nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2006‒03‒11
ten papers chosen by
Roberto Fontana
Universita Bocconi

  1. The effect of business regulations on nascent and actual entrepreneurship By Andre van Stel; David Storey; Roy Thurik
  2. Is Demand-Pulled Innovation Equally Important in Different Groups of Firms? By Mariacristina Piva; Marco Vivarelli
  3. Productivity, Profitability and Financial Fragility: Evidence from Italian Business Firms By Giulio Bottazzi; Angelo Secchi; Federico Tamagni
  4. Revolution in the Defence Electronics Market? An Economic Analysis of Sectoral Change By Paul Dowdall; Derek Braddon
  5. Innovation in Small and Medium-Sized Enterprises: A Study of Businesses in New South Wales, Australia By Olsen, Jane; Lee, Boon-Chye; Hodgkinson, Ann
  6. Vertical differentiation, network externalities and compatibility decisions : an alternative approach. By Hend Ghazzai; Rim Lahmandi-Ayed
  7. Venture Capital Industries and Policies: Some Cross-Country Comparisons By Morris Teubal; Terttu Luukkonen
  8. The Growth of Industrial Sectors: Theoretical Insights and Empirical Evidence from U.S. Manufacturing By Sandro Sapio; Grid Thoma
  9. Consumer Innovativeness and GLB: A comparative study By B. VANDECASTEELE; M. GEUENS
  10. Issues in measuring the degree of technological specialization with patent data By Nicolas van Zeebroeck; Bruno van Pottelsberghe de la Potterie; Wook Han

  1. By: Andre van Stel; David Storey; Roy Thurik
    Abstract: This paper investigates the effect of business regulations on various measures of entrepreneurship. Using data for a sample of countries participating in the Global Entrepreneurship Monitor between 2002 and 2005, we estimate a two-equation model explaining the nascent and the actual entrepreneurship rate, while taking into account the interrelationship between the two variables. Various determinants of entrepreneurship reflecting the demand and supply side of entrepreneurship as well as business regulation measures are incorporated in the model. Data on various categories of business regulations are taken from the World Bank Doing Business data base. Our estimation results suggest that, while entry regulations only have a small and indirect impact on the actual entrepreneurship rate, the impact of labour market regulations is more important. We also find that the determinants of opportunity and necessity entrepreneur-ship are fundamentally different.
    Keywords: nascent entrepreneurship, young businesses, business regulations, Global Entrepreneurship Monitor, World Bank Doing Business
    JEL: K20 L51 M13 O57
    Date: 2006–02
  2. By: Mariacristina Piva (Catholic University of Piacenza); Marco Vivarelli (Catholic University of Piacenza, CSGR Warwick, Max Planck Institute of Economics Jena and IZA Bonn)
    Abstract: Previous empirical literature - mainly cross-sectional - has tested the demand-pull hypothesis and found that overall, evidence does not conflict with the idea that innovation may be driven by output. Using a balanced panel of 216 Italian manufacturing firms over the 1995-2000 period, and checking for fixed effects, time, sectoral and size dummies and for the pathdependent nature of R&D, we also find a (barely significant) role of sales in inducing R&D expenditures. However, at the micro level, the demand-pull effect plays a varying role for the different sub-samples of firms. In particular, exporting firms, those which are liquidityconstrained, those not receiving public subsidies and those not heading a business group, seem to be particularly sensitive to sales in deciding their R&D expenditures. These microeconometric results have been obtained using a Least Squares Dummy Variable Corrected (LSDVC) estimator, a recently-proposed panel data technique particularly suitable for small samples.
    Keywords: R&D expenditures, demand-pull, innovative firms, LSDVC estimator
    JEL: O31
    Date: 2006–02
  3. By: Giulio Bottazzi; Angelo Secchi; Federico Tamagni
    Abstract: Exploiting a rich panel reporting balance sheets data from a large sample of Italian firms for the period 1996-2002, we attempt to shed light on two crucial dimensions of firms' structure and dynamics: profitability and productivity performances. We start by exploring the statistical properties of a set of measures of profit margins and profitability, some standard as ROI and others that we built from the data, applying a set of parametric and non parametric techniques to the analysis of both their empirical distributions and their persistence over time. Then, looking for the possible linkages existing between the structural characteristics of the firms and their productivity performance, we study the empirical distributions and the dynamics of productive structures and productivity. We also exploit an additional information present in the data which allows to group firms according to an index of financial rating. Besides checking the robustness of results with respect to this level of disaggregation, we also provide an initial understanding about how the economic performances of a firm affect (or are affected by) its financial conditions and, relatedly, the availability of external credit.
    Keywords: Firm performance, Profitability, Productivity, Financial constraints
    Date: 2006–03–03
  4. By: Paul Dowdall (School of Economics, University of the West of England); Derek Braddon (School of Economics, University of the West of England)
    Abstract: Within the defence sector there have been marked changes in the nature of the composite industries. This is particularly true of the electronics industry which continues to grow in importance, with electronic components built into nearly every weapons system and piece of equipment. Given the “Revolution in Military Affairs” (RMA) it seems certain that this growth will continue, impacting on both product and process. The result, however, may not be the contestable open market many expect (and hope for) as Network Enabled Warfare may result in new entrants, such as IT specialist and increased competition. Alternatively the nature of the market may continue to benefit the incumbents. This paper presents an analysis of the changes taking place in the industry using firm-level, primary, survey-based, qualitative data on corporate conduct. The results suggest that in practice the incumbents do seem to be in a strong position. The new demands of the customer require much more than mere technical capability. Specialists who do not have established industry relationships, who do not understand industry “protocols” and who cannot communicate effectively with the customer are unlikely to survive. This suggests that rather than new entrants, there may in fact be exits from the industry and further consolidation.
    Date: 2005–09
  5. By: Olsen, Jane; Lee, Boon-Chye (University of Wollongong); Hodgkinson, Ann (University of Wollongong)
    Abstract: This paper examines the process of innovation within SMEs, focusing on a sample of firms in New South Wales, Australia. The trend of the last several decades towards increased integration of global markets, or globalization, has meant that many firms are experiencing continuously increasing pressure to remain viable as their markets expand, and they begin competing with a larger number of firms. SMEs, in particular, are vulnerable to this pressure, since they tend to be disadvantaged relative to larger firms that generally have better access to funding and other resources. The ways in which SMEs operate to remain economically viable, and contribute to economic performance, is of especial interest to governments given the prominent roles that they play in most economies. One way of doing so is through innovation. In this paper, we present a more complex model of the innovation process than the traditional linear model involving R&D investment, what we term the "Ripple Effect Model", building upon recent developments in the literature. The Ripple-Effect Model appears to be substantially supported.
    Keywords: Structural break, unit root test, Lebanon economy
    Date: 2006
  6. By: Hend Ghazzai (CES-CERMSEM et LEGI-Ecole Polytechnique de Tunisie); Rim Lahmandi-Ayed (LEGI-Ecole Polytecnique de Tunisie)
    Abstract: We characterize the equilibrium of a game in vertically differentiated market which exhibits network externalities. There are two firms, an incumbent and a potential entrant. Compatibility means in our model that the inherent qualities of the goods are close enough. By choosing its quality, the entrant chooses in the same time to be compatible or not. The maximal quality difference that allows compatibility i.e the compatibility interval is chosen by the incumbent which involves costs increasing with the width of that interval. We show that in order to have two active firms at price equilibrium, the sufficient condition on the market size of a standard vertical differentiation model remains valid under compatibility. However, an additional condition on the firms' qualities is needed under incompatibility. For a small quality segment, the incumbent can block entry choosing an empty compatibility interval. At the subgame perfect equilibrium, incompatibility prevails if the quality segment is large and the compatibility costs are high. Compatibility prevails for sufficiently large quality segments and low costs of compatibility. Finally there is no entry if the quality segment is small and the compatibility costs are high.
    Keywords: Vertical differentiation, compatibility, network externalities.
    JEL: L13 L15 D43
    Date: 2006–02
  7. By: Morris Teubal; Terttu Luukkonen
    Abstract: The paper summarizes the findings obtained during the first year of the Venture Fun project, carried out in an EU Network of Excellence PRIME and funded from the Sixth Framework Programme. The paper defines the central concepts of the project, identifies questions for further elaboration and study, and finally provides a rough idea of the different profiles that the studied countries (Finland, Israel, France, Italy, and the UK) evidence in the organization of their VC industries. One of the conclusions of the paper is that Israel, and to a lesser extent, Finland, has succeeded in developing a specialized, independent VC industry oriented to the early phase finance and support of ICT start-ups. By contrast, though the UK has a strong Private Equity industry, it is, however, not focusing on early-stage or high tech areas. Italy and France showed a significant presence of Venture Capital and Private Equity industries (public/private organisations), but in Italy an early phase VC industry has almost disappeared after 2001. The paper further summarises factors that have influenced the development of VC industries in the studied countries.
    Keywords: venture capital, industry emergence, start-ups, venture capital -directed policy, innovation policy
    JEL: O16 O38
    Date: 2006–03–01
  8. By: Sandro Sapio; Grid Thoma
    Abstract: In this paper, we study the growth rates of 4-digit sectors in U.S. manufacturing. Two measures of size (value of shipments, value added) are considered, for each of the 38 years (1959-1996) of a sample of 458 4-digit sectors, drawn from the NBER Manufacturing Productivity database. Whole sample results are partly in line with firm growth facts: (i) sectoral growth rates are distributed according to heavy-tailed Subbotin distributions, with shape coefficient between 1.0 (Laplace) and 1.5; (ii) the volatility of growth rates is decreasing with respect to size, with a scaling exponent varying over time, but always between -0.20 and -0.10. Preliminary analyses on more homogeneous groups cast doubts on the evidence of scaling, but leave basically unaffected the distributional properties of sectoral growth. These results shed light on the role of inter-firm correlations, market concentration, and positive intersectoral feedbacks as drivers of meso-economic dynamics.
    Keywords: Sectoral Growth, Subbotin Distribution, Scaling, U.S. Manufacturing
    Date: 2006–03–03
    Abstract: Many companies survive because of the development and the introduction of successful new products3. According to Hultink and Schoormans (2004), 40 to 50 percent of the return and the profit of US and UK companies comes from products introduced on the market less than five years ago. However, new products often do not find their way to buyers: Hultink and Schoormans (2004) state that 30 to 50% of new products fail. The diffusion literature (e.g. Rogers, 2003) counts on innovative people to make a new product successful. When these innovative persons are known, a deliberate and efficient communication campaign can be developed and innovators can be targeted (Fell et al. 2003). But, who are innovative persons and how can they be effectively targeted? Marketers often try to reach and attract them via mass media communication and mass sampling, without much success though. Therefore, it would be interesting to find a subgroup within the society that is significantly more innovative than others. In this respect, several non-academic articles refer to the assumed innovativeness of gays, lesbians and bisexuals (GLB) (Kolko et al. 2003, Wilke 2000, 2000). GLB are supposed to be trendsetters and are called “the avant-garde of consumers” (Bilsen et al., 2000, p. 242). Kolko et al. (2003) state that “gays lead in the adoption of a whole host of emerging technologies and almost every online activity […]” (p.2). Nevertheless, to our knowledge, no academic research has been carried out measuring the innovativeness of GLB. Therefore, the purpose of this article was to investigate the innovativeness of both GLB and heterosexuals and to see whether empirical evidence can be found for the myth that GLB are more innovative and trendsetting than heterosexuals. Moreover, also the extent to which this innovativeness translates in new product trial was studied.
    Date: 2006–01
  10. By: Nicolas van Zeebroeck (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels); Bruno van Pottelsberghe de la Potterie (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels); Wook Han
    Abstract: This paper analyses several issues that arise when measuring technological specialisation with patent data. Three starting choices are required regarding the data source, the statistical measure and the sectoral aggregation level. We show that the measure is highly sensitive to the data source and to the level of sectoral aggregation. The statistical analysis further suggests that the most stable and reliable measures of technological specialization are obtained with patents applied at the EPO, with Gini or C20 as statistical measure and the 4-digits aggregation level of the IPC classification system.
    Keywords: Technological specialisation, patent data, patents statistics
    JEL: L16 O3 O57
    Date: 2005–05

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