By Pierluigi Murro; Valentina Peruzzi
  4. Of Academics and Creative Destruction: Startup Advantage in the Process of Innovation By Julian Kolev; Alexis Haughey; Fiona Murray; Scott Stern
  5. Surviving Pandemics: The Role of Spillovers By Meghana Ayyagari; Yuxi Cheng; Ariel Weinberger
  6. Focused innovation policy: Lessons from international experience By Ron Crawford

  1. By: Teodora Borota Milicevic; Fabrice Defever; Giammario Impullitti; Adam Hal Spencer
    Abstract: We build a two-region endogenous growth model to analyse the gains from innovation policy cooperation in an economic union. The model is calibrated to two blocks of the EU: the old and new members. R&D subsidy coordination is motivated by the distortion from subsidy competition, the strategic motive, and by intertemporal knowledge spillovers, which drive growth. The ideas production function features decreasing returns, making growth semi-endogenous, where policy affects growth temporarily. We compute gains from harmonised subsidies, chosen in each region to maximise EU welfare, with respect to competitive and observed subsidies. First, we find substantial gains to coordination, which derive exclusively from the strategic motive. Second, extending to include endogenous idea flows via FDI gives knowledge spillovers as the main driver of coordination gains. Third, extending to fully endogenous growth gives similar results. Fourth, conclusions based on steady state analysis have misleading optimal subsidies and overstate the estimated gains.
    Keywords: Optimal innovation policy, growth theory, international policy coordination, EU integration, FDI spillovers.
    Date: 2022
  2. By: Marta Fana (European Commission - JRC); Davide Villani (European Commission - JRC)
    Abstract: Using firm-level data from 28 European countries, this paper explores the relationship between two types of innovation (process and digital) and different forms of control (direct and indirect) at the workplace. We find that (1) digital innovation is more common than process innovation; (2) more innovative firms record higher levels of indirect control (especially related to algorithmic management) and lower level of direct control (3) the relationship between innovation and control is not uniform across European countries. These findings nurture the debate on the future of work as the process of digitalisation may promote a shift towards indirect forms of control and contribute to reduce the degree of direct control. Moreover, these changes may also affect the bargaining process and lead to a redefinition of managerial roles, though it should be acknowledged that social and institutional factors play an important role in shaping this process.
    Keywords: Process innovation; Digital innovation; Algorithmic management; Control, European firms.
    Date: 2022–09
  3. By: Pierluigi Murro (LUISS University); Valentina Peruzzi (Sapienza University of Rome)
    Abstract: We investigate whether credit constraints affect firms' reliance on open innovation strategies. Using data on 7,000 Italian small and medium-sized enterprises, we find that credit restricted firms are 26\% more likely to collaborate for innovation than firms not suffering from credit constraints. This result is confirmed both for product and process innovators. However, when accounting for the intensity of the product innovation, we find a negative impact of credit rationing on open innovation for firms introducing completely new products in the market. This confirms the relevance of opportunity costs in the choice between internal and open innovation in presence of credit restrictions. We also look at the role played by innovation partners. In particular, we show that the existence of credit constraints positively affects the probability of firms innovating with their suppliers. Finally, we provide evidence that the impact of credit frictions on innovation collaborations varies with the innovation environment and with the socio-economic conditions of the province where firms are located.
    Keywords: credit constraints; open innovation; product innovation; process innovation
    JEL: O36 G32 D22
    Date: 2022–09
  4. By: Julian Kolev; Alexis Haughey; Fiona Murray; Scott Stern
    Abstract: What is the role of startups within the innovation ecosystem? Since 2000, startups have grown in their share of commercializing research from top U.S. universities; however, prior work has little to say on the particular advantages of startup ventures in the innovation process relative to more traditional alternatives such as academia and established private-sector incumbents. We develop a simple model of startup advantage based on private information held by the initial inventor, and generate predictions related to the value and impact of startup innovation. We then explore these predictions using patents granted within the regional ecosystems of top-25 research universities from 2000 to 2015. Our results show a significant startup advantage in terms of forward citations and outlier-patent rates. Further, startup innovation is both more original and more general than innovation by incumbent firms. Moreover, startups that survive to become “scale-ups” quickly grow to dominate their regional innovation ecosystems. Our findings have important implications for innovation policy.
    JEL: L24 L26 M13 O31 O32 O34
    Date: 2022–08
  5. By: Meghana Ayyagari; Yuxi Cheng; Ariel Weinberger
    Abstract: What role do spillover effects play in firm resilience during crises? Using high-frequency data on over 7 million import transactions, we ask this question in the context of the large trade disruption faced by US importers in the months immediately following the initial COVID-19 shock. While US firms saw a reduction in imports due to Covid-related trade disruptions to their suppliers, these effects were lower for importers in counties that received greater loans under the Paycheck Protection Program (PPP), a government stimulus program aimed at small businesses. A one standard deviation increase in exposure to PPP reduces the effect of the supply shock faced by the firm by approximately one-fifth. These effects exist even when the importer is not a direct recipient of PPP loans. The effects are largest in counties with larger number of small suppliers and higher input-output industry linkages, and those with greater share of small and medium enterprises (SMEs). We also see similar effects of PPP preserving job growth at the county level even as the trade shock takes a negative toll on local employment. Our results point to local spillovers between SMEs that were PPP recipients and large importers as being an important determinant of firm resiliency during the pandemic.
    Keywords: agglomeration spillovers, Paycheck Protection Program, supply chains, Covid-19
    JEL: G30 H81 R10 R12
    Date: 2022
  6. By: Ron Crawford (Productivity Commission)
    Abstract: Focused innovation policy is a means for governments to work with industry, knowledge institutions and other stakeholders to realise the potential for productivity growth and export success in chosen areas of the economy. Governments in most small advanced economies (SAEs) take a more deliberate approach to such policy than does New Zealand. They typically draw on decades of experience in using and adapting such a policy to changing circumstances. Lessons that New Zealand can take from other SAEs include using high-level multistakeholder governance to develop and oversee the implementation of strategy (including choice of areas for focus); devolving governance of policy implementation in chosen areas of focus to independent multistakeholder bodies, and, together with other participants, marshalling sufficiently large and enduring resources to "shift the dial" on the outcomes sought. Areas of focus do not necessarily or usually correspond to standard industry classifications. They could, instead, be technologies spanning more than one industry, diverse technologies serving specific industries, or innovation in linked upstream and downstream industries. Governments employ focused innovation policies with a variety of objectives. For instance, mission-oriented policies address societal challenges such as those arising from climate change, technological disruption and social inequality. Focused innovation policies to enhance productivity will only be durable if they are also consistent with environmental and social objectives.
    Date: 2021–04

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