nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2007‒02‒17
twenty-one papers chosen by
Rui Baptista
Technical University of Lisbon

  1. Entry, Innovation and Exit. Evidence from the LAN switch Industry By Roberto Fontana; Lionel Nesta
  2. Do Spillovers Stimulate Incremental or Drastic Product Innovations? Hypotheses and Evidence from German Establishment Data By Jirjahn, Uwe; Kraft, Kornelius
  3. Persistence of Innovation: Stylised Facts and Panel Data Evidence By Bettina Peters
  4. Corporate Skills as an Ex-Ante Incentive to R&D Investment By Mariacristina Piva; Marco Vivarelli
  5. Detecting Behavioural Additionality An Empirical Study on the Impact of Public R&D Funding on Firms’ Cooperative Behaviour in Germany By Aschhoff, Birgit; Fier, Andreas; Löhlein, Heide
  6. The Further the Better? Knowledge Intensive Service Firms' Collaboration on Innovation By Anker Lund Vinding; Ina Drejer
  7. Factors Determining the Mode of Overseas R&D by Multinationals: Empirical Evidence By ITO Banri; WAKASUGI Ryuhei
  8. Mergers and Barriers to Entry In Pharmaceutical Markets By Granier, L.; Trinquard, S.
  9. Market Structure and Innovation: A Dynamic Analysis of the Global Automobile Industry By Hashmi, Aamir Rafique; Van Biesebroeck, Johannes
  10. Efficiency, technology and productivity change in Australian universities, 1998-2003 By Andrew Worthington; Boon L. Lee
  11. Appendices to Internationally Comparable Science, Technology and Competitiveness Indicators By Robert H. McGuckin; Bart van Ark; Sean M. Dougherty; Robert Inklaar
  12. R&D and Firm Performance in a Transition Economy By Czarnitzki, Dirk; Kraft, Kornelius
  13. Innovation, Licensing, and Imitation: The Effects of Intellectual Property Rights Protection and Industrial Policy By Koichi Futagami; Tatsuro Iwaisako; Hitoshi Tanaka
  14. International Comparisons of R&D Expenditure: Does an R&D PPP make a difference? By Sean M. Dougherty; Robert Inklaar; Robert H. McGuckin; Bart van Ark
  15. Innovation Activities Abroad and the Effects of Liability of Foreignness: Where it Hurts By Sofka, Wolfgang
  16. ICT adoption and productivity in developing countries: new firm level evidence from Brazil and India By Basant, R. & Commander, S. & Harrison, R. & Menezes Filho, N. A.
  17. Efficiency and productivity change in the English higher education sector from 1996/97 to 2002/03 By Jill Johnes
  18. Technology Shocks and Business Cycles: The Role of Processing Stages and Nominal Rigidities By Louis Phaneuf; Nooman Rebei
  19. The measurement and determinants of efficiency and productivity in the FE sector in England By Jill Johnes; Steve Bradley; Alan Little
  20. Sources of Knowledge and Productivity: How Robust is the Relationship? By Mosahid Khan; Kul B. Luintel
  21. Destructive Creation By Calvano, Emilio

  1. By: Roberto Fontana; Lionel Nesta (Observatoire Français des Conjonctures Économiques)
    Date: 2007
  2. By: Jirjahn, Uwe; Kraft, Kornelius
    Abstract: We estimate the determinants of various types of product innovation. Knowledge spillovers from rivals have a positive impact on incremental innovations. This impact is largely independent of the participation in R&D cooperations. Spillovers exert no such independent influence on drastic innovation activities. The results support the hypothesis that establishments face difficulties in using knowledge that comes from areas they are not familiar with. Establishments exploit spillovers for incremental innovations rather than for drastic innovations. To a limited degree R&D cooperations can help to overcome the difficulties in using spillovers for drastic innovations. Furthermore, our estimates provide evidence that a firm’s own R&D effort and the use of outside information are substitutive.
    Keywords: New Products, Patents, Spillovers, Learning, R&D
    JEL: L15 L60 O31 O32
    Date: 2006
  3. By: Bettina Peters
    Abstract: This paper investigates whether firms innovate persistently or discontinuously over time using an innovation panel data set on German manufacturing and service firms for the period 1994–2002. It turns out that innovation behaviour is permanent at the firm–level to a very large extent. Using a dynamic random effects discrete choice model and a new estimator recently proposed by Wooldrigde (2005), I further shed some light on the driving forces for this phenomenon. The econometric results show that past innovation experience is an important determinant for manufacturing as well as for service sector firms, and hence confirm the hypothesis of true state dependence. In addition, the results highlight the important role of knowledge provided by skilled employees and unobserved individual heterogeneity in explaining the persistence of innovation.
    Keywords: Innovation; persistence; state dependence; unobserved heterogeneity; dynamic random effects panel probit model
    JEL: O31 C23 C25 L20
    Date: 2006
  4. By: Mariacristina Piva (Università Cattolica Piacenza); Marco Vivarelli (Università Cattolica Piacenza, CSGR Warwick, Max Planck Institute of Economics Jena, and IZA)
    Abstract: Using a balanced panel of 215 Italian manufacturing firms over the 1995-2000 period, this paper investigates the determinants of R&D investment at the level of the firm. While finding further support for the well-established technology-push and demand-pull hypotheses, this study also tests the role of skill endowment in increasing a firm’s R&D investment. Consistently with the related managerial and economic literature, our basic result is that current skill endowment may significantly and positively influence a firm’s current R&D decision. 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: skills and innovation, R&D expenditures, endogenous skill bias, demand-pull, LSDVC estimator
    JEL: O31
    Date: 2007–01
  5. By: Aschhoff, Birgit; Fier, Andreas; Löhlein, Heide
    Abstract: Subsidising research networks has become a popular instrument in technology policies, driven mainly by expected positive spillovers. In particular, the stimulation of R&D co-operation between scientific institutions and industry is considered as most promising. In the context of policy evaluation we analyse if public R&D funding is suitable for influencing firms’ collaborative behaviour in the intended way and where applicable, if a lasting change results. The empirical analysis is based on German CIS data and a supplemental telephone survey. Using a nearest-neighbour matching approach we find that R&D funding is indeed a particularly valuable tool for the linking of science into industry R&D partnerships. However, we also show in a bivariate probit analysis that newly initiated R&D co-operations with science are less likely to be continued after funding has ended compared to already existing co-operations. Therefore, the behavioural change induced by public funding is not necessarily longlived.
    Keywords: Public Funding, Firm Behaviour, Policy Evaluation, R&D Co-operation
    JEL: C20 H32 L22 O32 O38
    Date: 2006
  6. By: Anker Lund Vinding; Ina Drejer
    Abstract: Three hypotheses in relation to knowledge intensive service firms’ collaboration in relation to development of new services are explored: i) firms with a high level of absorptive capacity are more likely to collaborate on innovation than firms with a relatively low level of absorptive capacity; ii) given that the firms collaborate on innovation, the main innovation partner of knowledge intensive service firms with a high level of absorptive capacity is likely to be located further away than the main innovation partner of firms with a low level of absorptive capacity; and iii) collaboration with distant partners in the innovation process will often be of a more explorative nature than interaction with local partners, thereby associating the innovative output of cross-border collaborations with a higher degree of novelty than collaboration with local/national partners. Hypotheses i and iii are confirmed, whereas the results for hypothesis ii are inconclusive.
    Keywords: Service innovation; absorptive capacity; collaboration
    JEL: O31 L80
    Date: 2006
  7. By: ITO Banri; WAKASUGI Ryuhei
    Abstract: The large expansion of MNCs' overseas R&D is noteworthy. This paper investigates the factors affecting the expansion of support-oriented R&D and knowledge sourcing R&D by using qualitative data which indicate the modes of R&D conducted at a plant site and a laboratory. The empirical results suggest that (1) the export propensity of affiliate firms, relative abundance of human resources for R&D, and accumulated technological knowledge have a positive effect on both the modes of R&D at a plant site and a laboratory, and (2) the stronger enforcement of intellectual property positively affects the expansion of knowledge sourcing R&D. These results show that not only firm-specific but also country-specific factors positively affect the overseas expansion of R&D.
    Date: 2007–02
  8. By: Granier, L.; Trinquard, S.
    Abstract: After patent expirations in pharmaceutical markets, brand-name laboratories are threatened by generic firms'entry. To fill the gap in the theoretical literature on this topic, we study brand-name .rms.incentives either to deter entry, or to merge with the entrant. These strategies are considered along with the possibility of the brandname firm producing its own generic drug, called a pseudo-generic drug. Using a vertical differentiation model with Bertrand-Stackelberg competition, we show that each strategy, merging and deterring entry, may be Nash equilibrium, according to the generic firm's setup cost level and to the rate of discount.
    Keywords: barriers, endogenous mergers, limit pricing, pharmaceuticals, pseudo-
    JEL: I11 L12
    Date: 2007
  9. By: Hashmi, Aamir Rafique; Van Biesebroeck, Johannes
    Abstract: The question that how market structure and innovation are related has been extensively studied in the literature. However, there is hardly any notable study on this question for the global automobile industry. We fill this gap by studying the relationship between market structure and innovation in the global automobile industry for the 1980-2005 period. We use the dynamic industry framework of Ericson and Pakes (Review of Economic Studies, 1995) and estimate the parameters of the model using a two-step procedure proposed by Bajari et al (Econometrica, forthcoming). Since the global auto industry has seen a lot of consolidation since 1980, mergers are an important ingredient of our model. After estimating the parameters of the model, we simulate the industry forward and study how changing market structure (mainly due to mergers) affects innovative activity at the firm as well as the industry level. Our findings are the following. (1) The effect of market structure on innovation in the global auto industry depends on the initial state of the industry. If the industry is not very concentrated, as it was in 1980, some consolidation may increase the innovative activity. However, if the industry is already concentrated, as in 2005, further consolidation may reduce the innovation incentives. (2) Mergers reduce the value of merging firms though they may increase the aggregate value of the industry. (3) Mergers between big firms eventually reduce consumers' utility.
    Keywords: Competition and Innovation; Automobile Industry; Dynamic Games
    JEL: O31 L62 L13
    Date: 2007–02–13
  10. By: Andrew Worthington; Boon L. Lee (School of Economics and Finance, Queensland University of Technology)
    Abstract: In this study, productivity growth in thirty-five Australian universities is investigated using nonparametric frontier techniques over the period 1998 to 2003. The inputs included in the analysis are full-time equivalent academic and non-academic staff, non-labour expenditure and undergraduate and postgraduate student load and the outputs are undergraduate, postgraduate and PhD completions, national competitive and industry grants and publications. Using Malmquist indices, productivity growth is decomposed into technical efficiency and technological change. The results indicate that annual productivity growth averaged 3.3 percent across all universities, with a range between -1.8 percent and 13.0 percent, and was largely attributable to technological progress. However, separate analyses of research-only and teaching-only productivity indicate that most of this gain was attributable to improvements in research-only productivity associated with pure technical and some scale efficiency improvements. While teaching-only productivity also contributed, the largest source of gain in that instance was technological progress offset by a slight fall in technical efficiency.
    Keywords: Productivity; technical and scale efficiency; technological progress; Malmquist indices; universities.
  11. By: Robert H. McGuckin (The Conference Board); Bart van Ark (The Conference Board and University of Groningen); Sean M. Dougherty (OECD [formerly with The Conference Board]); Robert Inklaar (The Conference Board and University of Groningen)
    Abstract: Report on US National Science Foundation Grant SRS/SES 00-99594
    Keywords: R&D, research, development, innovation, BERD
    JEL: O30 O32 O47 O57
    Date: 2006–05
  12. By: Czarnitzki, Dirk; Kraft, Kornelius
    Abstract: We estimate the effects of R&D on firms' credit ratings and on financial distress. The main purpose is the comparison of firms in Western Germany and Eastern Germany as a transitional economy. Innovative activity has a positive impact on firm value proxied by ratings in Western Germany, but a negative impact in Eastern Germany. We also consider future financial distress, and find that R&D in Eastern German firms leads to higher default risk, in contrast to Western Germany. There, R&D enhances future performance. This result is highly politically relevant, since the high level of subsidies present in Eastern Germany may be subject to misallocation.
    Keywords: Transitional Economy, Credit Rating, Bankruptcy, Innovation, Policy
    JEL: L33 O12 O31 O38 P27
    Date: 2006
  13. By: Koichi Futagami (Graduate School of Economics, Osaka University); Tatsuro Iwaisako (Faculty of Economics, Ritsumeikan University); Hitoshi Tanaka (Graduate School of Economics, Osaka University)
    Abstract: This paper examines the long-run effects of intellectual property rights (IPR) protection and industrial policies on innovation and technology transfer using a North-South quality ladder model where licensing is the main mode of technology transfer to developing countries. We show that the governments of developing countries can promote innovation and technology transfer by strengthening IPR protection, which is enforced by restricting the imitation of products. Moreover, the results also imply that subsidies on the cost of license negotiation can promote innovation and technology transfer, whereas subsidies on the cost of R&D have no effect.
    Keywords: Licensing; Imitation; Innovation; Intellectual property rights;
    JEL: F43 O33 O34
    Date: 2007–02
  14. By: Sean M. Dougherty (OECD); Robert Inklaar (University of Groningen); Robert H. McGuckin (The Conference Board); Bart van Ark (The Conference Board and University of Groningen)
    Abstract: Purchasing power parities (PPPs) for R&D expenditure in 19 manufacturing industries are developed for France, Germany, Japan, the Netherlands and the United Kingdom relative to the United States for the years 1997 and 1987. These PPPs are based on R&D input prices for specific cost categories and differ substantially from current practice of comparing R&D expenditure using GDP PPPs and deflators. After taking into account differences in the relative price of R&D labor and materials, separate PPPs for other R&D cost categories are less essential, and a simpler version using GDP PPPs for these other categories should suffice. Our preferred PPPs are used to compare international R&D costs and intensity. The results suggest that the efforts devoted to R&D in each country are more similar across countries than is apparent using the nominal R&D intensities that are currently the norm.
    Keywords: R&D, PPP, price indexes, research, development, innovation
    JEL: C43 L16 L60 O32 O47
    Date: 2003–07
  15. By: Sofka, Wolfgang
    Abstract: The innovation activities of foreign subsidiaries have been identified as an important source of competitive advantage for multinational corporations. The success of these engagements depends heavily on tapping host country pools of localized expertise. To achieve this foreign subsidiaries have to overcome cultural and social barriers (liability of foreignness). We derive potential stumbling blocks in the innovation process theoretically and argue that these materialize as neglected projects, cancellations or budget overruns. We test these hypotheses empirically for more than 1,000 firms with innovation activities in Germany from various sectors. We find that foreign-controlled firms are not challenged by liability of foreignness at the project mobilization stage. The lack of local embeddedness becomes more binding as projects have to be prioritized and managed which we identify as more frequent mistakes and delays. We argue that this is the result of shared practices within the multinational firm that do not readily fit into the local context. Finally, we derive management recommendations how foreign innovation engagements can achieve similar levels of effectiveness and efficiency as host country competitors.
    Keywords: Liability of foreignness, offshoring R&D, internationalization, innovation management
    JEL: D83 F23 O31 O32
    Date: 2006
  16. By: Basant, R. & Commander, S. & Harrison, R. & Menezes Filho, N. A.
    Date: 2007–10
  17. By: Jill Johnes
    Abstract: This study uses data envelopment analysis (DEA) and a distance function approach to derive Malmquist productivity indexes for 113 English higher education institutions (HEIs) over the period 1996/97 to 2002/03. The analysis finds that over the period of the study HEIs have experienced an annual average increase in Malmquist productivity of 1.5%. On investigating the components of this productivity change, however, it becomes apparent that HEIs have enjoyed an annual average of 2.3% increase in technology combined with a decrease in technical efficiency of -0.8%. The finding of the importance of technology change (relative to technical efficiency change) in the Malmquist productivity indexes for HEIs is in line with previous studies (Flegg et al 2004; Worthington & Lee 2005), but the finding of negative technical efficiency change is new. Further examination of the indexes reveals differences between the subgroups of HEIs in England. Pre-1992 HEIs have experienced much lower Malmquist productivity (and technology change) than post-1992 and colleges which belong to the Standing Conference of Principals Ltd (SCOP). Further examination reveals that, for pre- and post-1992 institutions, technology change may be related positively to change in the ratio of students to staff, while technical efficiency change may be negatively related to change in the student staff ratio. Thus rapid changes in the higher education sector may have a positive effect on the technology of production but this may be achieved at the cost of lower technical efficiency.
    Keywords: higher education; efficiency measurement; data envelopment analysis; distance functions; productivity change; Malmquist index
    Date: 2006
  18. By: Louis Phaneuf; Nooman Rebei
    Abstract: This paper develops and estimates a dynamic general equilibrium model that realistically accounts for an input-output linkage between firms operating at different stages of processing. Firms face technological change which is specific to their processing stage and charge new prices according to stage-specific Calvo-probabilities. Only a fixed fraction of households have an opportunity to adjust nominal wages to new information each period. Intermediate-stage technology shocks account for the bulk of output variability at business cycle frequencies, while final-stage technology shocks do not explain much. Although technology shocks drive the business cycle, the model predicts weakly procyclical real wages, and a near-zero correlation between return to working and hours worked. Furthermore, the model has rich implications for the dynamics of business cycles.
    Keywords: Business fluctuations and cycles; Economic models
    JEL: E32
    Date: 2007
  19. By: Jill Johnes; Steve Bradley; Alan Little
    Abstract: This study uses data for more than 500 Further Education providers in England to investigate the level of efficiency and change in productivity over the period 1999-2003. Using Data Envelopment Analysis we find that the mean provider efficiency varies between 82% and 86% over the period. Productivity change over the period was nearly 17%, and this was comprised of 10% technology change and 7% technical efficiency change. However, bootstrapping procedures show that the middle performing providers cannot be distinguished on the basis of their efficiency, but there are significant differences between the best and worst performing providers. A multivariate analysis is therefore performed, which shows that student-related variables, such as gender, ethnic and age mix are more important than staff-related variables in determining efficiency levels. The local unemployment rate also has an effect on provider efficiency.
    Keywords: Further Education, Efficiency, Data Envelopment Analysis, productivity change
    Date: 2006
  20. By: Mosahid Khan; Kul B. Luintel
    Abstract: We estimate domestic productivity relationships for a sample of 16 OECD countries through probably the most general specification yet. We identify ten key determinants of productivity - all derived from different theoretical models. Our specification may address the potential problem of omitted variables. The issues of cross-country heterogeneity and endogeneity are addressed. The sources of knowledge appear robust in driving productivity; however, other determinants postulated by different theoretical models are also significant. The productivity relationships are heterogeneous across OECD countries implying that country-specific factors may play an important role in domestic productivity policy. <P>Quelle est la robustesse de la relation entre sources de connaissances et productivité ? <BR>Nous estimons des relations concernant la productivité intérieure pour un échantillon de 16 pays de l'OCDE, en utilisant une spécification qui est probablement la plus générale ayant été employée jusqu'ici. Nous identifions dix déterminants essentiels de la productivité, tous obtenus à partir de modèles théoriques différents. Notre spécification peut permettre de remédier au problème potentiel soulevé par l'omission de certaines variables. Les problèmes d'hétérogénéité entre pays et d'endogénéité sont également traités. La relation de détermination existant entre les sources de connaissances et la productivité semble robuste, mais d'autres déterminants retenus par différents modèles théoriques jouent également un rôle significatif. Les relations concernant la productivité sont hétérogènes entre les pays de l'OCDE, ce qui tend à indiquer que des facteurs nationaux spécifiques peuvent jouer un rôle important dans la politique relative à la productivité intérieure.
    Keywords: productivité multifactorielle, dynamic heterogeneity, methods of moments
    JEL: C15 F12 F2 O3 O4
    Date: 2006–07–28
  21. By: Calvano, Emilio (GREMAQ, Université de Toulouse 1 and Dept. of Economics, Stockholm School of Economics)
    Abstract: "Destructive Creation" is the deliberate introduction of new, perhaps improved generations of durable goods that destroy, directly or indirectly, the usage value of units previously sold inducing consumers to repeat their purchase. This paper discusses this practice by a single seller in an infinite-horizon, discrete time model with heterogeneous consumers. Despite the lack of commitment power over future prices and introduction policies, this practice restores partially or totally market power even though consumers anticipate opportunistic behavior. However, the monopoly resorts "too much" to this mechanism from an ex-ante, profit maximizing perspective. High prices in earlier periods allow the seller to commit to defer innovation and therefore to maintain buyers' confidence over "durability". The paper characterizes the equilibrium properties of the resulting innovation cycles such as existence, uniqueness and asymptotic stability and discusses potential regulatory remedies in those instances where destructive creation generates economic inefficiencies. This theory applies, among others, to markets characterized by network externalities, compatibility issues, standard setting, social consumption and signal provision and may help explain many restrictive aftermarket practices as well as excessive add-on pricing without relying on any leverage hypothesis.
    Keywords: durable goods; aftermarkets; planned obsolescence;
    JEL: D42 L12 L15 O31
    Date: 2006–12–22

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