nep-knm New Economics Papers
on Knowledge Management and Knowledge Economy
Issue of 2009‒02‒28
eight papers chosen by
Laura Stefanescu
European Research Centre of Managerial Studies in Business Administration

  1. Knowledge and Growth in the Very Long-Run By Strulik, Holger
  2. An Innovation Index Based on Knowledge Capital Investment: Definition and Results for the UK Market Sector By Clayton, Tony; Dal Borgo, Mariela; Haskel, Jonathan
  3. Knowledge, Preferences and Shocks in Portfolio Analysis By Steinbacher, Matjaz
  4. Acquisitions, Divestitures and Innovation Performance in the Netherlands By Van Beers, Cees; Dekker, Ronald
  5. Global Production and Trade in the Knowledge Economy By Keller, Wolfgang; Yeaple, Stephen R
  6. Innovation and Change in the Process of Alliance Formation in the Japanese Electronics Industry By James R. Lincoln
  7. Venture Capital and Innovation: Which is First? By Hirukawa, Masayuki; Ueda, Masako
  8. Physical Capital, Knowledge Capital and the Choice Between FDI and Outsourcing By Chen, Yongmin; Horstmann, Ignatius J; Markusen, James R.

  1. By: Strulik, Holger
    Abstract: This paper proposes a theory for the evolution of knowledge diffusion and growth over the very long run. A feedback mechanism between capital accumulation and knowledge spillovers creates a unified growth theory that explains a long epoch of (quasi-) stasis and an epoch of high growth linked by gradual economic take-off. It is shown how the feedback mechanism can explain the Great Divergence, the failure of less developed countries to attract capital from abroad, the productivity slowdown in fully developed countries, and why R&D effort, TFP growth, and income growth are jointly rising along the transition towards modern growth. Finally, it is explained how a First Industrial Revolution, brought forth by increasing propositional knowledge, triggered a Second Industrial Revolution from which onwards technological progress was increasingly produced by market R&D activities.
    Keywords: Endogenous Growth, Knowledge Spillovers, R&D, Globalization, Unified Growth Theory, Productivity Slowdown, Roaring Twenties.
    JEL: O10 O30 O40 E22
    Date: 2009–02
  2. By: Clayton, Tony (Office of National Statistics); Dal Borgo, Mariela (University of Warwick); Haskel, Jonathan (Imperial College London)
    Abstract: We (a) propose an implementable innovation index, (b) relate it to existing innovation definitions and (c) show whole-economy and industry-specific results for the UK market sector, 2000-2005. Our innovation measure starts by observing that we could get more GDP without innovation by simply duplicating existing physical capital and labour (e.g. adding a second aircraft and crew on an existing route). Thus we propose to measure innovation as the additional GDP over and above the addition existing physical capital and labour. In our measure this is the contribution to GDP growth of market sector investment in knowledge (or intangible) capital. This contribution is measured from company spending on knowledge/intangible assets and TFP growth. We relate our measure to the literature on innovation definitions, TFP, creative industries and hidden innovation. We implement it for six UK market sector industries, 2000-2005, combining with output and tangible investment data from the EUKLEMS database. Our main findings are as follows. Over 2000-2005, market sector labour productivity grew at 2.74% per annum, of which the contribution of knowledge capital, our innovation measure, was 1.24% pa. In turn, manufacturing accounted for about 60% of this latter figure. If one includes increase in labour skill deepening (0.45% pa) as innovation, then innovation contributed 61% (=(1.24+0.45)/2.74)of labour productivity growth over the period.
    Keywords: innovation, productivity growth
    JEL: O47 E22 E01
    Date: 2009–02
  3. By: Steinbacher, Matjaz
    Abstract: We simulate social network games of a portfolio selection to analyze how knowledge, preferences of agents and their level of omniscience affect their decision-making. The key feature of the paper is that preferences and the level of omniscience of agents very much determine the ways agents make their decision. While omniscient agents respond very rapidly to the changing market conditions, non-omniscient agents are more resistant to such changes. By introducing one-time shock, we found that its efficiency depends on the level of omniscience of agents, with much stronger efficiency under omniscient agents.
    Keywords: social networks; stochastic finance; shocks; portfolio analysis
    JEL: G11 Z13 C73
    Date: 2009
  4. By: Van Beers, Cees; Dekker, Ronald
    Abstract: This aim of this paper is twofold. First it examines the determinants of acquisitions and divestitures of Dutch firms in the period 1996-2004. Second, it investigates the impact of acquisitions and divestitures on the firm’s innovative output performance. An econometric model is specified and estimated with Community Innovation Survey data for the Netherlands in the period 1996-2004. The main findings of this study are as follows. First, innovating firms are significantly more involved in acquisition activities than non-innovating firms, which suggests that acquisitions are a strategy to gain access to new technologies or knowledge. Second, lack of knowledge as a barrier to innovate increases the chance of acquiring assets of other firms although not significantly. Lack of finance as a barrier to innovate increases significantly the chance of divesting assets. Third, acquisitions motivated by knowledge barriers in the innovation process affect the probability of positive innovative sales positively while acquisitions motivated by other reasons than innovation barriers affect this probability negatively. No effect of knowledge barriers induced acquisitions on the level of the innovative sales could be found.
    Keywords: Innovation; performance; mergers; acquisitions; divestitures; strategy.
    JEL: L10 D40
    Date: 2009–02–02
  5. By: Keller, Wolfgang; Yeaple, Stephen R
    Abstract: This paper presents and tests a new model of multinational firms to explain a rich array of multinational behavior. In contrast to most approaches, here the multinational faces costs to transferring its know-how that are increasing in technological complexity. Costly technology transfer gives rise to increasing marginal costs of serving foreign markets, which explains why multinational firms are often much more successful in their home market compared to foreign markets. The model has four key predictions. First, as transport costs between multinational parent and affiliate increase, firms with complex production technologies and it relatively difficult to substitute local production for imports from the parent, because complex technologies are relatively costly to transfer. Second, the activity of affiliates with complex technologies declines relatively strongly as transport costs from the home market increase, both at the intensive and the extensive margin. We also show that as transport costs from the home market increase, affiliates concentrate their imports from the parent on intermediates that are technologically more complex. We test these hypotheses by employing information on the activities of individual multinational firms, on the nature of intra-firm trade at the product level, and on the skills required for occupations with different complexity. The empirical analysis finds strong evidence in support of the model by confirming all four hypotheses. The analysis shows that accounting for costly technology transfer within multinational firms is important for explaining the structure of trade and multinational production.
    Keywords: Factor cost differences; Firm heterogeneity; Intermediate inputs; Offshoring; Tasks; Technological complexity; Technology transfer
    JEL: F1 F15 F23 O33
    Date: 2009–02
  6. By: James R. Lincoln
    Abstract: This paper examines the changing process of strategic alliance formation in the Japanese electronics industry between 1985 and 1998. With data on 128 Japanese electronics/electrical machinery makers, we use a dyad panel regression methodology to address a series of hypotheses drawn from embeddedness and strong/weak tie theory on how keiretsu and prior alliance networks have constrained partner choice in new R&D and nonR&D alliances. We argue and find that the keiretsu effect is smaller on R&D than nonR&D alliances, and that this is truer of the “weaker-tie” horizontal keiretsu than the “stronger-tie” vertical keiretsu. Dividing our time series into four periods (1984-88, 89-90, 91-94, 95-98), however, reveals some important variations in the keiretsu role over time. The horizontal and vertical keiretsu effects on R&D alliances had vanished by 1991-94 (the post-bubble recession era), but they continued in the nonR&D case, in part, we believe, because these provided a means of reducing costs and capacity in a stringent macroeconomic environment. Following previous strategic alliance research, we further examine how the prior alliance network conditioned strategic alliance formation in Japanese electronics and how those patterns varied over time. The data suggest that, as the strategic alliance founding process became “disembedded” from Japan’s legacy keiretsu networks, it was driven increasingly by prior direct and indirect alliance ties.
    Date: 2009–02
  7. By: Hirukawa, Masayuki; Ueda, Masako
    Abstract: Policy makers typically interpret positive relations between venture capital investments and innovations as an evidence that venture capital investments stimulate innovation ('VC-first hypothesis'). This interpretation is, however, one-sided because there may be a reverse causality that innovations induce venture capital investments ('innovation-first hypothesis'): an arrival of new technology increases demands for venture capital by driving new firm startups. We analyze this causality issue of venture capital investments and innovation in the US manufacturing industry using both total factor productivity (TFP) growth and patent counts as measures of innovation. Using a panel AR regression as well as industry-by-industry AR regressions, we find that TFP growth is often positively and significantly related with future VC investment, which is consistent with the innovation-first hypothesis. We find little evidence that supports the VC-first hypothesis. More surprisingly, one-year lagged VC investments are often negatively and significantly related with both TFP growth and patent counts.
    Keywords: Innovation; Venture Capital
    JEL: D24 G24 O31 O32
    Date: 2008–12
  8. By: Chen, Yongmin; Horstmann, Ignatius J; Markusen, James R.
    Abstract: There exist two approaches in the literature concerning the multinational firm's mode choice for foreign production between an owned subsidiary and a licensing contract. One approach considers environments where the firm is transferring primarily knowledge-based assets. An important assumption there is that the relevant knowledge is absorbed by the local manager or licensee over the course of time: knowledge is non-excludable. More recently, a number of influential papers have adopted a property-right view of the firm, assuming the application abroad of physical capital, the owner of which retains full and exclusive rights to the capital should a relationship break down. In this paper we combine both forms of capital assets in a single model. The model predicts that foreign direct investment (owned subsidiaries) is more likely than licensing when the ratio of knowledge capital to physical capital is high, or when market value is high relative to the book value of capital (high Tobin's-Q).
    Keywords: FDI; hold-up; knowledge capital; outsourcing; physical capital
    JEL: F2 F23 L2 L22 L23
    Date: 2008–12

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