nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2008‒09‒29
four papers chosen by
Rui Baptista
Technical University of Lisbon

  1. Out of equilibrium profit and innovation By Antonelli Cristiano; Scellato Giuseppe
  2. When Market Competition Benefits Firms By Junichiro Ishida; Toshihiro Matsumura; Noriaki Matsushima
  3. Pecuniary Knowledge Externalities: Evidence from European Regions By Antonelli Cristiano; Patrucco Pierpaolo; Quatraro Francesco
  4. Innovation on Demand: Can Public Procurement Drive Market Success of Innovations By Aschhoff, Birgit; Sofka, Wolfgang

  1. By: Antonelli Cristiano (University of Turin); Scellato Giuseppe
    Abstract: Innovation is the result of intentional decision-making that takes place in out-of-equilibrium conditions. The farther is profitability from the average and the deeper the out-of-equilibrium conditions. The farther away is the firm from equilibrium and the stronger the likelihood for innovation to take place. The hypothesis of a U-relationship between levels of profitability and innovative activity, as measured by the rates of increase of total factor productivity, is articulated and tested. The evidence of a large sample of 7000 Italian firms in the years 1996-2005 confirms that a strong causal relation holds between the quadratic specification of profitability and the growth rates of total factor productivity. The results are robust to different approaches to evaluate productivity growth rates.
    Date: 2008–04
  2. By: Junichiro Ishida (Osaka School of International Public Policy (OSIPP),Osaka University); Toshihiro Matsumura (Institute of Social Science, University of Tokyo); Noriaki Matsushima (Graduate School of Business Administration, Kobe University)
    Abstract: A conventional wisdom in economics posits that more intense market competition, measured in almost any way, reduces firm profit. In this paper, we challenge this conventional wisdom in a simple Cournot model with strategic R&D investments wherein an efficient firm (dominant firm) competes against less efficient firms (fringe firms). We find that an increase in the number of fringe firms can stimulate R&D by the dominant firm, while it always reduces R&D by each of the fringe firms. More importantly, this force can be strong enough to compensate for the loss that arises from more intense market competition: the dominant firm's profit may indeed increase with the number of fringe firms, quite contrary to the conventional wisdom. An implication of this result is far-reaching, as it gives dominant firms to help, rather than harm, fringe competitors. We relate this implication to a practice know as open knowledge disclosure, especially Ford's strategy of disclosing its know-how publicly and extensively at the beginning of the 20th century.
    Keywords: competition, oligopoly, R&D, heterogeneity, entry
    Date: 2008–09
  3. By: Antonelli Cristiano (University of Turin); Patrucco Pierpaolo (University of Turin); Quatraro Francesco (University of Turin)
    Abstract: The paper investigates the effects of agglomeration and specialization of technological activities on regional productivity growth,applying the notion of pecuniary knowledge externalities. The latter are indirect interdependencies between firms mediated by the price system. Pecuniary knowledge externalities enable to appreciate both the positive and negative effects associated with the regional concentration of knowledge generating activities. Our analysis leads to specify the hypothesis of an inverted U-shaped relationship between the agglomeration of innovation activities and productivity growth. The empirical investigation, based upon 138 European regions in the years 1996 through 2003, supports the hypothesis that agglomeration yields diminishing positive net effects beyond a maximum. The homogeneity of knowledge generating activities however reduces absorption costs and hence rises the net benefits at each agglomeration level.
    Date: 2008–03
  4. By: Aschhoff, Birgit; Sofka, Wolfgang
    Abstract: Public procurement has been at the centre of recent discussions on innovation policy on both European and national levels (e.g., Aho-Report, Barcelona Strategy). It has a large potential to stimulate innovation since it accounts for 16% of combined EU-15 GDP. We embed public procurement for innovation into the broader framework of public policies to stimulate innovation: regulations, R&D subsidies and knowledge infrastructure (i.e. basic research at universities). We synthesize the characteristics of all four instruments based on existing literature and quantitatively compare their effects on innovation success. Our empirical investigation rests upon a survey of more than 1,100 innovative firms in Germany. Our survey puts us in the position to trace all sources of valuable innovation impulses, namely public customers, law and regulations, universities and public funding for R&D. We relate these sources back to innovation success. We find that (non-defense related) public procurement and knowledge spillovers from universities propel innovation success equally. In a second step, we explore whether these effects vary across firms (e.g. size, location, industry). The benefits of university knowledge apply uniformly to all firms. However, public procurement is especially effective for smaller firms in regions under economic stress as well as in distributive and technological services. Based on these findings targeted policy recommendations can be developed.
    Keywords: Innovation policy, public procurement, comparison of instruments, innovation success
    JEL: C34 H32 O38
    Date: 2008

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