nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2005‒09‒29
twenty papers chosen by
Roberto Fontana
Universita Bocconi

  1. Corporate Growth and Industrial Dynamics: Evidence from French Manufacturing By Giulio Bottazzi; Alex Coad; Nadia Jacoby; Angelo Secchi
  2. Organizing for innovation: R&D projects, activities and partners By Cassiman, Bruno; Guardo, Chiara di; Valentini, Giovanni
  3. Does it matter where patent citations come from? Inventor versus examiner citations in European patents By Criscuolo,Paola; Verspagen ,Bart
  4. Learning Through Inter-Organizational Interactions:Public Research Institutes in the Nigerian (Bio)pharmaceutical System of Innovation By Oyelaran-Oyeyinka, Banji; Gehl-Sampath, Padmashree
  5. The effect of university culture and stakeholders' perceptions on university-business linking activities By Jeannine Horowitz Gassol
  6. Mapping Technological Trajectories as Patent Citation Networks. A Study on the History of Fuel Cell Research By Verspagen,Bart
  7. What are Firms? Evolution from Birth to Public Companies By Kaplan, Steven; Sensoy, Berk A.; Strömberg, Per Johan
  8. Everything you Always Wanted to Know about Inventors (but Never Asked): Evidence from the PatVal-EU Survey By Paola Giuri; Myriam Mariani; Stefano Brusoni; Gustavo Crespi; Dominique Francoz; Alfonso Gambardella; Walter Garcia-Fontes; Aldo Geuna; Raul Gonzales; Dietmar Harhoff; Karin Hoisl; Christian Lebas; Alessandra Luzzi; Laura Magazzini; Lionel Nesta; Önder Nomaler; Neus Palomeras; Pari Patel; Marzia Romanelli; Bart Verspagen
  9. Networks of People in Specialty Production: Family Firms in the Iron and Steel Wire Industries in Spain (1870-2000) By Paloma Fernández Pérez
  10. Firms’ Creative Capabilities, the Supporting Innovation System and Globalization in Southern Latin America: A Bleak Technological Outlook or a Myopic Standpoint? Evidence from a Developing Region in Brazil By Figueiredo, Paulo N.; Vedovello, Conceição
  11. Entrepreneurial Risk and Market Entry By Brian Wu; Anne Marie Knott
  12. Self-organization of R&D search in complex technology spaces By Silverberg,Gerald; Verspagen,Bart
  13. Competition and Innovation - Microeconometric Evidence Using Finnish Data By Juha Kilponen; Torsten Santavirta
  14. The organization and performance evaluation of R&D projects in a dynamic environment By Cassiman, Bruno; Guardo, Chiara di; Valentini, Giovanni
  15. Firms’ Learning Capabilities under a New Economic Environment: A Case Study of Mexican Auto Parts Firms By Vallejo, Bertha
  16. Virtual Enterprises, Mobile Markets and Volatile Customers By Jaspers, F.; Hulsink, W.; Theeuwes, J.J.M.
  17. Vertical Product Differentiation, Entry-Deterrence Strategies, and Entry Qualities By Noh, Yong-Hwan; Moschini, GianCarlo
  18. Entry, Access Pricing, and Welfare in the Telecommunications Industry By Stefan Behringer
  19. Past, Present and Future of the Telecommunications Industry By Pennings,Jacqueline; Kranenburg,Hans,van; Hagedoorn,John
  20. The Industrial Organization of Markets with Two-Sided Platforms By David S. Evans; Richard Schmalensee

  1. By: Giulio Bottazzi; Alex Coad; Nadia Jacoby; Angelo Secchi
    Abstract: We report several characteristics of industrial dynamics, including the firm size distribution, Gibrat's Law, and also the distribution of growth rates and their autocorrelation. We use a variety of econometric techniques, looking first at the aggregate and subsequently at a sectoral level. Many of our results corroborate previous findings, but there are also several surprises. For example, although previous findings on US and Italian data find that the growth rate distribution follows the Laplace density (i.e. is 'tent-shaped'), the French growth rates distribution has noticeably fatter tails. Growth rates depend negatively on size but the relationship does not seem to be linear, with larger firms possibly growing faster than medium-sized ones. It also appears that growth rate autocorrelation may vary with firm size: autocorrelation is negative for smaller firms, but the magnitude seems to decrease with size and becomes positive for larger firms.
    Keywords: Industrial dynamics, Gibrat's Law, Firm Growth, Aggregation.
    Date: 2005–09–11
  2. By: Cassiman, Bruno (IESE Business School); Guardo, Chiara di (University of Cagliari); Valentini, Giovanni (IESE Business School)
    Abstract: We explore how R&D project characteristics condition the governance of an R&D project and its individual activities. Prior literature has tried to understand the factors - both at the industry and at the firm level - that influence the way in which firms partner for innovation. In this paper, through the analysis of detailed data from a subsidiary of STMicroelectronics, we identify the main drivers of partner selection for innovation. Partnering or contracting with universities for innovation is common practice for developing new -original- knowledge, as opposed to applying existing knowledge to a problem. But firms are more reluctant to partner, especially with other firms, when that knowledge directly enhances their competitiveness. However, conditional on cooperation, partners are more likely to act individually when the project is strategically important. Contracting for innovation to universities or research centers, as opposed to partnering, happens for more experimental projects, where highly original knowledge is developed, and typically early on in the project.
    Keywords: Innovation strategy; Technological innovation; R&D projects' organization; Partner selection;
    Date: 2005–07–14
  3. By: Criscuolo,Paola; Verspagen ,Bart (MERIT)
    Abstract: This paper investigates whether the distinction between patent citations added by the inventor or the examiner is relevant for the issue of geographical concentration of knowledge flows (as embodied in citations). The distinction between inventor and examiner citations enables us to work with a more refined citation indicator of knowledge flows. We use information in the search reports of patent examiners at the European Patent Office to construct our dataset of regional patenting in Europe, and apply various econometric models to investigate our research question. The findings point to a significant localization effect of inventor citations, after controlling for various other factors, and hence suggest that knowledge flows are indeed geographically concentrated. This holds true also for a sub-sample of patents owned by 169 large multinational enterprises (MNEs). The results for the sample of MNEs suggest that multinational firms seek out specific regional knowledge specializations (and hence at least partly reinforce geographical concentration), but are also able to transfer knowledge "easier" over larger distances.
    Keywords: research and development ;
    Date: 2005
  4. By: Oyelaran-Oyeyinka, Banji (United Nations University, Institute for New Technologies); Gehl-Sampath, Padmashree (United Nations University, Institute for New Technologies)
    Abstract: Using field level data collected in Nigeria in 2003-2004, this paper examines the possibilities for learning through inter-organizational interactions in the country's biotechnological system of innovation, using public research institutes as an example. The paper considers inter-organizational interactions to be all forms of formal and informal linkages and contacts between various agents in the system of innovation, including firms, universities, traditional medicine practitioners, hospitals and other external agencies. Using results obtained in the survey and the experiences of other countries that have succeeded in developing biotechnological capacity, critical interactions and scope for policy interventions are discussed
    Keywords: Innovation, Capacity Building, Institution Building, Research, Learning, Pharmaceutical Industry, Nigeria
    Date: 2005
  5. By: Jeannine Horowitz Gassol
    Abstract: The present work discusses the effects of university culture and structure on university-business relations, focusing on knowledge transfer activities. It puts forward the thesis that when links between university and business are introduced into the university system as a turn-key proposition rather than as developmental process, the prevailing university culture and structure will exert resistance against change and will oppose the creation of appropriate structures to promote them, with deleterious effects for the university.
    Keywords: technology transfer, organizational development and innovation management
    JEL: O31 O32 O33 O57
    Date: 2005–05
  6. By: Verspagen,Bart (MERIT)
    Abstract: Technological change is argued to be taking place along ordered and selective pat-terns, shaped jointly by technological and scientific principles, and economic and other societal factors. Historical, descriptive analysis is often used to analyze these ''trajectories''. Recently, quantitative methods have been proposed to map these tra-jectories. It is argued that such methods have, so far, not been able to illuminate the engineering side of technological trajectories. In order to fill this gap, a methodology proposed by Hummon and Doreian (1989) is used and extended to undertake a cita-tion analysis of patents in the field of fuel cells.
    Keywords: research and development ;
    Date: 2005
  7. By: Kaplan, Steven; Sensoy, Berk A.; Strömberg, Per Johan
    Abstract: We study how firm characteristics evolve from early business plan, to initial public offering, to public company for 49 venture capital financed companies. The average time elapsed is almost six years. We describe the financial performance, business idea, point(s) of differentiation, non-human capital assets, growth strategy, customers, competitors, alliances, top management, ownership structure, and the board of directors. Our analysis focuses on the nature and stability of those firm attributes. Firm business lines remain remarkably stable from business plan through public company. Within those business lines, non-human capital aspects of the businesses appear more stable than human capital aspects. In the cross-section, firms with more alienable assets have substantially more human capital turnover.
    Keywords: entrepreneurship; theory of the firm; venture capital
    JEL: D21 D23 G24
    Date: 2005–09
  8. By: Paola Giuri; Myriam Mariani; Stefano Brusoni; Gustavo Crespi; Dominique Francoz; Alfonso Gambardella; Walter Garcia-Fontes; Aldo Geuna; Raul Gonzales; Dietmar Harhoff; Karin Hoisl; Christian Lebas; Alessandra Luzzi; Laura Magazzini; Lionel Nesta; Önder Nomaler; Neus Palomeras; Pari Patel; Marzia Romanelli; Bart Verspagen
    Abstract: By drawing information from a survey of inventors of 9,017 European patents (PatVal-EU), this paper provides novel and detailed data about the characteristics of the European inventors, the sources of their knowledge, the importance of formal and informal collaborations among researchers and institutions, the motivations to invent, and the actual use and economic value of the patents. This is important information as the unavailability of direct indicators has limited the scope and depth of the empirical studies on innovation.
    Date: 2005–09–10
  9. By: Paloma Fernández Pérez (Universitat de Barcelona)
    Abstract: Capital intensive industries in specialized niches of production have constituted solid ground for family firms in Spain , as evidenced by the experience of the iron and steel wire industries between 1870 and 2000. The embeddedness of these firms in their local and regional environments have allowed the creation of networks that, together with favourable institutional conditions, significantly explain the dominance of family entrepreneurship in iron and steel wire manufacturing in Spain, until the end of the 20 th century. Dominance of family firms at the regional level has not been not an obstacle for innovation in wire manufacturing in Spain, which has taken place even when institutional conditions blocked innovation and traditional networking. Therefore, economic theories about the difficulties dynastic family firms may have to perform appropriately in science-based industries must be questioned.
    Keywords: Family Firms, Steel Wire Industries, Spanish Economic History
    JEL: N63 N64 N83 N84
    Date: 2005
  10. By: Figueiredo, Paulo N. (Brazilian School of Public and Business Administration); Vedovello, Conceição (Technological Research Institute of the State of Sao Paulo)
    Abstract: This paper examines empirical evidence of the technological capabilities of firms in the industrial pole of Manaus, in a developing area of northern Brazil. It also investigates the links these firms have with supporting organizations of the innovation system such as universities, research institutes or business incubators. Firms’ capabilities are classified by type and level of development, and we also identify the nature of the links between them and the supporting organizations. The paper draws on a sample of 75 organizations from Manaus: 46 firms (in two sectors: electro-electronics and motorcycle and bicycle industries, and their major suppliers) and 29 research-oriented support organizations. The evidence was collected through extensive fieldwork at both the industry- and firm-level as well as from first-hand accounts. From the study we find that all the sampled firms have progressed beyond basic operational capabilities. At the time of the fieldwork, several firms possessed a high level of innovative capabilities in diverse technological functions. Many of these firms have actively established a variety of informal, human resource-based and even research-based links with innovation supporting organizations. These findings oppose prevailing generalizations and assumptions that, as a consequence of globalization and outward-looking industrialization regimes, firms in southern Latin American economies lack technological capabilities. Furthermore our evidence does not support the view that there is a prevailing weakness in the innovation system in this region. Although this study does not explicitly examine technological development over time, we believe it offers an alternative (and more optimistic) view of the industrial reality in this developing area of Brazil. This view, which differs from existing conventional (and myopic) standpoints, could potentially support the design of more realistic industrial strategies.
    Keywords: Firm-level capabilities, technological capabilities, innovation systems, globalization, Latin America.
    Date: 2005
  11. By: Brian Wu; Anne Marie Knott
    Abstract: This paper attempts to reconcile the risk-bearing characterization of entrepreneurs with the stylized fact that entrepreneurs exhibit conventional risk aversion profiles. We propose that the disparity arises from confounding two distinct dimensions of uncertainty: demand uncertainty and ability uncertainty. We further propose that entrepreneurs will be risk averse with respect to demand uncertainty, yet “risk-seeking” (or overconfident) with respect to ability uncertainty. To examine this view we model the entrepreneur’s entry decision then test the model empirically. We find that entrepreneurs in aggregate behave as we predict. Accordingly, risk-averse entrepreneurs are willing to bear market risk when the degree of ability uncertainty is comparable to the degree of demand uncertainty. A potential market failure exists however in instances where there is a high degree of demand uncertainty, but low ability uncertainty. In those settings there may be insufficient entry, competition and innovation.
    Date: 2005
  12. By: Silverberg,Gerald; Verspagen,Bart (MERIT)
    Abstract: We extend an earlier model of innovation dynamics based on invasive percolation by adding endogenous R&D search by economically motivated firms. The {0,1} seeding of the technol-ogy lattice is now replaced by draws from a lognormal distribution for technology ‘difficulty’. Firms are rewarded for successful innovations by increases in their R&D budget. We compare two regimes. In the first, firms are fixed in a region of technology space. In the second, they can change their location by myopically comparing progress in their local neighborhoods and probabilistically moving to the region with the highest recent progress. We call this the mov-ing or self-organizational regime. We find that as the mean and standard deviation of the log-normal distribution are varied, the relative rates of aggregate innovation switches between the two regimes. The SO regime has higher innovation rates, other things being equal, for lower means or higher standard deviations of the lognormal distribution. This results holds for in-creasing size of the search radius. The clustering of firms in the SO regime grows rapidly and fluctuates in a complex way around a high value which increases with the search radius. We also investigate the size distributions of the innovations generated in each regime. In the fixed one, the distribution is approximately lognormal and certainly not fat tailed. In the SO regime, the distributions are radically different. They are much more highly right skewed and show scaling over at least two decades with a slope of almost exactly one, independently of parame-ter settings. Thus we argue that firm self-organization leads to self-organized criticality. (Keywords: innovation, percolation, search, technological change, R&D, clustering, self-organized criticality.
    Keywords: research and development ;
    Date: 2005
  13. By: Juha Kilponen (Bank of Finland); Torsten Santavirta (University of Helsinki)
    Abstract: In this study we provide a theoretical prediction of a complementary relationship between the incentive effects of product market competition and R&D subsidies using the theory of Aghion et. al (1997, 2001). The complementarity relationship and that of an inverted U-relationship is then tested using a large Finnish firm level data set combined with patent and patent citations of the firms. Econometric analysis shows that the inverted U-relationship is fairly robust to different innovation measures derived from patent data. We also find that the inverted-U relationship tends to be steeper when also R&D subsidies are considered. This result suggests that there exists a complementarity between competition and R&D subsidies.
    Keywords: Product market competition, Innovations, R&D subsidies
    JEL: L
    Date: 2005–09–16
  14. By: Cassiman, Bruno (IESE Business School); Guardo, Chiara di (University of Cagliari); Valentini, Giovanni (IESE Business School)
    Abstract: Faster technological development, shorter product life-cycles, and more intense global competition have transformed the current competitive environment for most firms. This new competitive landscape forces organizations to actively acquire knowledge, as a firm's competitive advantage is now more dependent on continuous knowledge development and enhancement. Therefore, knowledge has become a central theme in strategic management. Against this background, we argue that the knowledge characteristics of R&D projects are fundamental variables to explain governance decisions. Drawing upon the case of STMicroelectronics, we provide evidence that partnering or contracting with universities for innovation is common practice for developing new -original- knowledge, as opposed to applying existing knowledge, for solving a problem. However, the firm is more reluctant to partner, especially with another firm, when this knowledge directly enhances its competitiveness. Moreover, we find that R&D project performance is a bi-dimensional construct. One dimension picks up project efficacy and immediate benefits, while the other includes learning and long-term benefits. Though spanning firm boundaries for innovation does not seem to have appreciable effects on perceived project efficiency, it nonetheless brings about intertemporal benefits related to learning and capabilities development. In a dynamic environment, building knowledge may be more important than protecting it. Thus, an open innovation process may be an exceptionally effective way to build and develop the firm's technological future.
    Keywords: Innovation strategy; R&D projects' organization; R&D projects' performance; open innovation;
    Date: 2005–07–29
  15. By: Vallejo, Bertha (United Nations University, Institute for New Technologies)
    Abstract: The study presented in this paper describes preliminary findings on changes in the adoption of different learning mechanisms before and after the implementation of the North American Free Trade Agreement (NAFTA), based on a study of 193 Mexican automotive firms. The results obtained give us useful insights on the composition and capability levels of the sector as well as highlighting changes in the research and development (R&D) capacity of these firms under the new competitive market conditions. The study is based on firm-level panel data from the automotive industry obtained from the National Survey on Employment, Salaries, Technology and Training (ENESTyC) carried out by the National Statistics Office and the Ministry of Labour for the years 1991, 1994, 1998 and 2000. It presents a descriptive analysis of quantitative measures taken by firms with regards to learning, and focuses on changes in learning trends owing to different market conditions brought about by NAFTA. The analysis is complemented by a multivariate probit model that tests the relationship between critical firm-level variables and a firm’s probability of conducting R&D activities, training staff, acquiring technological packages and/or receiving technology transfers from their headquarters, or procuring machinery and equipment. The empirical analysis highlights important associations between different kinds of learning mechanisms adopted by firms and their own critical characteristics. The study shows that of all the learning mechanisms available to firms, training is the one most commonly used in the sector – and it is on the increase. However, the results also indicate that training is mainly given to those who operate specific machines or technologies, and does not go towards helping firms develop the absorptive capacity they need if they are to move towards newer and more complex technologies and market changes. This may imply that the automotive sector is moving towards a lower level of dynamic learning, concentrating on day-to-day operational activities with a tendency to import knowledge from foreign countries. On the other hand there may be more competition since the implementation of NAFTA, which requires firms to conduct training simply in order to maintain their operational level rather than to upgrade their capabilities. The results obtained in this study provide useful insights and lessons that go beyond the Mexican context and that may be useful for other manufacturing sectors in developing countries.
    Keywords: Learning, capability building, technology transfer, automotive industry, NAFTA, Mexico
    Date: 2005
  16. By: Jaspers, F.; Hulsink, W.; Theeuwes, J.J.M. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Recently, several new mobile virtual network operators (MVNOs) have entered the European mobile telecommunications markets. These service providers do not own a mobile network, but instead they buy capacity from other companies. Because these virtual operators do not possess an infrastructure of their own, they have signed contracts with incumbent mobile operators with a network. The growth of these MVNOs which use leased network capacity from existing carriers, presents the incumbent mobile operators with a strategic dilemma. Network-based mobile operators have almost full control over their infrastructure but they may not know their customers well enough to fill the demand for cheaper and/or innovative services. New service-based operators may create affinity with the customer and introduce quickly all kinds of innovations and/or price discounts, but they still have to negotiate access terms and conditions with one of the domestic network-based operators. It has become important, and in some countries even urgent, to introduce regulatory measures concerning non-discriminatory access to the mobile telecommunications sector. This paper looks furthermore deeper into the entry and innovation strategies by MVNOs on the mobile market in the Netherlands, and its impact on competition.
    Keywords: MVNO (Mobile Virtual Network Operators);Entry & Innovation Strategies;Virtual Enterprise;Unbundling Value Chain;David & Goliath Competition;
    Date: 2005–06–28
  17. By: Noh, Yong-Hwan; Moschini, GianCarlo
    Abstract: We analyze the entry of a new product into a vertically differentiated market in which an entrant and an incumbent compete in prices. Here the entry-deterrence strategies of the incumbent firm rely on “limit qualities.” With a sequential choice of quality, a quality-dependent marginal production cost, and a fixed entry cost, we relate the entry-quality decision and the entry-deterrence strategies to the level of entry cost and the degree of consumer heterogeneity. Quality-dependent marginal production costs in the model entail the possibility of inferior-quality entry as well as an incumbent’s aggressive entry-deterrence strategies of increasing its quality level toward potential entry. Welfare evaluation confirms that social welfare is not necessarily improved when entry is encouraged rather than deterred.
    Keywords: entry deterrence; quality choice; vertical product differentiation.
    JEL: C72 D43 L13
    Date: 2005–09–14
  18. By: Stefan Behringer (Economics Department, Frankfurt University)
    Abstract: This paper looks at the effects of entry on welfare in the telecommunication industry. The equilibrium pricing parameters for an incumbent (state) monopoly and for a duopoly situation are determined in which access charges are chosen non-reciprocally. A welfare comparison between the monopoly and duopoly equilibrium situation is undertaken and the welfare consequences of alternative access pricing regimes are investigated.
    Date: 2005–07
  19. By: Pennings,Jacqueline; Kranenburg,Hans,van; Hagedoorn,John (METEOR)
    Abstract: The telecommunications industry has experienced a series of dramatic changes since itsinception in the 1880s. Due to the latest liberalization and privatization wave in the world, the telecommunications industry has turned into a dynamic environment and is rapidly growing.In addition, the New Economy emerged and brought new technological developments in the1990s. They have stimulated the convergence of previously distinct industries such as thetelecommunications, information technology, entertainment, media, and consumerelectronics, into the so-called multimedia information industry. This study discusses the (de)regulation actions and their implications on the telecommunications industry as of its beginning. Furthermore, this study also presents a general overview of major trends in inter-firm partnerships and M&As in the telecommunications industry since 1985, examining both the general developments and the distribution according to internationalization and industries. We find that the overall trends demonstrated an increase in importance of inter-firm partnerships and M&As over time. Another significant finding is the increase in importance of other industries. In relative terms, the growth of M&As and alliances with partners outside the telecommunications industry superseded the increase in the number of M&A’s and alliances within the industry.
    Keywords: Strategy;
    Date: 2005
  20. By: David S. Evans; Richard Schmalensee
    Abstract: Two-sided platforms (2SPs) cater to two or more distinct groups of customers, facilitating value-creating interactions between them. The village market and the village matchmaker were 2SPs; eBay and are more recent examples. Other examples include payment card systems, magazines, shopping malls, and personal computer operating systems. Building on the seminal work of Rochet and Tirole (2003), a rapidly growing literature has illuminated the economic principles that apply to 2SPs generally. One key result is that 2SPs may find it profit-maximizing to charge prices for one customer group that are below marginal cost or even negative, and such skewed pricing pattern is prevalent, although not universal, in industries that appear to be based on 2SPs. Over the years, courts have also recognized that certain industries, notably payment card systems and newspapers, now understood to be based on 2SPs, are governed by unusual economic relationships. This chapter provides an introduction to the economics of 2SPs and its application to several competition policy issues.
    JEL: D4 L1 L4
    Date: 2005–09

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