nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2012‒03‒28
six papers chosen by
Rui Baptista
Technical University of Lisbon

  1. The Relationship between Market Structure and Innovation in Industry Equilibrium: A Case Study of the Global Automobile Industry By Hashmi, Aamir Rafique; Van Biesebroeck, Johannes
  2. Product-market competition, corporate governance and innovation: evidence on US-listed firms By Hashem, Nawar; Ugur, Mehmet
  3. Innovation Beyond Patents: Technological Complexity as a Protection against Imitation By Henry, Emeric; Ruiz-Aliseda, Francisco
  4. Complementary assets, patent thickets and hold-up threats: Do transaction costs undermine investments in innovation? By Schwiebacher, Franz
  5. The Effects of Internationalization on Innovation: Firm-Level Evidence for Transition Economies By Martijn A. Boermans; Hein Roelfsema
  6. Innovation Strategies and Employment in Latin American Firms By Gustavo Crespi; Pluvia Zuñiga

  1. By: Hashmi, Aamir Rafique; Van Biesebroeck, Johannes
    Abstract: We first estimate a dynamic game for the global automobile industry and then compute a Markov Perfect equilibrium to study the equilibrium relationship between market structure and innovation. The key state variable in the model is the efficiency level of each firm and the market structure is characterized by the vector of efficiency levels across all firms. Efficiency is estimated to be stochastically increasing in the dynamic control--innovation--which is proxied by patenting behavior. Equilibrium innovation is a function of all state variables in the industry and the cost of R&D which includes a privately observed cost shock. We find that it exhibits the following patterns: 1) innovation by the industry leader is decreasing in the efficiency of other firms; 2) innovation is decreasing in the efficiency dispersion; 3) innovation is more concentrated that efficiency; 4) innovation is declining in the number of active firms; 5) the innovation gap between the leader and other firms increases with competition.
    Keywords: Competition; Dynamic game; Schumpeter
    JEL: C73 L13 L62 O31
    Date: 2012–01
  2. By: Hashem, Nawar; Ugur, Mehmet
    Abstract: The debate on competition and innovation has produced a wide range of theoretical and empirical findings. Recently, corporate governance quality has emerged as an additional factor that may complement or substitute for competition’s effect on innovation. We aim to contribute to the debate by investigating whether product-market competition and corporate governance quality affect firm-level innovation, utilising a dataset for 1,400 non-financial US-listed companies. Using two-way cluster-robust estimation, we report several findings. First, the relationship between industry-level competition and input as well as output measures of innovation is non-linear. Secondly, the non-linear relationship is of an inverted-U shape with respect to input measures of innovation, but the relationship has a U-shape when output measure of innovation is estimated. Third, corporate governance indicators such as anti-takeover defences and insider control tend to have a negative effect on input measures of innovation but their effect is positive with respect to the output measure. Finally, when interacted with market concentration, anti-takeover defences and insider control emerge as substitutes, leading to sign reversals in the relationship between competition and innovation. The results are obtained by using two-way cluster-robust estimation that controls for dependence within company/year and industry/year clusters, but they are robust to different estimation methods including fixed-effect and Fama-Macbeth procedure.
    Keywords: Innovation, competition, corporate governance, two-way cluster-robust estimation
    JEL: D21 G3 O31 L1
    Date: 2011–12
  3. By: Henry, Emeric; Ruiz-Aliseda, Francisco
    Abstract: A large portion of innovators do not patent their inventions. This is a relative puzzle since innovators are often perceived to be at the mercy of imitators in the absence of legal protection. In practice, innovators however invest actively in making their products technologically hard to reverse-engineer. We consider the dynamics of imitation and investment in such protection technologies, both by the innovator and by imitators. We show that it can justify high level of profits beyond patents and can account for the differences across sectors in the propensity to patent. Surprisingly, in general, the protection technologies that yield the highest profits for the innovator are expensive and do not protect well. Our model also allows us to draw conclusions on the dynamics of mobility of researchers in innovative industries.
    Keywords: complexity; dynamic games; imitation; innovation
    JEL: C73 O31 O32 O33 O34
    Date: 2012–03
  4. By: Schwiebacher, Franz
    Abstract: Innovation is commercialization of technology. Imperfections in markets for technology should leave marks on physical investments for innovation. Two types of transaction costs could affect innovative investments: royality stacking and hold-up threats. Backward references in firm's patent portfolio indicate potential technology suppliers. I find a negative effect of ownership fragmentation on investments related to innovation for firms with small patent portfolios. Hold-up threats are credible when upstream patentees have less specific capital sunk than innovating firms. Differences in fixed capital stocks between downstream firms and upstream patentees negatively affect investments in innovation for firms with large patent portfolios. These effects are specific to investments in innovation. There are no comparable effects on investments in R&D or residual physical investments. The effects of patent thickets on innovation are thus not uniform. They depend on the characteristics of the downstream firm. --
    Keywords: Market for Technology,Complementary Assets,Transaction Costs,Patent Thickets
    JEL: O31 O34
    Date: 2012
  5. By: Martijn A. Boermans; Hein Roelfsema
    Abstract: It is well-documented that international enterprises are more productive. Only few studies have explored the effect of internationalization on productivity and innovation at the firm-level. Using propensity score matching we analyze the causal effects of internationalization on innovation in 10 transition economies. We distinguish between three types of internationalization: exporting, FDI, and international outsourcing. We find that internationalization causes higher levels of innovation. More specifically, we show that (i) exporting results in more R&D, higher sales from product innovation, and an increase in the number of international patents (ii) outward FDI increases R&D and international patents (iii) international outsourcing leads to higher sales from product innovation. The paper provides empirical support to the theoretical literature on heterogeneous firms in international trade that argues that middle income countries gain from trade liberalization through increases in firm productivity and innovative capabilities.
    Keywords: Firm heterogeneity, Internationalization, Innovation, Transition economies
    JEL: D22 F14 F23 O12
    Date: 2012–03
  6. By: Gustavo Crespi; Pluvia Zuñiga
    Abstract: This study examines the impact of innovation strategies on employment growth in four Latin American countries (Argentina, Chile, Costa Rica, and Uruguay) using micro-data for manufacturing firms from innovation surveys. Building on the model proposed by Harrison et al. (2008), we relate employment to three innovation strategies: make only (R&D), buy only (external R&D, licensing of patents and know-how, technical assistance, and other external innovation activities) and make and buy (mixed strategy). Firms that conduct in-house innovation activities ("make only") have the greatest impact on employment; the "make and buy" strategy comes in second. Similar results are found for small firms. These results highlight the importance of fostering in-house technological efforts not only for innovation per se, but also to promote growth in firm employment. The impact of "make only" strategies is greater in high-tech industries, whereas "make only" and "make and buy" have a similar impact on employment in low-tech industries. Finally, the study provides evidence of the mechanisms through which innovation strategies affect employment. The findings show that innovation strategies enhance technological innovation, but their impact differs between product and process innovation. Product innovation is mainly motivated by in-house technology investments, followed by mixed strategies, whereas process innovation is basically driven by "buy" strategies.
    Keywords: Economics :: Productivity, Economics :: Economic Development & Growth, Private Sector :: SME, Science & Technology :: Research & Development, Science & Technology :: New Technologies, innovation, employment, external R&D, Latin America, innovation surveys, CTI, IFD, RG-K1164
    JEL: O12 O31 O33 O40 J21 O14
    Date: 2012–03

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