nep-ino New Economics Papers
on Innovation
Issue of 2007‒02‒24
thirty-one papers chosen by
Koen Frenken
Utrecht University

  2. Innovation Performance of Firms in Manufacturing Industry: Evidence from Belgium, Finland and Germany in 1998-2000 By Elina Seppä
  3. Patents, Trade Secrets and the Correlation Among R&D Projects By Bulut, Harun; Moschini, GianCarlo
  4. Uncertain R&D, Backstop Technology and GHGs Stabilization By Valentina Bosetti; Massimo Tavoni
  5. Employment, innovation and productivity: evidence from Italian microdata By Bronwyn Hall; Francesca Lotti; Jacques Mairesse
  6. The Role of Small Firms in China's Technology Development By Lundin, Nannan; Sjöholm, Fredrik; Ping, He; Qian, Jinchang
  7. District leaders as open networks: emerging business strategies in Italian industrial districts By Eleonora Di Maria; Stefano Micelli
  8. On Moral Hazard and Joint R&D By Simona Fabrizi; Steffen Lippert
  9. Technology Development and Job Creation in China By Lundin, Nannan; Sjöholm, Fredrik; Ping, He; Qian, Jinchang
  10. Royalty Stacking in High Tech Industries: Separating Myth from Reality By Geradin, Damien; Layne-Farrar, Anna; Padilla, Atilano Jorge
  11. Outsourcing in Finnish Manufacturing - Does Industry Matter? (in Finnish with an English abstract/summary) By Jyrki Ali-yrkkö
  12. Harnessing Success: Determinants of University Technology Licensing Performance By Belenzon, Sharon; Schankerman, Mark
  13. University research and the location of business R&D By Laura Abramovsky; Rupert Harrison; Helen Simpson
  14. Cross-Border Acquisition or Greenfield Entry: Does it Matter for Affiliate R&D? By Bertrand, Olivier; Hakkala, Katariina; Norbäck, Pehr-Johan
  15. Information Technology, Organisational Change and Productivity By Crespi, Gustavo; Criscuolo, Chiara; Haskel, Jonathan
  16. Outsourcing of Manufactoring R&D Functions - Motives and Results (in Finnish with an English abstract/summary) By Jyrki Ali-Yrkkö
  17. Effects on competitiveness and innovation activity from the integration of strategic aspects with social and environmental management. By Marcus Wagner
  18. R&D, productivity and market value By Bronwyn Hall
  19. Capturing the Evolving Nature of Science, the Development of New Scientific Indicators and the Mapping of Science By Masatsura Igami; Ayaka Saka
  20. Cost effectiveness of R&D and strategic trade policy By Praveen Kujal; Juan Ruiz
  21. Network Formation and Strategic Firm Behaviour to Explore and Exploit. By Muge Ozman
  22. Research Cycles By Bramoullé, Yann; Saint-Paul, Gilles
  23. Regional Versus Individual Aspects of the Digital Divide in Germany By Katrin Schleife
  24. Information Technology, Efficient Restructuring and the Productivity Puzzle By Grüner, Hans Peter
  25. Is the internet delivery channel changing banks' performance? The case of Spanish banks By Ignacio Hernando; María J. Nieto
  26. Immigration, Industrial Revolution and Urban Growth in the United States, 1820-1920: Factor Endowments, Technology and Geography By Sukkoo Kim
  27. WHAT IS AN ENTREPRENEURIAL OPPORTUNITY? By Jeffery S. McMullen; Lawrence A. Plummer; Zoltan J. Acs
  28. Teaching locals new tricks: foreign experts as a channel of knowledge transfer By Markusen, James R.; Trofimenko, Natalia
  29. A General Inter-Industry Relatedness Index By David Bryce; Sidney Winter
  30. Vision 2023: Turkey’s National Technology Foresight Program – a contextualist description and analysis By Ozcan Saritas; Erol Taymaz; Turgut Tumer
  31. Social Change By Greenwood, Jeremy; Guner, Nezih

  1. By: A. Rodriguez-Pose; Riccardo Crescenzi
    Abstract: Research on the impact of innovation on regional economic performance in Europe has fundamentally followed three approaches: a) the analysis of the link between investment in R&D, patents, and economic growth; b) the study of the existence and efficiency of regional innovation systems; and c) the examination of geographical diffusion of regional knowledge spillovers. These complementary approaches have, however, rarely been combined. Important operational and methodological barriers have thwarted any potential crossfertilization. In this paper, we try to fill this gap in the literature by combining in one model R&D, spillovers, and innovation systems approaches. A multiple regression analysis is conducted for all regions of the EU-25, including measures of R&D investment, proxies for regional innovation systems, and knowledge and socio-economic spillovers. This approach allows us to discriminate between the influence of internal factors and external knowledge and institutional flows on regional economic growth. The empirical results highlight how the interaction between local and external research with local and external socio-economic and institutional conditions determines the potential of every region in order to maximise its innovation capacity. They also indicate the importance of proximity for the transmission of economically productive knowledge, as spillovers show strong distance decay effects. In the EU-25 context, only the innovative efforts pursued within a 180 minute travel radius have a positive and significant impact on regional growth performance.
    Keywords: Economic growth, innovation, R&D, knowledge, spillovers,
    JEL: R11 R12 R58
    Date: 2006–01
  2. By: Elina Seppä
    Abstract: The objective of this study is to study whether the R&D expenditures in Finnish firms generate better innovation output than in Belgian and German firms following the studies of Mohnen et al. (2006) and Mohnen and Dagenais (2001) and using CIS 3 data on manufacturing firms in 1998?2000. First, we use generalised tobit model to scrutinise what factors impact the firm?s propensity to innovate and the amount of innovation output, the share of sales in innovative products. Second, we construct an innovation indicator based on the estimates of pooled regression and compare the expected innovation output to the observed innovation output in sample countries and industries. We find that innovativeness is overall largest in Germany whereas the results of Belgium and Finland are nearly equal. The most surprising country differences are found in the effects of public funding, which do not have any significant impact on innovation output in Finland, have a negative impact in Belgium and positive in Germany.
    Keywords: Innovation, R&D, CIS, innovativeness, productivity, innovation and technology policy
    Date: 2007–02–14
  3. By: Bulut, Harun; Moschini, GianCarlo
    Abstract: In patent race models, firms' noncooperatively chosen research projects typically display too much correlation. But when there are multiple intellectual property rights protection instruments, we find that the paths chosen in an R&D race can move towards the social optimum.
    Keywords: Intellectual property rights; Parallel R&D; Patent races
    Date: 2007–02–22
  4. By: Valentina Bosetti (Fondazione Eni Enrico Mattei); Massimo Tavoni (Fondazione Eni Enrico Mattei)
    Abstract: This paper analyses optimal investments in innovation when dealing with a stringent climate target and with the uncertain effectiveness of R&D. The innovation needed to achieve the deep cut in emissions is modelled by a backstop carbon-free technology whose cost depends on R&D investments. To better represent the process of technological progress, we assume that R&D effectiveness is uncertain. By means of a simple analytical model, we show how accounting for the uncertainty that characterizes technological advancement yields higher investments in innovation and lower policy costs. We then confirm the results via a numerical analysis performed with a stochastic version of WITCH, an energy-economy-climate model. The results stress the importance of a correct specification of the technological change process in economy-climate models.
    Keywords: Climate Change, Information and Uncertainty, Environmental Policy, Optimal R&D Investments
    JEL: O32 Q54 Q55
    Date: 2007–01
  5. By: Bronwyn Hall (Institute for Fiscal Studies and University of California, Berkeley); Francesca Lotti; Jacques Mairesse
    Abstract: Italian manufacturing firms have been losing ground with respect to many of their European competitors. This paper presents some empirical evidence on the effects of innovation on employment growth and therefore on firms' productivity with the goal of understanding the roots of such poor performance. We use firm level data from the last three surveys on Italian manufacturing firms conducted by Mediocredito- Capitalia, which cover the period 1995-2003. Using a modified version of the model proposed by Harrison, Jaumandreu, Mairesse and Peters (2005), which separates employment growth rates into those associated with old and new products, we provide robust evidence that there is no employment displacement effect stemming from process innovation. The sources of employment growth during the period are split equally between the net contribution of product innovation and the net contribution from sales growth of old products. However, the contribution of product innovation is somewhat lower than that for the four comparison European countries considered by Harrison et al.
    Keywords: Innovation, employment, productivity, Italy.
    JEL: L60 O31 O33
    Date: 2006–11
  6. By: Lundin, Nannan (Örebro University); Sjöholm, Fredrik (Research Institute of Industrial Economics); Ping, He (National Bureau of Statistics of China); Qian, Jinchang (National Bureau of Statistics of China)
    Abstract: Science & Technology (S&T) is high on the Chinese policy agenda but there are large uncertainties on the actual S&T development. For instance, previous studies tend to focus only on large and medium-sized enterprises (LMEs). The situation in Chinese small firms is far less explored. This paper aims to examine the role of S&T-based small firms. More precisely, we examine how much S&T that has been accounted for by small firms and how their S&T intensity differs across industries and ownership groups. We also analyze how various firm characteristics differ over size categories and S&T status. This study is based on newly processed micro level data provided by the National Bureau of Statistics with information on a large number of S&T indicators for small-, medium-, and large-sized manufacturing firms in China in 2000 and 2004. Our results suggest that small firms in Chinese S&T resemble their role in many other countries. They account for a comparably small share of total S&T and most small firms are not engaged in any S&T. However, those small firms that do engage in S&T tend to be more S&T intensive and have a higher output in terms of patents than larger Chinese S&T firms.
    Keywords: Technology; SMEs; China; S&T; R&D
    JEL: O30 O31 O53
    Date: 2007–02–06
  7. By: Eleonora Di Maria (University of Padova); Stefano Micelli (University of Venice)
    Abstract: Italian industrial districts are no longer self-contained systems of small firms, where firms' competitiveness is the result of physical proximity and links with global economy are limited to export sales. A new generation of firms is taking the lead, reshaping the form of districts through their innovative strategies focused on R&D, design and ICT. Most of these firms are leaders within their markets and organize their value chains by coupling district knowledge and competencies with opportunities offered by globalization processes. The rise of these open networks contributes to the transformation of industrial districts and the real drivers of the district firm's competitiveness. Based on a survey of 650 Italian SMEs from 41 Italian districts, the paper describes the characteristics of this new firm model, compared to the traditional district one. The paper also discusses implications for districts in terms of innovation dynamics and governance.
    Keywords: district firms, open networks, global value chain, innovation, governance
    Date: 2007–02
  8. By: Simona Fabrizi (Keele University, Centre for Economic Research and School of Economic and Management Studies); Steffen Lippert (Department of Commerce, Albany Campus, Massey University)
    Abstract: This paper analyzes how the determinants of two entrepreneurs’ choice whether to conduct product innovation R&D projects alone, or in a cross license agreement, or in a research joint venture depend on the intrinsic nature of the R&D projects. Results show that in fundamental research -- which is considered to be affected by moral hazard behavior of the researchers -- there is a systematic bias toward conducting R&D projects alone and against making use of synergies in an RJV. Furthermore, from a social standpoint, in non-fundamental research -- which is considered not to be affected by moral hazard behavior of the researchers -- too few RJVs and too few cross license agreements are chosen; whereas in fundamental research too few RJVs, and too many cross license agreements are chosen.
    Keywords: Monetary policy, zone of discretion, intermediate inflation target.
    JEL: D23 D82 L24 O31 O32
    Date: 2007–01
  9. By: Lundin, Nannan (Örebro University); Sjöholm, Fredrik (Research Institute of Industrial Economics); Ping, He (National Bureau of Statistics of China); Qian, Jinchang (National Bureau of Statistics of China)
    Abstract: This paper examines how Science and Technology (S&T) contribute to job creation in the Chinese manufacturing sector. The ambition of transforming China into an innovation-oriented nation and the emphasis on indigenous innovation capacity building have placed Science and Technology (S&T) high on the Chinese policy agenda. At the same time, the need for job creation is pressing, both to absorb the huge supply of underemployed people, and to enable the annual 20 million new labor market entrants to find employment. We examine the relationship between S&T and job growth in the Chinese industrial sector. S&T can be expected to have both positive and negative effects on employment. For instance, new technology might increase competitiveness and enable Chinese firms to expand their labor force. On the other hand, new technology might be labor-saving, thereby enabling Chinese firms to produce more output with fewer employees. Based on a large sample of manufacturing firms in China between 1998 and 2004, we analyze how S&T affect employment growth. Our results suggest that S&T activities have no effect on job creation.
    Keywords: China; Science and Technology; Job-Creation
    JEL: J21 O14 O33
    Date: 2007–02–07
  10. By: Geradin, Damien; Layne-Farrar, Anna; Padilla, Atilano Jorge
    Abstract: A few recent contributions have claimed that in high-tech industries—where innovation is often cumulative and products include many components which are protected by patents in the hands of many different patent holders—the cost of obtaining all necessary licenses is too high. Some have even requested sweeping policy reforms to deal with the so-called royalty stacking problem. In this Essay we find that the empirical evidence—including new evidence for the 3G telecom industry—does not corroborate the gloomy predictions of the proponents of the royalty stacking hypothesis. A careful look at the theoretical underpinnings of this hypothesis explains the lack of empirical support. First, three necessary conditions must be satisfied for a royalty stacking problem to exist: (a) innovation must be cumulative, so that the patents are complementary; (b) there must be many patents for a given product; and (c) the many patents must be held by numerous, distinct rights holders. Second, royalty stacking may not be a problem even if the three necessary conditions are met; i.e., the three necessary conditions are not sufficient. And, third, several market mechanisms, such as cross licensing or voluntary patent pools, can be used to mitigate the costs of multiple concurrent patent negotiations. We conclude that the so-called royalty stacking problem is more myth than reality and that there is no reason to adopt the dramatic reforms in antitrust and patent law that have been recently proposed by, inter alia, Lemley and Shapiro (2006).
    Keywords: excessive royalties; hold up; innovation; mobile telecommunications; patent licensing
    JEL: L13 L96 O34
    Date: 2007–02
  11. By: Jyrki Ali-yrkkö
    Abstract: : This study analyses the extent of outsourcing in Finnish manufacturing. We find that in the early 2000s, 60% of companies in the Metal, Engineering and Electronics industries (the Technology industry) on average have outsourced some of their functions. In other manufacturing industries, the corresponding share is 68%. Differentiating between functions and regions, the offshore outsourcing concerns mainly production activities, and to a lesser extent R&D. The study also analyses the expectations of companies´ labour demand between outsourcers and non-outsourcers. Roughly half of the companies in the Technology industry that have outsourced R&D will increase their domestic R&D employment during the next 3 years. In other com-panies in the Technology industry, the corresponding share is significantly lower.
    Keywords: outsourcing, R&D, extent, production, manufacturing, services.
    Date: 2007–02–12
  12. By: Belenzon, Sharon; Schankerman, Mark
    Abstract: We study the impact of incentive pay, local development objectives and government constraints on university licensing performance. We develop and test a simple contracting model of technology licensing offices, using new survey information together with panel data on U.S. universities for 1995-99. We find that private universities are much more likely to adopt incentive pay than public ones, but ownership does not affect licensing performance conditional on the use of incentive pay. Adopting incentive pay is associated with about 30-40 percent more income per license. Universities with strong local development objectives generate about 30 percent less income per license, but are more likely to license to local (in-state) startup companies. Stronger government constraints are ‘costly’ in terms of foregone license income and startup activity. These results are robust to controls for observed and unobserved heterogeneity.
    Keywords: incentives; licensing; local development; performance pay; technology transfer; universities
    JEL: F23 O31 O32 O33
    Date: 2007–02
  13. By: Laura Abramovsky (Institute for Fiscal Studies); Rupert Harrison (Institute for Fiscal Studies and University College London); Helen Simpson (Institute for Fiscal Studies)
    Abstract: <p>We investigate the relationship between the location of private sector R&D labs and university research departments in Great Britain. We combine establishment-level data on R&D activity with information on levels and changes in research quality from the Research Assessment Exercise. The strongest evidence for co-location is for pharmaceuticals R&D, which is disproportionately located near to relevant university research, particularly 5 or 5* rated chemistry departments. This relationship is stronger for foreign-owned labs, consistent with multinationals sourcing technology internationally. We also find some evidence for co-location with lower rated research departments in industries such as machinery and communications equipment.</p>
    JEL: O3 R11 R13 I23
    Date: 2007–01
  14. By: Bertrand, Olivier (GREMAQ); Hakkala, Katariina (Research Institute of Industrial Economics); Norbäck, Pehr-Johan (Research Institute of Industrial Economics)
    Abstract: This paper investigates how the entry mode of foreign direct investment (FDI) affects the affiliate R&D activities using unique data on Swedish multinational firms over a long period of time (1970 to 1998). On average, acquired affiliates are more likely to do R&D and have a higher level of R&D intensity than affiliates created by greenfield entry. This difference in observed R&D is explained by differences in parent, affiliate, industry and country characteristics as well as by different reactions to these characteristics, as predicted by the recent theoretical literature on international mergers and acquisitions (M&As). The results also suggest that M&As are, to a larger extent, motivated by asset-seeking motives than greenfield entry, especially in the 1990s.
    Keywords: FDI; M&A; Greenfield Investment; R&D; Multinational Firm
    JEL: F23 L10 L20 O30
    Date: 2007–01–30
  15. By: Crespi, Gustavo; Criscuolo, Chiara; Haskel, Jonathan
    Abstract: We examine the relationships between productivity growth, IT investment and organisational change (DO) using UK firm data. Consistent with the small number of other micro studies we find (a) IT appears to have high returns in a growth accounting sense when DO is omitted; when DO is included the IT returns are greatly reduced, (b) IT and DO interact in their effect on productivity growth, (c) non-IT investment and DO do not interact in their effect on productivity growth. Some new findings are (a) DO is affected by competition; (b) US-owned firms are much more likely to introduce DO relative to foreign owned firms who are more likely still relative to UK firms; (c) our predicted measured TFP growth slowdown for firms who are not doing DO and/or are in the early stages of IT investment compare well with the macro numbers documenting a UK measured TFP growth slowdown.
    Keywords: information technology; organisational change; productivity growth
    JEL: D24 E22 L22 O31
    Date: 2007–02
  16. By: Jyrki Ali-Yrkkö
    Abstract: This study analyses the motives and results of outsourcing. According to the results, companies have pursued outsourcing for a variety of reasons. Cost savings are the major driving force behind the outsourcing of production function. Increased flexibility, focusing and additional capacity are other important motives. In most cases, R&D outsourcing is driven by knowledge acquisition, but increasing R&D capacity and increasing flexibility are also important motives. In addition to outsourcing motives, another major result of the study concerns the results of out-sourcing. Approximately 50% of companies have completely achieved the original goals of outsourcing. Moreover, the targeted cost savings have been completely achieved in 40% of cases.
    Date: 2007–02–12
  17. By: Marcus Wagner
    Abstract: This paper analyses the nature and details of the impact which the integration of social and environmental considerations with business strategy has on different dimensions of competitiveness and innovation activity on the firm level. Its objective is to answer the question as to whether a positive link exists between integration and the effects of environmental and social performance on competitiveness and innovation activity. After presenting a theoretical framework based on extant work, the paper introduces the research methods and variables. Subsequently results are presented for four different dimensions of competitiveness, namely market-related, image-related, efficiency-related and risk-related advantage as well as for innovatory activity in terms of product and process innovation. These raise the possibility that the process of integration is more important for bringing about a positive link than a resulting integration type. Based on the results, implications are discussed and we shall draw the conclusions from the findings.
    Keywords: stakeholder, environmental management, integration, strategy, quality, social performance, environmental performance, competitiveness, innovation
    Date: 2007
  18. By: Bronwyn Hall (Institute for Fiscal Studies and University of California, Berkeley)
    Abstract: Measuring the private returns to R&D requires knowledge of its private depreciation or obsolescence rate, which is inherently variable and responds to competitive pressure. Nevertheless, most of the previous literature has used a constant depreciation rate to construct R&D capital stocks and measure the returns to R&D, a rate usually equal to 15 per cent. In this paper I review the implications of this assumption for the measurement of returns using two different methodologies: one based on the production function and another that uses firm market value to infer returns. Under the assumption that firms choose their R&D investment optimally, that is, marginal expected benefit equals marginal cost, I show that both estimates of returns can be inverted to derive an implied depreciation rate for R&D capital. I then test these ideas on a large unbalanced panel of US manufacturing firms for the years 1974 to 2003. The two methods do not agree, in that the production function approach suggests depreciation rates near zero (or even appreciation) whereas the market value approach implies depreciation rates ranging from 20 to 50 per cent, depending on the period. The concluding section discusses the possible reasons why this is true.
    Date: 2006–11
  19. By: Masatsura Igami; Ayaka Saka
    Abstract: There is a long history describing the structure and evolution of science. Recent unprecedented progress in access, use, and analysis of information on scientific publications and patents open innovative ways to study the structure and evolution of science. Especially, a mapping of knowledge has received wide recognition as a new, evolving area of research.<p> The ultimate goal of this study is to contribute to endeavours to understand and track the changing nature of science. In this study, current trends in scientific activities were mapped and their characteristics were examined. Research areas were explored through a co-citation analysis and a map of science was generated to analyse how research areas were related to each other. Methodology which is commonly used in social network analysis was also applied to examine knowledge networks at the institutional level.<p> The analysis clearly shows the multi-disciplinary character of some research, such as ‘Nano materials and devices’, ‘Genomics’, and ‘Environment’. A precursor of the emergence of nano-bioscience is also observed. Measurement of countries’ specialisation clearly indicates an increased share of the BRICs (Brazil, Russia, India, and China) in some research. The BRICs are currently in a stage of intense catching up and their importance in knowledge networks is likely to become substantial. Social network analysis at the institutional level reveals that the structure of knowledge networks strongly depends on research and each institution probably has its own function in the network. These results show how science is evolving not only across disciplines but also across countries or regions. <P>Mise en évidence du caractère évolutif de la science, élaboration de nouveaux indicateurs scientifiques et typologie de la science <BR>Il existe une longue tradition de description de la structure et de l’évolution de la science. Cependant, les progrès récents sans précédent dans l’accès à l’information sur les publications et brevets scientifiques et dans l’utilisation et l’analyse de cette information ouvrent des voies nouvelles pour étudier la structure et l’évolution de la science. En particulier la typologie du savoir est de plus en plus reconnue comme un nouveau domaine de recherche prometteur.<p> Le but ultime de cette étude est de contribuer aux efforts pour comprendre et retracer le caractère évolutif de la science. Dans cette étude, les tendances actuelles des activités scientifiques ont été mises en évidence et leurs caractéristiques analysées. Les domaines de recherche ont été explorés au moyen d’une analyse de co-citations et une typologie de la science a été dressée pour analyser les liens existant entre les différents domaines scientifiques. Une méthodologie couramment employée dans l’analyse des réseaux sociaux a également été utilisée pour examiner les réseaux de connaissance au niveau institutionnel.<p> L’analyse a clairement montré le caractère pluridisciplinaire de certaines recherches, comme les « nanomatériaux et nanodispositifs », la « génomique » et l«’environnement ». Un précurseur de l’émergence de la nanobioscience a également été observé. La mesure de la spécialisation des pays a clairement indiqué l’émergence des BRICs (Brésil, Russie, Inde et Chine) dans certaines recherches. Les BRICs sont actuellement engagés dans une phase intense de rattrapage et ils vont certainement prendre une importance significative dans les réseaux de connaissance. L’analyse des réseaux sociaux au niveau des institutions a montré que la structure des réseaux de connaissance est fortement conditionnée par la recherche et que chaque institution occupe sans doute une fonction propre dans le réseau. Ces résultats ont mis en évidence la façon dont la science évolue non seulement entre les disciplines, mais aussi entre les pays et les régions.
    Date: 2007–02–20
  20. By: Praveen Kujal (Universidad Carlos III de Madrid); Juan Ruiz (Banco de España)
    Abstract: This paper analyzes the incentives for governments to impose export subsidies when firms invest in a cost saving technology before market competition. Governments first impose an export subsidy or a tax. After observing export policy, firms invest in cost reducing R&D and subsequently compete in the market. Governments subsidize exports under Cournot competition. Under Bertrand competition, export subsidies are positive whenever R&D is sufficiently cost-effective at reducing marginal costs, and negative otherwise. The trade policy reversal found in models without endogenous sunk costs disappears if R&D is sufficiently cost-effective. Thus, output subsidies seem more robust than implied by the recent literature.
    Keywords: product differentiation, strategic trade policy, policy reversals, r&d
    JEL: F12 F13 L13
    Date: 2007–02
  21. By: Muge Ozman
    Abstract: The aim of this paper is to investigate the effect of technological opportunities and knowledge tacitness on inter-firm network formation, under two different industry regimes. In the first regime environment is stable and the aim of firms is to exploit knowledge. In this case, they attribute more value to repeated interactions with geographically close firms. In the second regime, there is environmental turbulence, which increases the value of access to novel information from distant partners for exploration. The question addressed is, under these regimes how do technological opportunities and knowledge tacitness influence structure of networks? The main contribution of the paper different from previous work is that it explicitly models the effect of history between two firms on networks that form. A simulation model is carried out where firms select partners and learn from them, which further shapes their selection process. The results reveal that in both regimes richer technological opportunities and higher tacitness generates local and global star firms depending on the parameter range.
    Date: 2007
  22. By: Bramoullé, Yann; Saint-Paul, Gilles
    Abstract: This paper studies the dynamics of fundamental research. We develop a simple model where researchers allocate their effort between improving existing fields and inventing new ones. A key assumption is that scientists derive utility from recognition from other scientists. We show that the economy can be either in a regime where new fields are constantly invented, and then converges to a steady state, or in a cyclical regime where periods of innovation alternate with periods of exploitation. We characterize the cyclical dynamics of the economy, show that indeterminacy may appear, and establish some comparative statics and welfare implications.
    Keywords: indeterminacy; innovation cycles; research dynamics
    JEL: C61 O39
    Date: 2007–02
  23. By: Katrin Schleife (ZEW Mannheim, Centre for European Economic Research, Research Group Information and Communication Technologies)
    Abstract: This paper analyzes the regional dimension of the German digital divide. It considers the impact of regional characteristics on differences in the share of Internet use between German counties. In addition, it studies the influence of regional factors as well as individual characteristics on the individual probability of becoming a new Internet user. Based on two large data sets, SOEP and INKAR, the analyses show that it is not the rusticity of a region itself that explains regional differences in Internet use. The results rather indicate that it is the different composition of the population between rural and urban areas that accounts for the regional digital divide.
    Keywords: digital divide, Internet use, regional differences
    JEL: O33 O18 R20
    Date: 2006–12
  24. By: Grüner, Hans Peter
    Abstract: Labour productivity in the US has recently grown more strongly than in most European countries. It is often argued that the American productivity increase is due to the widespread introduction of new information and communication technologies (ICT). But why have the same technologies not similarly increased Europe's labour productivity? This paper provides a theoretical explanation for this productivity puzzle based on an extension of Radner's (1992) model of hierarchical information aggregation. The introduction of new ICTs enables organizations to process any given amount of information with a shorter delay. This enables organizations to restructure and solve incentive problems without risking excessive delay. Even a marginal improvement in the ICT can yield significant increases in labour productivity if - and only if - the organization is drastically restructured. Restructuring yields hierarchies with fewer layers and fewer managers, all working under incentive pay and providing first best effort. However, managers need not participate in the gains associated with the restructuring of their business firms.
    Keywords: hierarchies; ICT; Information processing; labour productivity; restructuring
    JEL: D23 D70 D83 L22 P51
    Date: 2007–02
  25. By: Ignacio Hernando (Banco de España); María J. Nieto (Banco de España)
    Abstract: In spite of the conspicuous use of the Internet as a delivery channel, there is a relative dearth of empirical studies that provide a quantitative analysis of the impact of the Internet on banks´ financial performance. This paper attempts to fill this gap by identifying and estimating the impact of the adoption of a transactional web site on financial performance using a sample of 72 commercial banks operating in Spain over the period 1994-2002. The impact on banks´ performance of transactional web adoption takes time to appear. The adoption of the Internet as a delivery channel involves a gradual reduction in overhead expenses (particularly, staff, marketing and IT). This effect is statistically significant after one and a half years after adoption. The cost reduction translates into an improvement in banks´ profitability, which becomes significant after one and a half years in terms of ROA and after three years in terms of ROE. The paper also concludes that the Internet is being used as a complement to, rather than a substitute for, physical branches.
    Keywords: commercial banks, internet banking, profitability, cost and income structure
    JEL: G21 O32 O33
    Date: 2006–09
  26. By: Sukkoo Kim
    Abstract: Industrial revolution is fundamentally linked with the rise of factories and the decline of skilled artisans in manufacturing. Most scholars agree that factories as compared to artisan shops were intensive in unskilled labor. Indeed, the hallmark of the early factories is the utilization of division of labor of relatively unskilled workers. This paper explores whether the massive influx of unskilled immigrants between 1840 and 1920, by significantly increasing the ratio of unskilled to skilled labor endowment, contributed to the growth and spread of factory manufacturing in the United States. The data indicate that immigration not only contributed to the growth and spread of factories but it also contributed to the growth of cities.
    JEL: F2 J2 N3 N6 O30
    Date: 2007–02
  27. By: Jeffery S. McMullen; Lawrence A. Plummer; Zoltan J. Acs
    Keywords: entrepreneurial opportunity, creation, knowledge, discovery, strategy
    JEL: L26 M13 D5
    Date: 2007–02
  28. By: Markusen, James R.; Trofimenko, Natalia
    Abstract: Gains from productivity and knowledge transmission arising from the presence of foreign firms have received a good deal of empirical attention, but theoretical micro-foundations for this mechanism are limited. Here we develop a dynamic model in which foreign experts may train domestic workers who work with them. Gains from training can in turn be decomposed into two types: (a) obtaining knowledge and skills at a lower cost than if they were self-learnt at home, (b) producing domestic skilled workers earlier in time than if the domestic economy had to rediscover the relevant knowledge through 'reinventing the wheel.' We use fixed effects and nearest neighbour matching estimators on a panel of plant-level data for Colombia that identifies the use of foreign experts, to show that these experts have substantial, although not always immediate, positive effects on the wages of domestic workers and on the value added per worker.
    Keywords: foreign experts; knowledge transfer; spillovers
    JEL: F10 F23 O24 O33 O47
    Date: 2007–02
  29. By: David Bryce; Sidney Winter
    Abstract: Firm growth and expansion is widely believed to be guided by the desire to leverage existing resources. But which resources? The answer depends largely on context.the peculiarities of industries, firms, technologies, production, customers, and a host of other dimensions. This fact makes pointing to any particular set of resources as the source of expansion decisions potentially problematic and makes more difficult tests of theories such as the resource-based view of the firm. This paper tackles the problem by developing a general inter-industry relatedness index that can be usefully applied across industry and firm contexts. The index harnesses the relatedness information embedded in the multi-product organization and diversification decisions of every firm in the US manufacturing economy. The index is general in that it implicitly varies the underlying resources upon which expansion proceeds with the industries in question and provides a percentile relatedness rank for every possible pair of fourdigit SIC manufacturing industries. The general index is tested for predictive validity and found to perform as expected. Applications of the index in strategy research are suggested.
    Date: 2006–12
  30. By: Ozcan Saritas (PREST, Manchester Business School, University of Manchester); Erol Taymaz (Department of Economics, METU); Turgut Tumer (Department of Mechanical Engineering, METU)
    Abstract: This paper describes and analyses Vision 2023 Turkish National Technology Foresight Program. The paper is not about a mere description of the activities undertaken. It analyses the Program from a contextualist perspective, where the Program is considered in its own national and organizational contexts by discussing how the factors in these contexts led to the particular decisions taken and approaches adopted when the exercise was organized, designed and practiced. With the description and analysis of the Vision 2023 Technology Foresight Program, the paper suggests that each Foresight exercise should be considered in its own context. The exercise should be organized, designed and practiced by considering the effects of the external contexts (national, regional and/or corporate) and organizational factors stemming from these different context levels along with the nature of the issue being worked on, which constitute the content of the exercise.
    Keywords: Foresight, contextualism, Vision 2023, Turkey, Science and Technology Policy
    Date: 2006–01
  31. By: Greenwood, Jeremy; Guner, Nezih
    Abstract: Society is characterized by the common attitudes and behaviour of its members. Such behaviour reflects purposive decision making by individuals, given the environment they live in. Thus, as technology changes, so might social norms. There were big changes in social norms during the 20th Century, especially in sexual mores. In 1900 only six percent of unwed females engaged in premarital sex. Now, three quarters do. It is argued here that this was the result of technological improvement in contraceptives, which lowered the cost of premarital sex. The evolution from an abstinent to a promiscuous society is studied using an equilibrium-matching model.
    Keywords: technological progress in contraceptives; the sexual revolution
    JEL: E1 J1 O3
    Date: 2007–02

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