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on Technology and Industrial Dynamics |
| By: | Niels Bosma (Urban and Regional research Centre Utrecht (URU), Utrecht University, Utrecht, The Netherlands); Erik Stam (Tjalling Koopmans Institute, Utrecht School of Economics, Utrecht University, Utrecht, The Netherlands; Centre for Technology Management, University of Cambridge, Cambridge, United Kingdom; Scientific Council for Government Policy (WRR), The Hague, The Netherlands; Max Planck Institute of Economics - Entrepreneurship, Growth and Public Policy group, Jena, Germany); Veronique Schutjens (Urban and Regional research Centre Utrecht (URU), Utrecht University, Utrecht, The Netherlands) |
| Abstract: | Do firm entry and exit improve the competitiveness of regions? If so, is this a universal mechanism or is it contingent on the type of industry or region in which creative destruction takes place? This paper analyses the effect of firm entry and exit on the competitiveness of regions, measured by total factor productivity (TFP) growth. Based on a study across 40 regions in the Netherlands over the period 1988-2002, we find that firm entry is related to productivity growth in services, but not in manufacturing. The positive impact found in services does not necessarily imply that new firms are more efficient than incumbent firms; high degrees of creative destruction may also improve the efficiency of incumbent firms. We also find that the impact of firm dynamics on regional productivity in services is higher in regions exhibiting diverse but related economic activities. |
| Keywords: | firm entry, firm exit, turbulence, regional competitiveness, total factor productivity |
| JEL: | L10 M13 O18 R11 |
| Date: | 2009–01–12 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2009-003&r=tid |
| By: | Erik Stam (Tjalling Koopmans Institute, Utrecht School of Economics, Utrecht University, Utrecht, The Netherlands; Centre for Technology Management, University of Cambridge, Cambridge, United Kingdom; Scientific Council for Government Policy (WRR), The Hague, The Netherlands; Max Planck Institute of Economics - Entrepreneurship, Growth and Public Policy group, Jena, Germany); Karl Wennberg (Centre for Entrepreneurship and Business Creation, Stockholm School of Economics, Stockholm, Sweden.) |
| Abstract: | Innovative start-ups are an important driver of economic growth. This article presents empirical evidence on the effects of R&D on new product development, inter-firm alliances and employment growth during the early life course of firms. We use a dataset that contains a sample of new firms that is representative for the whole population of start-ups. This dataset covers the first six years of the life course of firms. R&D reveals to play several roles during the early life course of high tech as well as high growth firms. The effect of initial R&D on high tech firm growth runs via increasing levels of inter-firm alliances in the first post-entry years. R&D efforts enable the exploitation of external knowledge. Initial R&D also stimulates new product development later on in the life course of high tech firms, but this does not seem to affect firm growth. R&D does not affect the growth rate of new low tech firms, which seems to be driven mainly by the growth ambitions of the founding entrepreneur. The results show that R&D matters for a limited but important set of new high tech and high growth firms, which are key in innovation and entrepreneurship policies. |
| Keywords: | New Firms, Innovation, R&D, firm growth, alliances, product development |
| JEL: | D21 L23 L25 L26 M13 |
| Date: | 2009–01–12 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2009-004&r=tid |
| By: | Cellini, Roberto; Lambertini, Luca; Sterlacchini, Alessandro |
| Abstract: | We study the product and process innovation choice of firms in which a managerial incentive à la Vickers (1985) is present. Taking a two-stage dynamic game approach, we show that managerial firms are led to over-invest in process innovation, as compared to standard profit-maximising firms, while they under-invest in product innovation. The reason is that process innovation allows to decrease cost, and this is consistent with a convenient increase in the production level. On the opposite, product innovation allows increasing price, which is in contrast with the taste for output expansion embodied in the objective function of firms run by managers. Preliminary empirical evidence on Italian companies suggests that in fact the managerial nature of firm associates with significantly smaller efforts in product innovation while the effect on process innovation is positive but non-significant. |
| Keywords: | Process innovation; Product innovation; R&D; Managerial incentive |
| JEL: | O32 O31 D43 C72 |
| Date: | 2009–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:12935&r=tid |
| By: | Wiberg, Daniel (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology) |
| Abstract: | Economic theory tells us that abnormal industry and firm profits will not persist for any length of time. Any industry or firm making profits in excess of the normal rate of return will attract entrants and this competitive process will erode profits. A substantial amount of research however, has found evidence of persistent profits above the norm. Barriers to entry and exit are often put forward as explanation to this anomaly. In the absence of, or with low barriers to entry and exit, this reasoning provides little help in explaining why these above-norm profits arise and persist. In this paper the association between profits and the systematic search for knowledge is investigated. The results show that by investing in research and development firms may succeed in creating products or services that are preferred by the market and/or find a more cost efficient method of production. Corporations that systematically invest in research and development are, by doing so, offsetting the erosion of profits and thereby have profits which persistently diverge from the competitive return. It is argued that even in the absence of significant barriers to entry and exit profits may persist. This can be accredited to a systematic search for knowledge through research and development. |
| Keywords: | Persistence of profits; research and development; industrial organization |
| JEL: | L00 L22 L25 O32 |
| Date: | 2009–01–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0161&r=tid |