nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2010‒11‒06
six papers chosen by
Rui Baptista
Technical University of Lisbon

  1. Competition and Innovation: ICT- and non-ICT-enabled Product and Process Innovations By Nepelski, Daniel
  2. Learning and innovation under changing market conditions: the auto parts industry in Mexico. By Vallejo Carlos, Bertha
  3. Technology Upgrading, Exporting and Heterogeneous Firms By Ferguson, Shon
  4. Optimal Patentability Requirements with Fragmented Property Rights By Vincenzo Denicolò; Christine Halmenschlager
  5. Entry, Exit, Firm Dynamics, and Aggregate Fluctuations By Gian Luca Clementi; Dino Palazzo
  6. R&D, Innovation and Liquidity Constraints By Maria Luisa Mancusi; Andrea Vezzulli

  1. By: Nepelski, Daniel
    Abstract: The reason for contradictory predictions of the models studying the impact of competi¬tion on innovation is the varying assumptions with respect to competition or innovation type. Thus, we study how the impact of competition changes with different types of innova¬tive Output. In particular, we distinguish between non-ICT - and ICT-enabled product and process innovations. To allow for such flexibility, we apply Bayesian inference techniques and use direct measures of innovative that control for the heterogeneity of innovation Output. Our analysis provides evidence that supports the hypothesis that the effect of market com¬petition on innovation is not alike for all types of innovation. We observe an inverse U-shape relationship between competition and non-ICT-enabled and a clear U-shape dependency for ICT-enabled innovations. However, the results become considerably weaker, once industry effects are taken into account. Thus, although the impact of competition on innovation varies with the type of innovation, other factors seem to have a stronger impact on the incentives to innovate.
    Keywords: Competition, innovation, Information and communication technologies
    JEL: L20 L22 O31
    Date: 2010–06–01
  2. By: Vallejo Carlos, Bertha (Maastricht University)
    Date: 2010
  3. By: Ferguson, Shon (Dept. of Economics, Stockholm University)
    Abstract: Empirical evidence shows that R&D spending is highly correlated with firm productivity, highly concentrated among large firms, and responsive to trade liberalization. This paper develops a model of product upgrading with heterogeneous firms that captures these characteristics by allowing firms to choose their optimal level of fixed cost spending from a continuum. The endogenous component of fixed costs is assumed to represent R&D or product development that is spent once but reaps demand benefits over all the markets the firm serves. This mechanism encourages firms to export and capture economies of scale in fixed cost spending. The model makes two new predictions. The first prediction is that exporters upgrade while domestic firms cut costs when trade liberalizes. The second prediction is that the selection effect of trade liberalization is weaker in industries characterized by intense upgrading competition between firms.
    Keywords: International Trade; Upgrading; Trade Liberalization
    JEL: F10 F12 O30 O31
    Date: 2010–10–26
  4. By: Vincenzo Denicolò (Università di Bologna); Christine Halmenschlager (University Paris II)
    Abstract: We study the effect of the fragmentation of intellectual property rights on optimal patent design. The major finding is that when several complementary innovative components must be assembled to operate a new technology, the patentability requirements should be stronger than in the case of stand-alone innovation. This reduces the fragmentation of intellectual property, which is socially costly. However, to preserve the incentives to innovate, if a patent is granted the strength of protection should be generally higher than in the stand-alone case.
    Keywords: Intellectual Property Rights, Fragmentation, Patent Requirements
    JEL: O3 O34
    Date: 2010–10
  5. By: Gian Luca Clementi (Department of Economics, Stern School of Business, New York University and RCEA); Dino Palazzo (Department of Finance and Economics, Boston University School of Management)
    Abstract: How important are firm entry and exit in shaping aggregate dynamics? We address this question by characterizing the equilibrium allocation in Hopenhayn (1992)’s model of equilibrium industry dynamics, amended to allow for investment in physical capital and aggregate fluctuations. We find that entry and exit propagate the effects of aggregate shocks. In turn, this results in greater persistence and unconditional variation of aggregate time-series. In the aftermath of a positive productivity shock, the number of entrants increases. The new firms are smaller and less productive than the incumbents, as in the data. As the common productivity component reverts to its unconditional mean, the new entrants that survive become progressively more productive, keeping aggregate efficiency higher than in a scenario without entry or exit. We also find that both the mean and variance of the cross-sectional distribution of firm–level productivity are counter–cyclical, in spite of the assumption that innovations to firm–level productivity are i.i.d. and orthogonal to aggregate shocks. This happens because of selection: the idiosyncratic productivity of the marginal entrant is lower in expansion than during recessions. Since idiosyncratic productivity is mean–reverting, mean and variance of the distribution of productivity growth are pro–cyclical.
    Keywords: Selection, Propagation, Persistence, Survival, Reallocation
    JEL: D21 D92 E32 L11
    Date: 2010–01
  6. By: Maria Luisa Mancusi (KITeS, Bocconi University, Milan, Italy); Andrea Vezzulli (Department of Management, University of Bologna, Bologna, Italy and KITeS, Bocconi University, Milan, Italy)
    Abstract: We study the effect of financing constraints on the decision to do R&D and on the level of R&D investment using survey data and complete financial accounting data on a large number of Italian manufacturing SMEs from 2001 to 2003. We use a direct indicator of credit constraints and employ an econometric approach allowing for the existence of binding financing constraints to be endogenously determined. We find that there is a significantly negative effect on the probability to set up R&D activities due to the presence of financing constraints, ceteris paribus. We also find that ignoring the endogeneity of the financing constraints indicator and the sample selection originating from firms not interested in doing R&D induces a bias in the estimated effect, which turns out to be positive and significant. We find the same result when studying the effect of liquidity constraints on R&D spending and are able to show that its reduction of liquidity constraints is largely to be associated with the reduction in the likelihood to do R&D (the R&D participation decision), rather than with a reduced level of investment. Finally, but importantly, firms that are both young and small appear to have additional difficulties in obtaining financing - even after controlling for both size and age - and disply a higher probability of being subject to credit constraints, ceteris paribus.
    Keywords: R&D, financing constraints, bivariate probit, IV Tobit
    JEL: G32 C35 O31
    Date: 2010–05

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