nep-ino New Economics Papers
on Innovation
Issue of 2007‒07‒07
29 papers chosen by
Koen Frenken
Utrecht University

  1. Knowledge Flows, Patent Citations and the Impact of Science on Technology By Verspagen, Bart; Nomaler, Onder
  2. Do subsidies have positive impacts upon R&D and innovation activities at the firm level? By Tommy Clausen
  3. The Adoption and Diffusion of Organizational Innovation: Evidence for the U.S. Economy By Lisa M. Lynch
  4. Technological capability building through networking strategies within high-tech industries By Duysters, Geert; Vanhaverbeke, Wim; Beerkens, Bonnie
  5. Collusion and research joint ventures By Kaz Miyagiwa
  6. R&D offshoring and technology learning in emerging economies: Firm-level evidence from the ICT industry By Huang, Can; Qu, Zhe; Zhang, Mingqian; Zhao, Yanyun
  7. External technology sourcing: The effect of uncertainty on governance mode choice By Duysters, Geert; Vanhaverbeke, Wim; Vrande, Vareska van de
  8. Industry Diversity and Its Impact on the Innovation Performance of Firms: An Empirical Analysis Based on Firm-level Panel Data By Martin Wörter
  9. Technological Spillovers and Productivity in Italian Manufacturing Firms By Claudio A. Piga; Giuseppe Medda
  10. Beyond clusters: Fostering innovation through a differentiated and combined network approach By Evert-Jan Visser; Oedzge Atzema
  11. Creative destruction in a model of competitive innovation By Staley, Mark
  12. A Test of Perpetual R and D Races By Yves Breitmoser; Jonathan H. W. Tan; Daniel John Zizzo
  13. Production Outsourcing, Organizational Governance and Firm’s Technological Performance: Evidence from Italy By Roberto Antonietti; Giulio Cainelli
  14. The Innovation System of Norwegian Aquacultured Salmonids By Heidi Wiig Aslesen
  15. Uncertainty and the Dynamics of R&D By Nick Bloom
  16. Innovation and production in the Norwegian aluminium industry By Svein Erik Moen
  17. Exploration and Exploitation in Technology-based Alliance Networks By Duysters, Geert; Vanhaverbeke, Wim; Beerkens, Bonnie; Gilsing, Victor
  18. The development of the Norwegian Petroleum Innovation System: A historical overview By Ole Andreas Engen
  19. Americans Do I.T. Better: US Multinationals and the Productivity Miracle By Nick Bloom; Raffaella Sadun; John Van Reenen
  20. Access (not) granted: What kinds of firms participate in technology programs? By Tommy Clausen
  21. A National Systems View of University Development: Towards a Broadened Perspective on the Entrepreneurial University Based on the German and US Experience By Mark Lehrer; Phillip Nell; Lisa Gärber
  22. Information Technology, Organisational Change and Productivity Growth: Evidence from UK Firms By Gustavo Crespi; Chiara Criscuolo; Jonathan Haskel
  23. How Do Firm Characteristics Influence the Relationship Between R&D and Firm Value? By Queiroz, Valdoceu de; Pindado, Julio; Torre, Chabela de la
  24. Open Source Software and Economic Growth: A Classical Division of Labor Perspective By Garzarelli, Giampaolo; Limam, Yasmina Reem; Thomassen, Bjørn
  25. ICT Externalities: Evidence from cross country data By Meijers, Huub
  26. Productivity Growth, Knowledge Flows and Spillovers By Gustavo Crespi; Chiara Criscuolo; Jonathan Haskel; Matthew Slaughter
  27. Business services and the changing structure of European economic growth By Kox, Henk L.M.; Rubalcaba, Luis
  28. Spin-offs and the Market for Ideas By Satyajit Chatterjee; Esteban Rossi-Hansberg
  29. Measuring a Society’s Knowledge Base By Khumalo, Bhekuzulu

  1. By: Verspagen, Bart (Eindhoven University of Technology); Nomaler, Onder (Eindhoven University of Technology)
    Abstract: Technological innovation depends on knowledge developed by scientific research. The num-ber of citations made in patents to the scientific literature has been suggested as an indicator of this process of transfer of knowledge from science to technology. We provide an intersec-toral insight into this indicator, by breaking down patent citations into a sector-to-sector ma-trix of knowledge flows. We then propose a method to analyze this matrix and construct vari-ous indicators of science intensity of sectors, and the pervasiveness of knowledge flows. Our results indicate that the traditional measure of the number of citations to science literature per patent captures important aspects intersectoral knowledge flows, but that other aspects are not captured. In particular, we show that high science intensity implies that sectors are net suppli-ers of knowledge in the economic sector, but that science intensity does not say much about pervasiveness of either knowledge use or knowledge supply by sectors. We argue that these results are related to the specific and specialized nature of knowledge.
    Keywords: Knowledge, Input-Output Analysis, Knowledge Flow Matrices, Science-to-Technology Transfer, Patents
    JEL: D83 C67 O33
    Date: 2007
  2. By: Tommy Clausen (Centre for Technology, Innovation and Culture, University of Oslo)
    Abstract: The main aim in this paper is to analyze whether “research” and “development” subsidies influence private R&D activity. The results show that “research” subsidies stimulate private R&D activity while “development” subsidies substitute private R&D activity.
    Date: 2007–07
  3. By: Lisa M. Lynch (Tufts University, NBER and IZA)
    Abstract: Using a unique longitudinal representative survey of both manufacturing and nonmanufacturing businesses in the United States during the 1990’s, I examine the incidence and intensity of organizational innovation and the factors associated with investments in organizational innovation. Past profits tend to be positively associated with organizational innovation. Employers with a more external focus and broader networks to learn about best practices (as proxied by exports, benchmarking, and being part of a multi-establishment firm) are more likely to invest in organizational innovation. Investments in human capital, information technology, R&D, and physical capital appear to be complementary with investments in organizational innovation. In addition, non-unionized manufacturing plants are more likely to have invested more broadly and intensely in organizational innovation.
    Keywords: organizational innovation, productivity, human capital, technological change
    JEL: D2 J24 M5 O3
    Date: 2007–05
  4. By: Duysters, Geert (UNU-MERIT); Vanhaverbeke, Wim (Technical University Eindhoven); Beerkens, Bonnie (Technical University Eindhoven)
    Abstract: Learning through networks has been considered as an important research topic for several years now. Technological learning is more and more based on a combination of internal and external learning and firms need to develop both technological and social capital for that purpose. This paper analyses the relationship between both types of capital and their impact on the technological performance of companies in high-tech industries. We claim and find empirical evidence for decreasing marginal returns on social capital. Technological capital and social capital mutually reinforce each other's effect on the rate of innovation for companies with small patent and alliance portfolios. However, when the patent portfolio and network of alliances are extensive, companies risk to over-invest since optimal levels of social capital become smaller at higher levels of technological capital and the marginal benefits of investing in technological capital decreases the higher the levels of social capital. Finally, we find empirical evidence that companies that explore novel and pioneering technologies have higher levels of innovation performance in subsequent years than companies that solely invest in incremental innovations.
    Keywords: Strategic Alliances, Networks, Innovation
    JEL: O32 O31
    Date: 2007
  5. By: Kaz Miyagiwa
    Abstract: We examine whether cooperation in R&D leads to product market collusion. Suppose firms compete in a stochastic R&D race while maintaining the collusive equilibrium in a repeated-game framework. Innovation creates a cost asymmetry and destabilizes the collusive equilibrium. Firms forming an R&D joint venture can maintain cost symmetries through technology sharing agreement, thereby stabilizing collusion. The stability of post-discovery collusion makes collusion stable in pre-discovery periods. However, formation of R&D cooperatives may increase social welfare because firms share an efficient technology. Interestingly, a welfare improvement is less likely if innovation leads to a large cost reduction.
    Date: 2007–03
  6. By: Huang, Can (UNU-MERIT); Qu, Zhe (College of Management, Georgia Institute of Technology); Zhang, Mingqian (School of Economics, Hebei University of China); Zhao, Yanyun (Center for Applied Statistic and School of Statistics, Renmin University of China)
    Abstract: This paper studies the impact of the R&D offshoring of multinational enterprises on the firms in host emerging economies. We develop a two-stage non-cooperative game to analyze the strategic interaction between multinational and host country enterprises engaged in R&D investment. An empirical analysis of 12,309 manufacturing firms in the ICT industry in China shows that R&D offshoring has a positive effect on the intensity of the R&D of host country firms. However, the magnitude of the impact depends on both the technological and geographical distance between the multinational and host country firms. The policy implications of these findings are that the governments of host country should be cautious about allowing advanced multinational R&D investment in under-developed sectors, but they should encourage such investment in developed sectors; and that local governments should be involved in R&D policy making because the positive impact of multinational R&D offshoring diminishes as the geographical distance between the multinational and host country firms increases.
    Keywords: Research and Development, Offshoring, Spillovers, Emerging Economies
    JEL: F23 L23 O32 O33
    Date: 2007
  7. By: Duysters, Geert (UNU-MERIT); Vanhaverbeke, Wim (Technical University Eindhoven); Vrande, Vareska van de (Technical University Eindhoven)
    Abstract: This study examines the effect of external and relational uncertainty on the governance choice for inter-organizational technology sourcing. We develop a number of hypotheses about the impact of environmental turbulence, technological newness, technological distance and prior cooperation on the choice between different governance modes. Data about external technology sourcing transactions in the pharmaceutical industry do not provide evidence for a continuum from less to more integrated sourcing modes. However, we find that the ranking depends on the type of uncertainty, indicating that firms tackle different types of uncertainty with different governance modes.
    Keywords: Open Innovation, Corporate Venture Capital, Mergers and Acquisitions
    JEL: O32 O31 G34 G24
    Date: 2007
  8. By: Martin Wörter (KOF Swiss Economic Institute, ETH Zurich)
    Abstract: This paper investigates empirically the impact of diversity on the innovation performance of a firm. We created a measure for diversity that mirrors differences in the resource base of firms within an industry and tested its impact on innovation in addition to more traditional factors like technology-push, demand-pull, and firm-size, based on panel data stemming from three representative cross sectional surveys carried out in the years 1996, 1999, and 2002 respectively. In fact, diversity has a significant positive impact on the innovation intensity of firms and thus supports more theoretical findings in this area. We also find empirical evidence for the technology push and the demand pull hypotheses as well as the importance of competition for innovation.
    Keywords: Diversity, Innovation Performance, Evolution of Industries, Jacobs Externalities, Panel data,
    JEL: O30
    Date: 2007–05
  9. By: Claudio A. Piga (Dept of Economics, Loughborough University); Giuseppe Medda (DEIR, University of Sassari, Italy.)
    Abstract: We study whether a firm’s total factor productivity dynamics is positively influenced by its own R&D activity and by the technological spillovers generated at the intra- and inter-sectorial level. Our approach corrects simultaneously for the endogeneity and the selectivity biases introduced by the use of a firm’s own R&D as a regressor. A firm’s involvement in R&D activities accounts for significant productivity gains. Firms also benefit from spillovers originating from their own industries, as well as from innovative upstream sectors.
    Keywords: R&D, TFP, selectivity, treatment effect
    JEL: C21 C80 D24 O30
    Date: 2007–07
  10. By: Evert-Jan Visser; Oedzge Atzema
    Abstract: Over the past decades, economic and innovation policy across Europe moved in the direction of creating regional clusters of related firms and institutions. Creating clusters through public policy is risky, complex and costly, however. Moreover, it is not necessary to rely on clusters to stimulate innovation. A differentiated and combined network approach to enhancing innovation and stimulating economic growth may be more efficient and effective, especially though not exclusively in regions lacking clusters. The challenge of such a policy is to mitigate the bottlenecks associated with ‘global pipeline’, ‘local buzz’ and ‘stand alone’ strategies used by innovative firms (cf. Bathelt et al. 2004; Atzema & Visser 2005b), and to combine these strategies with a view to their complementarity in terms of knowledge effects. Private and semi-public brokers will be key in the evolving policy, as timely organizational change is crucial for continued innovation, while brokers also need to mitigate governance problems. This requires region-specific knowledge in terms of sectors, life cycles, institutional and socio-cultural factors, and yields spatially differentiated and differentiating adjustment strategies. The role of public policy is to assist in recruiting, provide start-up funding and monitor brokers. With this, policy moves towards a decentralized, process-based, region-specific, spatially diverging and multi-level system of innovation that is geared towards the evolving innovation strategies of firms.
    Keywords: innovation policy, clusters, networks, governance, regionalization
    JEL: R11 R58 O12 O31 O38
    Date: 2007–06
  11. By: Staley, Mark
    Abstract: This paper presents a scale-invariant model of endogenous growth built on the premise that delays in the diffusion of technologies allow innovators to capture temporary rents. The economy consists of two sectors: a final goods sector that follows constant returns to scale, and an innovative capital sector consisting of a large number of price-taking firms that make incremental improvements to embodied technologies. The model has the property that as one increases the rate of diffusion of innovations, the growth rate of the economy increases even though the level of R&D spending decreases. A process of selection, mathematically similar to Darwinian selection, drives both the diffusion of innovations and the accumulation of capital. The paper shows that by reversing the roles of capital and labour the model can also be used to describe the pre-industrial economy.
    Keywords: creative destruction; competitive innovation; endogenous growth; Schumpeterian; selection; Darwinism; diffusion
    JEL: O40 O30 N00
    Date: 2007–07–02
  12. By: Yves Breitmoser (Institute of Microeconomics, European University Viadrina); Jonathan H. W. Tan (Institute of Microeconomics, European University Viadrina); Daniel John Zizzo (Centre for Competition Policy, University of East Anglia)
    Abstract: This paper presents an experimental study of dynamic indefinite horizon R and D races with uncertainty and multiple prizes. The theoretical predictions are highly sensitive: small parameter changes determine whether technological competition is sustained over time of converges into a market structure with an entrenched leadership and lower aggregate R and D research. The subjects' strategies are far less sensitive. In three out of four treatments (with the exception being a control treatment), the R and D races tend to converge to entrenched leadership. Investment is highest when rivals are close, and there is evidence of average over-investment.
    Keywords: R&D race, innovation, dynamics, experiment
    JEL: C72 C91 O31
    Date: 2006–07
  13. By: Roberto Antonietti (University of Bologna); Giulio Cainelli (University of Bari)
    Abstract: Aim of this paper is to study whether and how the firm’s decision to outsource production activities affects its technological performance. In particular, we look at how the alignment between the firm’s governance strategy and the underlying attributes of the transactions affects the capacity of the firm to introduce new products and processes. Using microeconomic data on a repeated cross-section of Italian manufacturing firms for the period 1998-2003, we develop a two-stage approach: first, we estimate the determinants of the firm’s organizational governance (production outsourcing); second, we incorporate a measure of governance misalignment into a technological performance relation. We find (i) that firms not aligned with the optimal organizational governance perform less well in terms of process innovation than more aligned competitors, but (ii) that misalignment has a positive effect on product innovation. However, this counterintuitive result is strongly characterized by non-linear effects that reverse the latter correlation for high values of governance misfit.
    Keywords: Production Outsourcing, Organizational Governance, Misalignment, Technological Performance, Non-Linearity
    JEL: L23 L24 L25 O31
    Date: 2007–05
  14. By: Heidi Wiig Aslesen (Norwegian Institute for Studies in Research and Education - Centre for Innovation Research)
    Abstract: This paper is about one of the most important export products in Norway, “Norwegian salmon”, focusing especially on the innovation system of aquaculture of salmon and trout in Norway, the aim of the paper is to describe the sector in a national and global context, for thereafter highlight in particular how different aquaculture firms operate and carry out innovation by looking at what kind of external relations and interactive learning processes are involved in innovation, and as such suggesting input to policy makers on how to strengthen the sectoral innovation system, a sector with the potential to become even more knowledge intensive and innovative than today. By differentiating aquaculture according to knowledge base and degree of structured and functionally differentiated organisations, the empirical material presented in this paper shows that aquaculture firms have very different approaches to innovation; from antiinnovation strategies to strategies of being in the fore-front of innovation in the industry. The empirical material has shown that firms with very operative innovation systems exists side-by-side and the overall functioning of the sectoral innovation system of aquaculture is influenced by all the different layers of firm types.
    Date: 2007–07
  15. By: Nick Bloom
    Abstract: Uncertainty varies strongly over time, rising by 50% to 100% in recessions and by up to200% after major economic and political shocks. This paper shows that higher uncertaintyreduces the responsiveness of R&D to changes in business conditions - a "caution-effect" -making it more persistent over time. Thus, uncertainty will play a critical role in shaping thedynamics of R&D through the business cycle, and its response to technology policy. I alsoshow that if firms are increasing their level of R&D then the effect of uncertainty will benegative, while if firms are reducing R&D then the effect of uncertainty will be positive.
    Keywords: R&D, uncertainty, real options
    JEL: D92 D8 O3
    Date: 2007–05
  16. By: Svein Erik Moen (Centre for Technology, Innovation and Culture, University of Oslo)
    Abstract: The paper analyses the path of the Norwegian primary aluminium industry. From the industry’s initiation in 1908 it has relied upon the close interaction with foreign aluminium MNEs with regard to knowledge, technological innovation and market access. After 1945 it has also been strongly supported by Norwegian institutions. The case gives important insights to the innovation system literature regarding how the drivers of innovation are influenced by the interaction between the national and the sectoral level; this also necessitates an international perspective of the industry’s innovation and production system. The character of these linkages has change through time.
    Date: 2007–07
  17. By: Duysters, Geert (UNU-MERIT); Vanhaverbeke, Wim (ECIS, Technical University Eindhoven); Beerkens, Bonnie (ECIS, Technical University Eindhoven); Gilsing, Victor (ECIS, Technical University Eindhoven)
    Abstract: Although the literature converges regarding the reasons why and how networks of technology alliances are formed, there is still lack of agreement on what constitutes an optimal network structure, once it has been formed. The aim of this paper is to fill this void and to determine what constitutes an optimal network structure for exploration and exploitation within the context of technological innovation. We differentiate among a firm's direct ties, indirect ties and degree of redundancy and analyze their role in the pharmaceutical, chemical and automotive industry. Regarding the role of direct ties, in combination with indirect ties, we find two alternative alliance network structures that are effective for both exploitation and exploration. We also find that redundancy in a firm's alliance network has a positive effect on exploitation. This is not the case for exploration, however, which seems to reveal a new insight into the role of redundancy when firms explore new technological fields. A final point is that our findings remain largely invariant across the three industries, enhancing the generalisability of our results.
    Keywords: Networks, Strategic Alliances, Innovation, Learning
    JEL: O32 O31 D85
    Date: 2007
  18. By: Ole Andreas Engen (University of Stavanger)
    Abstract: This paper addresses the development of the Norwegian Petroleum Innovation System. The characteristics of the Norwegian Petroleum Innovation System were on the one hand the increasing ability to solve bottlenecks connected to production and operation on the Norwegian shelf, and on the other a gradual learning process which enabled a large portion of Norwegian participation in the petroleum business. While the initial phase of the petroleum development of Norway in the sixties was characterised by an absorptive capacity of receiving new technology, the building of Norwegian competence in the seventies and eighties was in certain respects directly shaped by public policy in order to participate. With the Condeep design it became possible to speak of an independent Norwegian petroleum industry. The development of Norwegian producer and supplier companies signified that petroleum activity in Norway was entering a new phase. In the R/D System of Norway petroleum education and research were introduced at several levels. Due to new cost efficient technologies introduced in the nineties, we may say that the adjustment was concluded by the beginning of 21st century. The Norwegian oil and gas actors perceived themselves ready to fully participate in the international system of energy producers.
    Date: 2007–07
  19. By: Nick Bloom; Raffaella Sadun; John Van Reenen
    Abstract: The US has experienced a sustained increase in productivity growth since the mid-1990s, particularly in sectorsthat intensively use information technologies (IT). This has not occurred in Europe. If the US "productivitymiracle" is due to a natural advantage of being located in the US then we would not expect to see any evidenceof it for US establishments located abroad. This paper shows in fact that US multinationals operating in the UKdo have higher productivity than non-US multinationals in the UK, and this is primarily due to the higherproductivity of their IT. Furthermore, establishments that are taken over by US multinationals increase theproductivity of their IT, whereas observationally identical establishments taken over by non-US multinationalsdo not. One explanation for these patterns is that US firms are organized in a way that allows them to use newtechnologies more efficiently. A model of endogenously chosen organizational form and IT is developed toexplain these new micro and macro findings.
    Keywords: Productivity, Information Technology, multinationals, organization
    JEL: E22 O3 O47 O52
    Date: 2007–04
  20. By: Tommy Clausen (Centre for Technology, Innovation and Culture, University of Oslo)
    Abstract: In this paper we focus on the participation stage and analyze what kinds of firms that are granted access to the 5 most important technology programs in Norway. Based upon a combination of logistic regression and factor analysis we find that the public support system for R&D in Norway is built around export oriented, innovative and larger firms. Technology programs support these firms with “research” and “development” subsidies in order to support the development of national champions.
    Date: 2007–07
  21. By: Mark Lehrer; Phillip Nell; Lisa Gärber
    Abstract: This paper postulates a life cycle model of university entrepreneurialism at the national level. Based on the analysis, this paper identifies two fundamental sources of such entrepreneurialism: 1) the institutional anchoring of the university of a public-private hybrid form in organization and finance; 2) decentralization of the system in such a way as to encourage a high level of competition and differentiation. We hypothesize that when national university systems grow and exhibit signs of demand overload, political pressures for system homogenization increase; system homogenization weakens both sources of entrepreneurialism and leads to decline. The sources of decline are thus unintended consequences of policy choices to cope with the side effects of demand overload within national university systems. Implications for the ascendant Chinese university system are derived.
    Keywords: Entrepreneurial University, German University System, US University System, National Systems of Innovation, Interregional Competition, R&D Reform
    JEL: I23 N30 N32 N33
    Date: 2007–06
  22. By: Gustavo Crespi; Chiara Criscuolo; Jonathan Haskel
    Abstract: We examine the relationships between productivity growth, IT investment and organisational change(??) using UK firm data. Consistent with the small number of other micro studies we find (a) ITappears to have high returns in a growth accounting sense when ?? is omitted; when ?? is includedthe IT returns are greatly reduced, (b) IT and ?? interact in their effect on productivity growth, (c)non-IT investment and ?? do not interact in their effect on productivity growth. Some new findingsare (a) ? ? is affected by competition; (b) US-owned firms are much more likely to introduce ??relative to foreign owned firms who are more likely still relative to UK firms; (c) our predictedmeasured TFP growth slowdown for firms who are not doing ?O and/or are in the early stages of ITinvestment compare well with the macro numbers documenting a UK measured TFP growthslowdown.
    Keywords: information technology, productivity growth, organisational change
    JEL: D24 E22 L22
    Date: 2007–03
  23. By: Queiroz, Valdoceu de (Ministerio de Hacienda de Brasil); Pindado, Julio (Departamento de Administración y Economía de la Empresa, Facultad de Economía y Empresa, Universidad de Salamanca); Torre, Chabela de la (Departamento de Administración y Economía de la Empresa, Facultad de Economía y Empresa, Universidad de Salamanca)
    Abstract: This paper focuses on how a firm’s characteristics affect the market valuation of its research and development (R&D) spending. We derive a valuation model based on the capital market arbitrage condition. The estimation of this model by using the Generalized Method of Moments and data from the eurozone countries yields interesting results. Several firm characteristics (namely, size, firm growth and market share) are found to positively affect the relationship between firm value and R&D spending, while others (specifically, free cash flow, dependence on external finance, labour intensity and capital intensity) exert a negative effect. Therefore, the effectiveness of the R&D spending depends on the firm characteristics.
    Keywords: Research and development, valuation model, firm characteristics.
    JEL: G30 O32
    Date: 2006–12
  24. By: Garzarelli, Giampaolo; Limam, Yasmina Reem; Thomassen, Bjørn
    Abstract: The article turns to classical economic insights on the division of labor and to institutional reasoning to identify some costs and benefits of Open Source Software (OSS) and proprietary software production. It suggests that, thanks to its licenses, OSS favors market expansion more than proprietary software does by tapping into spontaneous work input. The spontaneous tapping leads to a division of labor that exhibits what the article calls redundant economies. By generating a circle of knowledge growth, reuse, and sharing, redundant economies lead to increasing returns, which are crucial for economic growth.
    Keywords: Division of Labor; Extent of the Market; Increasing Returns; Institutions; Knowledge; Open Source Software; Redundant Economies.
    JEL: O34 D20 O33 L23 L17
    Date: 2007–06–22
  25. By: Meijers, Huub (UNU-MERIT)
    Abstract: This paper reports the findings of an empirical study on the external effects of Information and Communication Technologies (ICT) on economic growth and productivity at an aggregate level. It focuses on possible network effects and spillovers emerging as externalities from investments in ICT. The existence of externalities is well described in theoretical work however empirical evidence is scarce. By using time series at the macro level for a panel of 15 countries I find positive externalities for investments in IT software and in telecommunication equipment, but not for IT hardware. The analysis, which accounts for cyclical effects and also takes external effects from non-ICT factors into account, points at considerable lags between the time of investing in these technologies and the time at which the externalities arise. Taking these externality effects into account, the paper shows that the impact of ICT on productivity is almost twice as high as compared to a model that does not include such effects.
    Keywords: Productivity, Network Effects, Spillovers, Information and Communication Technologies, Total Factor Productivity
    JEL: D24 D85 O11 O47
    Date: 2007
  26. By: Gustavo Crespi; Chiara Criscuolo; Jonathan Haskel; Matthew Slaughter
    Abstract: This paper explores the role of knowledge flows and TFP growth by using direct survey data onknowledge flows linked to firm-level TFP growth data. Our knowledge flow data correspond to thekind of information flows often argued, especially by policy-makers, as important, such as within thefirm, or from suppliers, purchasers, universities and competitors. We examine three questions (a)What is the source of knowledge flows? (b) To what extent do such flows contribute to productivitygrowth? (c) Do such flows constitute a spillover flow of free knowledge? Our evidence show that themain sources of knowledge are competitors; suppliers; plants that belong to the same group anduniversities. We conclude that the main "free" information flow spillover is from competitors and thatmulti-national presence may be a proximate source of this spillover.
    Keywords: business services, structural change, economic growth, productivity
    JEL: O11 M2
    Date: 2007–04
  27. By: Kox, Henk L.M.; Rubalcaba, Luis
    Abstract: A pervasive trend that characterised the past two decades of European economic growth is that the share in the economy of commercial services, and particularly business services, grows monotonically, and this mainly to the expense of the manufacturing sector. The structural shift reflects a changing and increasingly complex social division of labour between economic sectors. The fabric of inter-industry relations is being woven in a new way due to the growing specialisation in knowledge services, the exploitation of scale economies for human capital, lowered costs of outsourcing in-house services, and the growing encapsulation of manufacturing products in a ‘service jacket’. Business services, which inter alia includes the software industry and other knowledge-intensive business services (KIBS), play a key role in many of these processes. We argue that in recent decades business services contributed heavily to European economic growth, in terms of employment, productivity and innovation. A direct growth contribution stems from the business-services sector’s own remarkably fast growth, while an indirect growth contribution was caused by the positive knowledge and productivity spill-overs from business services to other industries. The spill-overs come in three forms: from original innovations, from speeding up knowledge diffusion, and from the reduction of human capital indivisibilities at firm level. The external supply of knowledge and skill inputs exploits positive external scale economies and reduces the role of internal (firm-level) scale (dis)economies associated with these inputs. The relatively low productivity growth that characterises some business-services sectors may be a drag on the sector's direct contribution to overall economic growth. The paper argues that there is no reason to expect a “Baumol disease” effect as long as the productivity and growth spill-overs from KIBS to other economic sectors are large enough. Finally, the paper pinpoints some policy 'handles' that could be instrumental in boosting the future contribution of business services to overall European economic growth.
    Keywords: economic growth; human capital; specialisation; business services; Europe
    JEL: L8 O52 O4 O3
    Date: 2007–07
  28. By: Satyajit Chatterjee; Esteban Rossi-Hansberg
    Abstract: We propose a theory of firm dynamics in which workers have ideas for new projects that can be sold in a market to existing firms or implemented in new firms: spin-offs. Workers have private information about the quality of their ideas. Because of an adverse selection problem, workers can sell their ideas to existing firms only at a price that is not contingent on their information. We show that the option to spin off in the future is valuable so only workers with very good ideas decide to spin off and set up a new firm. Since entrepreneurs of existing firms pay a price for the ideas sold in the market that implies zero expected profits for them, firms' project selection is independent of their size, which, under some assumptions, leads to scale-independent growth. The entry and growth process of firms in this economy leads to an invariant distribution that resembles the one in the US economy.
    JEL: E10 E23 L22 L23 L25 L26
    Date: 2007–06
  29. By: Khumalo, Bhekuzulu
    Abstract: The quest to measure knowledge effectively will in no doubt lead to better knowledge policies of governments around the world in both developing and developed countries. This paper endeavours to seta sound theoretical base for measuring knowledge and does this by demonstrating that existing tools used by economists for measuring knowledge are largely self contradictory, they contradict existing theory. Knowledge to be measured effectively we must give knowledge its own units like weight and length have their own units, only then can we say how much knowledge one needs to carry out a particular task.
    Keywords: knowl; knowledge
    JEL: B41 O2 A1
    Date: 2006–10–09

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