nep-ino New Economics Papers
on Innovation
Issue of 2018‒09‒03
eighteen papers chosen by
Uwe Cantner
University of Jena

  1. The Technology Frontier and the Rise and Fall of Cities By Enrico Berkes; Marti Mestieri; Ricardo Dahis
  2. R&D, embodied technological change and employment: Evidence from Spain By Pellegrino, Gabriela; Piva, Mariacristina; Vivarelli, Marco
  3. Le tecnologie di Industria 4.0 e le PMI/Technologies of Industry 4.0 and SMEs By Angelo Bonomi
  4. Is innovation obsession good news for employees? How new technology adoption and work organization practices transform job quality and working conditions By Malo Mofakhami
  5. Entrepreneurship and Knowledge Spillovers from the Public Sector By Audretsch, David; Link, Albert
  6. Growth: Scale or Market-Size Effects? By Chu, Angus C.; Cozzi, Guido
  7. Informal sector innovation in Ghana: Data set and descriptive analysis. By Avenyo, Elvis
  8. Connecting to Power: Political Connections, Innovation, and Firm Dynamics By Salome Baslandze
  9. Innovation in the Rural Nonfarm Economy: Its Effect on Job and Earnings Growth, 2010-2014 By Wojan, Tim; Parker, Timothy
  10. Exploring how innovation strategies at time of crisis influence performance: a cluster analysis perspective By Marcel Ausloos; Francesca Bartolacci; Nicola G. Castellano; Roy Cerqueti
  11. Technological Innovation and the Distribution of Labor Income Growth By Dimitris Papanikolaou
  12. Yield effects of selected agronomic innovation packages in maize cropping systems of six countries in Sub-Saharan Africa By Eyshi Rezaei, Ehsan; Gaiser, Thomas
  13. The race for an artificial general intelligence: Implications for public policy By Naude, Wim; Dimitri, Nicola
  14. High-Growth Entrepreneurship By Brown, J. David; Earle, John S.; Kim, Mee Jung; Lee, Kyung Min
  15. The effect of being Protestant on entrepreneurial choice By Michael Wyrwich
  16. Economic Policy for Artificial Intelligence By Ajay K. Agrawal; Joshua S. Gans; Avi Goldfarb
  17. The Middle-Income Trap from a Schumpeterian Perspective By Aghion, Philippe; Bircan, Cagatay
  18. The Technological Origins of the Decline in Labor Market Dynamism By Jan Eeckhout; Xi Weng

  1. By: Enrico Berkes (Northwestern University); Marti Mestieri (Northwestern University); Ricardo Dahis (Northwestern University)
    Abstract: Abstract We analyze the universe of U.S. patents over the period 1830-2015. We document how innovation patterns have evolved over time and space, paying special attention to the evolution of leading technological sectors and the location of innovation hubs. We infer the leading technologies at different points in time from the evolution of the patent citation network. We document the rise and fall in prominence of different technologies and show that the technology frontier has moved towards more income elastic and skill-intensive sectors. We document innovation patterns at the city level using geocoded information for all patents in our sample. We find that innovation has become more clustered in space over time and, at the same time, the average distance between inventors of a patent has also increased over time. We then analyze whether the technological mix of a city has predictive power for future city growth. We also explore whether recombinant growth has become more prominent over time.
    Date: 2018
  2. By: Pellegrino, Gabriela (EPFL, Lausanne); Piva, Mariacristina (Università Cattolica del Sacro Cuore, Piacenza); Vivarelli, Marco (UNU-MERIT, and Universita’ Cattolica del Sacro Cuore, Milano)
    Abstract: In this work, we test the employment impact of distinct types of innovative investments using a representative sample of Spanish manufacturing firms over the period 2002-2013. Our GMM-SYS estimates generate various results, which are partially in contrast with the extant literature. Indeed, estimations carried out on the entire sample do not provide statistically significant evidence of the expected labour-friendly nature of innovation. More in detail, neither R&D nor investment in innovative machineries and equipment (the so-called embodied technological change, ETC) turn out to have any significant employment effect. However, the job-creation impact of R&D expenditures becomes highly significant when the focus is limited to the high-tech firms. On the other hand - and interestingly - ETC exhibits its labour-saving nature when SMEs are singled out.
    Keywords: Innovation, R&D, Embodied Technological Change, Employment, GMM-SYS
    JEL: O33
    Date: 2018–06–11
  3. By: Angelo Bonomi (CNR-IRCRES, National Research Council, Research Institute on Sustainable Economic Growth, via Real Collegio 30, Moncalieri (TO) – Italy)
    Abstract: This paper concerns a study on the next production revolution called Industry 4.0 based on confluence of various technologies, mainly digital, with far reaching consequences especially for productivity and employment. This study considers the implementation of Industry 4.0 in SMEs and industrial districts that represent a great part of Italian industry. The latter represents certainly a major challenge to such implementation because of the existence of various obstacles constituted by availability of investment capitals, small scale productions and tendency to develop and to adopt only incremental innovations rather than radical ones typical of Industry 4.0. In this work we study the technologies involved in Industry 4.0, taking account of existence of specific technologies, called enabling technologies, whose confluence in the manufacturing industry determines the implementation of Industry 4.0. Such enabling technologies originate from the major fields of R&D activities such as nanotechnologies, biotechnologies, digital technologies and artificial intelligence (AI). In this paper we study the dynamic and possible evolution characterizing the formation of the various enabling technologies in a sort of ramification process, using specific models of technology, technology innovation and R&D, and their relation with manufacturing in SMEs and industrial districts. The results of the study underlines the importance of AI in determining possibilities and limits to Industry 4.0, the necessity to disrupt the tendency of SMEs in adopting only incremental innovations, the existence of “intranality effects” raising difficulties from the supply chain, and the importance of technology consulting firms in the integration of ICT in operating technologies of a manufacturing activity.
    Keywords: Industry 4.0, SMEs, industrial districts, technology innovation
    JEL: O14 O25 O33
    Date: 2018–06
  4. By: Malo Mofakhami (CEET - Centre d'études de l'emploi et du travail - CNAM - Conservatoire National des Arts et Métiers [CNAM] - M.E.N.E.S.R. - Ministère de l'Éducation nationale, de l’Enseignement supérieur et de la Recherche - Ministère du Travail, de l'Emploi et de la Santé, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Our paper contributes to better understanding the relations between innovation diffusion by adoption and the evolution of work practices and institutions. Most studies on employment and innovation focus on the impacts of innovation on employment variation and turnover. These studies tend to analyze the differentiated effects of technological change on the labor structure with the well-known skilled-biased technological change (SBTC) and routine-biased technological change (RBTC) hypotheses. However, few empirical studies focus explicitly on the transformative role of new technology adoption in the qualitative dimension of jobs. A new technology adoption in the workplace does not induce a total replacement of the workforce. In that respect, understanding the effect of a new technology adoption on job quality and working conditions, among other job characteristics, is a key element in capturing the reality of technological change with regard to employment. By combining the literature on innovation, workplace practices (especially human resource management (HRM) practices), and job quality, we build an empirical model that highlights various interdependencies. The literature provides us with fragmented hypotheses about these interactions, but the main limit is the very different approaches, which lead to ambiguous effects. Starting from the European Working Conditions Survey (EWCS) (2010), we try to identify the effect of innovation combined with work organization practices on job quality. We observe that new technology adoption is generally associated with better employment quality in some ways but, simultaneously, leads to higher workplace risk and work-time intensity. Furthermore, our study highlights the need to associate innovation with different forms of work practices. Analyzing new technology adoption coupled with new information and communication technology (ICT) use or some work organization practices, we observe dissociated effects, and the same occurs when we separately analyze the new technology adoption effect by type of employee. Our paper is a first step not only in answering the calls for more in-depth research on the links between employment variation and work transformations due to technological change but also in studying that which more clearly distinguishes the effect according to the type of innovation. Finally, our study shows the weakness of the available and adopted database for testing and evaluating these interrelations.
    Date: 2018–08–23
  5. By: Audretsch, David (Indiana University); Link, Albert (University of North Carolina at Greensboro, Department of Economics)
    Abstract: A compelling body of research has found that investments in knowledge from other firms and universities spill over to enhance the performance of entrepreneurial firms. This literature has shown that firm performance is positively related to investments in new knowledge by other firms and research universities. This paper addresses a gap in the literature by positing that public sector knowledge is also conducive to enhancing performance by knowledge intensive entrepreneurial (KIE) firms. Our findings suggest that the public sector provides a fertile source of knowledge for enhancing KIE firm performance.
    Keywords: entrepreneurship; performance; knowledge spillovers; public sector
    JEL: H41 L26
    Date: 2018–08–22
  6. By: Chu, Angus C.; Cozzi, Guido
    Abstract: Is the supply of researchers or the demand for technologies more important for innovation? The supply of research labor captures a scale effect, whereas the demand from production labor for technologies captures a market-size effect. We find that both the scale effect and the market-size effect are important for innovation and their relative importance depends on the relative intensity of lab-equipment R&D and knowledge-driven R&D in the innovation process.
    Keywords: innovation, economic growth, scale effects, market-size effects
    JEL: O3 O4
    Date: 2018–08
  7. By: Avenyo, Elvis (UNU-MERIT)
    Abstract: While informal enterprises and their activities dominate sub-Saharan African (SSA) economies, data on 'informal' innovation activities remain lacking. This paper presents descriptive statistics from survey data collected in 2016, on the types of innovations informal enterprises adopt and/or adapt in urban Ghana (Accra and Tema). Using zones defined in the Ghana Informal Enterprise Survey (GIFS) of the World Bank as area-based frame, and randomly selecting and canvassing 17 zones, the study identified and interviewed 513 informal enterprises. The analysis reveals that informal enterprises do innovate. Innovations, as found in formal enterprises as well, are not big swings, that is, not radical but incremental, and are found to occur over several years. These suggest that incremental innovations, notwithstanding, are important to the survival of sampled informal enterprises.
    Keywords: Innovation, Informal Sector, Survey, Ghana, sub-Saharan Africa
    JEL: C83 D22 H32 L11 O17 O31
    Date: 2018–08–08
  8. By: Salome Baslandze (EIEF - Einaudi Institute for Economics a)
    Abstract: We study the Italian firms and their workers to answer this question. Our analysis uses a brand-new data spanning the period from 1993 to 2014 where we merge: (i) firm-level balance sheet data, (ii) the social security data on the universe of workers, (iii) patent data from the European Patent Office, (iv) registry of local politicians, and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that industries with a larger share of politically connected firms feature worse firm dynamics. Market leaders are much more likely to be politically connected and less likely to innovate, compared to their competitors. In addition, connections relate to higher survival and growth in employment and revenue but not in productivity – the result that we also confirm using regression discontinuity design. We build a firm dynamics model where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. The model highlights the new interaction between static gains and dynamic losses from rent-seeking for aggregate productivity.
    Date: 2018
  9. By: Wojan, Tim; Parker, Timothy
    Abstract: Innovation—introducing new goods, services, or ways of doing business that are valued by consumers—is widely regarded as essential to dynamic and resilient local economies with long-term growth potential. However, innovation in the nonfarm rural economy has received relatively little attention. This report uses the first nationally representative sample of self-reported innovation at the U.S. establishment level to: (1) assess the level of innovation in rural establishments relative to their urban peers; (2) identify rural industries that are the most innovation-intensive; and (3) estimate how innovation at the local level may have affected the rate of recovery after the Great Recession.
    Keywords: Community/Rural/Urban Development
    Date: 2017–09–19
  10. By: Marcel Ausloos; Francesca Bartolacci; Nicola G. Castellano; Roy Cerqueti
    Abstract: This paper analyzes the connection between innovation activities of companies -- implemented before crisis -- and their performance -- measured at time of crisis. The companies listed in the STAR Market Segment of the Italian Stock Exchange are analyzed. Innovation is measured through the level of investments in total tangible and intangible fixed assets in 2006-2007, while performance is captured through growth -- expressed by variations of sales, total assets and employees -- profitability -- through ROI or ROS -- and productivity -- through asset turnover or sales per employee in the period 2008-2010. The variables of interest are analyzed and compared through statistical techniques and by adopting cluster analysis. In particular, a Voronoi tessellation is also implemented in a varying centroids framework. In accord with a large part of the literature, we find that the behavior of the performance of the companies is not univocal when they innovate.
    Date: 2018–08
  11. By: Dimitris Papanikolaou (Northwestern University)
    Abstract: We examine how the distribution of worker earnings growth shifts following major technological advances by the firm, or its competitors, using administrative data from the US. Specifically, we find that own firm innovation is associated with a modest increase in worker earnings growth, while innovation by competing firms is related to lower future worker earnings. Importantly, these earnings changes are asymmetrically distributed across workers: both gains and losses are concentrated on a subset of workers, which implies that the distribution of worker earnings growth rates becomes more right- or left-skewed following innovation by the firm, or its competitors, respectively. These effects are particularly strong for the highest-paid workers. Our results suggest innovation is associated with a substantial increase in the labor income risk, especially for workers at the top of the earnings distribution. Our simulations reveal that the increased disparity in innovation outcomes across firms in the 1990s can account for a significant part of the rise in income inequality. In sum, our evidence is consistent with the view that innovation leads to substantial reallocation in labor income across workers through creative destruction in the product market and displacement of their human capital.
    Date: 2018
  12. By: Eyshi Rezaei, Ehsan; Gaiser, Thomas
    Abstract: Implementation of suitable innovation packages into cropping systems is required to address the issues of food security and improvement of the crop yield in Sub-Saharan Africa. However, quantification of the effects of innovation packages such as increase in fertilizer application rates, introduction of high yielding cultivars or change in farming practices such as sowing date and irrigation, generally requires substantial investments, in particular the quantification at large scales. Crop models are widely employed to estimate the impacts of agronomic decisions on cropping systems and to detect the most suitable areas for their implementation. The main goal of the study is to quantify the effects of a) change in nitrogen fertilization rate, b) adjustment of sowing date, c) implementation of new cultivars, and d) supplementary irrigation on maize cropping systems across six African countries including Ghana, Nigeria, Kenya, Malawi, Ethiopia and Burkina Faso. For this purpose, 30 years (1980-2010) of climate data are used as well as soil and management information obtained from global datasets at 0.5° x 0.5° spatial resolution. The nitrogen and cultivar packages were tested for all six countries whereas the changes in sowing dates (Ghana and Malawi) and the irrigation (Ethiopia) package were used in specific countries only. The crop modelling framework SIMPLACE was used to test the effects of innovation packages at the country level. The model results indicated that the agronomic innovation packages could improve maize yield by 1 t ha-1 to 2.3 t ha-1 in the studied countries. The magnitude of the yield improvement is country and package specific. The largest maize yield improvements across the packages were obtained by increase in nitrogen application rate, assuming that other nutrients like phosphorus and potassium are not limiting crop growth and yield. However, in some cases a combination of the agronomic innovation packages showed the highest maize yield. We conclude that it is vital to combine the agronomic packages to fill the gap between potential and current yields of maize in Africa. This will require appropriate incentives and investments in extension services, fertilizer distribution networks, and farmer capacity building.
    Keywords: Agribusiness, Research and Development/Tech Change/Emerging Technologies
    Date: 2018–05–18
  13. By: Naude, Wim (Maastricht University, Maastricht School of Management, RWTH Aachen, IZA Bonn and UNU-MERIT); Dimitri, Nicola (University of Siena)
    Abstract: An arms race for an artificial general intelligence (AGI) would be detrimental for and even pose an existential threat to humanity if it results in an unfriendly AGI. In this paper an all-pay contest model is developed to derive implications for public policy to avoid such an outcome. It is established that in a winner-takes all race, where players must invest in R&D, only the most competitive teams will participate. Given the difficulty of AGI the number of competing teams is unlikely ever to be very large. It is also established that the intention of teams competing in an AGI race, as well as the possibility of an intermediate prize is important in determining the quality of the eventual AGI. The possibility of an intermediate prize will raise quality of research but also the probability of finding the dominant AGI application and hence will make public control more urgent. It is recommended that the danger of an unfriendly AGI can be reduced by taxing AI and by using public procurement. This would reduce the pay-off of contestants, raise the amount of R&D needed to compete, and coordinate and incentivize co-operation, all outcomes that will help alleviate the control and political problems in AI. Future research is needed to elaborate the design of systems of public procurement of AI innovation and for appropriately adjusting the legal frameworks underpinning high-tech innovation, in particular dealing with patents created by AI.
    Keywords: Artificial intelligence, innovation, technology, public policy
    JEL: O33 O38 O14 O15 H57
    Date: 2018–08–08
  14. By: Brown, J. David (U.S. Census Bureau); Earle, John S. (George Mason University); Kim, Mee Jung (George Mason University); Lee, Kyung Min (George Mason University)
    Abstract: Analyzing data on all U.S. employers in a cohort of entering firms, we document a highly skewed size distribution, such that the largest 5% account for over half of cohort employment at firm birth and more than two-thirds at firm age 7. Little of the size variation is accounted for by industry or amount of finance, but relative size is strongly persistent over time: at age 7, the probability of 20+ employees is about 40 times larger for those entering with 20+ than for those entering with one. We link administrative and survey data to study the role of founder characteristics in high growth, defined as the largest 5% of the cohort at ages 0 and 7. Female-founded firms are 50% less likely to be in this ventile at both ages, and 34% less likely when controlling for detailed demographic and human capital variables. A similar initial gap for African-Americans, however, disappears by age 7. Founder age is positively associated with high growth at entry, but the profile flattens and turns negative as the firm ages. The education profile is initially concave, with graduate degree recipients no more likely than high school graduates to found high growth firms, but the former nearly catch up to those with bachelor's degrees by firm age 7, while the latter do not. Most other relationships of high growth with founder characteristics are highly persistent over time. Prior business ownership is strongly positively associated, and veteran experience negatively associated, with high growth. A larger founding team raises the probability of high growth, while, controlling for team size, diversity (by gender, age, race/ethnicity, or nativity) either lowers the probability or has little effect. Controlling for start-up capital raises the high-growth probability of firms founded by women, minorities, immigrants, veterans, smaller founding teams, and novice, younger, and less educated entrepreneurs. Perhaps surprisingly, female, minority, and less-educated entrepreneurs tend to choose high-growth industries, but fewer of them achieve high growth relative to their industry peers.
    Keywords: entrepreneurship, business entry, firm growth, firm dynamics, founder, employment, firm size distribution, firm performance
    JEL: D22 J24 L25 L26
    Date: 2018–07
  15. By: Michael Wyrwich (FSU Jena)
    Abstract: This brief research note identifies a causal effect of being Protestant on entrepreneurial choice.
    Keywords: Religion, Protestantism, Entrepreneurship
    JEL: L26 Z1 Z12
    Date: 2018–08–27
  16. By: Ajay K. Agrawal; Joshua S. Gans; Avi Goldfarb
    Abstract: Recent progress in artificial intelligence (AI) – a general purpose technology affecting many industries - has been focused on advances in machine learning, which we recast as a quality-adjusted drop in the price of prediction. How will this sharp drop in price impact society? Policy will influence the impact on two key dimensions: diffusion and consequences. First, in addition to subsidies and IP policy that will influence the diffusion of AI in ways similar to their effect on other technologies, three policy categories - privacy, trade, and liability - may be uniquely salient in their influence on the diffusion patterns of AI. Second, labor and antitrust policies will influence the consequences of AI in terms of employment, inequality, and competition.
    JEL: L86 O3
    Date: 2018–06
  17. By: Aghion, Philippe (London School of Economics); Bircan, Cagatay (European Bank for Reconstruction and Development)
    Abstract: We provide an outline for viewing the middle-income trap through the lens of the Schumpeterian growth paradigm, which places the notion of creative destruction at the center of economic growth. Economic growth and development come from the interplay between changes in economic structure and supporting institutions at different stages of development, i.e., structural transformation. We present a view of the process of economic development that takes the microlevel growth of firms and their competitive interaction as its building blocks. We discuss how institutional factors affect the evolution of these building blocks in understanding growth outcomes at different stages of development.
    Keywords: competition; creative destruction; middle-income trap; Schumpeterian growth
    JEL: O10 O11 O30 O40
    Date: 2017–09–17
  18. By: Jan Eeckhout (University College London and Barcelona); Xi Weng (Guanghua School of Management, Peking Un)
    Abstract: We ask whether and how technological change can account for the secular decline in labor market dynamism with decreasing job flows to and from unemployment and between employment. We focus on two determinants of technology broadly defined: 1. the complementarity between worker skill and firm productivity; and 2. the volatility in productivity shocks. We derive job flows in a sorting model with search frictions and endogenous search effort both on and off the job, as well as shocks that lead to mismatch. We find a decrease in complementarities between labor and technology, driven mainly by a decline in the elasticity of labor. The decrease in the labor share is largest for workers with high school education only. Instead, changes in the shock process leads a decrease in the frequency and a slight increase in the variance of those shocks. We show quantitatively that the changing nature of the technology contributes to the secular decline in labor market dynamism.
    Date: 2018

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