nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2010‒09‒18
two papers chosen by
Rui Baptista
Technical University of Lisbon

  1. Innovation Strategy and Firm Performance What is the long-run impact of persistent R&D? By Börje, Johansson; Hans, Lööf
  2. Trade, Firm selection, and innovation: the competition channel By Giammario Impullitti; Omar Licandro

  1. By: Börje, Johansson (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Hans, Lööf (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: There are systematic long-run differences in the performance of firms explained by the R&D-strategy that each firm employs. Controlling for unobservable heterogeneity, past performance and other firm characteristics, this paper shows that labour productivity is, on average, 13 percent higher among firms with persistent R&D commitment and 9 percent higher among firms which make occasional R&D efforts when compared with non-R&D-firms. Furthermore, firms which employ a strategy with persistent R&D efforts are rewarded with a productivity growth rate that on average is about 2 percent higher than for other firms. The results are similar when firm performance is measured as total sales or exports per labor input.
    Keywords: R&D; Innovation-strategy; productivity; export; dynamic panel-data
    JEL: C23 O31 O32
    Date: 2010–09–07
  2. By: Giammario Impullitti; Omar Licandro
    Abstract: The availability of rich firm-level data sets has recently led researchers to uncover new evidence on the effects of trade liberalization. First, trade openness forces the least productive firms to exit the market. Secondly, it induces surviving firms to increase their innovation efforts and thirdly, it increases the degree of product market competition. In this paper we propose a model aimed at providing a coherent interpretation of these findings. We introducing firm heterogeneity into an innovation-driven growth model, where incumbent firms operating in oligopolistic industries perform cost-reducing innovations. In this framework, trade liberalization leads to higher product market competition, lower markups and higher quantity produced. These changes in markups and quantities, in turn, promote innovation and productivity growth through a direct competition effect, based on the increase in the size of the market, and a selection effect, produced by the reallocation of resources towards more productive firms. Calibrated to match US aggregate and firm-level statistics, the model predicts that a 10 percent reduction in variable trade costs reduces markups by 1:15 percent, firm surviving probabilities by 1 percent, and induces an increase in productivity growth of about 13 percent. More than 90 percent of the trade-induced growth increase can be attributed to the selection effect.
    Keywords: International Trade, Trade Liberalization, Heterogeneous Firms, Endogenous Market Structure, Productivity Growth, Endogenous Growth.
    JEL: F12 F13 O31 O41
    Date: 2010–09–01

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