nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2013‒11‒14
seven papers chosen by
Fulvio Castellacci
Norwegian Institute of International Affairs (NUPI)

  1. Industrial diversity and innovation spillovers: dynamic innovation and adoption By Philip Amison; David Bailey
  2. Innovation and trade policy coordination: the role of firm heterogeneity By Navas, Antonio; Sala, Davide
  3. Towards DUI Regional Innovation Systems By Phil Cooke
  4. Money for novelty: The role of venture capital investments for innovation in young technology-based firms By Heger, Diana
  5. Regulatory Versus Natural Endogenous Sunk Costs: Observational Equivalence In Rationalizing Lower Bounds On Industry Concentration By Pham Hoang Van; David D. VanHoose
  6. Mergers and Product Quality: Evidence from the Airline Industry By Chen, Yongmin; Gayle, Philip
  7. Strategic Approaches of CO2 Emissions: The Cases of the Cement Industry and Chemical Industry By Arjaliès , Diane-Laure; Goubet , Cécile; Ponssard , Jean Pierre

  1. By: Philip Amison; David Bailey
    Abstract: This paper explores the links between open innovation and the emergence of a phoenix industry – the low carbon vehicles sector - in the UK’s traditional automotive heartland, focusing on the West Midlands region. It highlights three major factors in driving the development of this ‘phoenix’ industry at a regional level. Firstly, it highlights the role of ‘open innovation’ approaches in driving the sector, for example noting that smaller firms can sometimes innovate more quickly/more cheaply than the major auto firms; the increased interaction across technologies, up and down supply chains and between larger and smaller firms. In so doing, it also notes the role of hybrid firms providing services, plus prototyping/low volume manufacturing (largely in niche vehicles) and the transferability of these competences across industrial sectors. Secondly, it points to the role of historic (and relatively immobile) investments in the region, for example the past/ongoing importance of established mass producers, the depth of skills and experience in suppliers and in the local workforce; and cross-overs with the overlapping motorsport cluster. Finally, it stresses the role of public-private sector cooperation, such as: the establishment of the Automotive Council UK and its work in developing technology roadmaps, informing regulation, and supporting development of the UK supply chain (a type of industrial policy as a discovery process and in line with ‘smart specialisation’ principles); the R&D funding programmes developed with industry input; and the earlier role of the Regional Development Agency. Overall, it points to the possibilities of building smart specialisation strategies and industrial policies which are aligned with ‘high-road strategies’.
    Keywords: Clusters, ecological innovation, high road strategy, industrial policy, innovation policy, new technologies, post-industrialisation
    JEL: O3 O31 O32 O33
    Date: 2013–11
  2. By: Navas, Antonio (Department of Economics); Sala, Davide (Department of Business and Economics)
    Abstract: Recent studies have concluded that R&D grants can induce firms to export and that exporting and innovating can be complementary activities at the firm level. Yet the trade literature has paid little attention to the scope of innovation policy as a stimulus to both trade and innovation. To investigate this question we rely on a general work-horse model of trade and firm heterogeneity with firm investments in R&D activities. The multiplicity of equilibria together with the interplay of innovation and trade policies uncover novel results. In particular, we show that the effects of either policy depend on the degree of protectionism in a country. Therefore, countries can respond differently to the same policy, and similarly to different policies. In such a context, different governments may face different degrees of freedom regarding how to achieve a given target. This finding leads us to discuss the issue of policy coordination.
    Keywords: Innovation; innovation policy; heterogeneous firms; technology adoption; trade policy
    JEL: F12 F13 F15 O32
    Date: 2013–11–04
  3. By: Phil Cooke
    Abstract: This paper marks a departure in seeking to develop the conceptual and practical apparatus of a regional innovation system (RIS) for science & technology-disadvantaged regions. It is empirically based and builds on insights about the limitations of STI (The Science-Technology-Innovation Approach, which is Linear, Specialist, Exclusive, Explicit/Codified, Global) and the strengths of DUI (The Doing-Using-Interacting Approach, which is Interactive, Diversified, Inclusive, Implicit, Regional/Local). DUI is highly compatible with Schumpeterian understanding that the core process of innovation is 'knowledge recombination'. From an evolutionary economic geography perspective, which is taken in the paper, this raises interesting issues for the economics of knowledge. First it underlines the need to pay serious attention to questions of the 'proximity' imperative, suggesting not that knowledge is easily appropriable for ('open') innovation but that it may be excessively difficult to identify because it lies hidden in possibly neighbouring - but different - industries and firms. Thus, second, it makes the notion of 'knowledge spillovers' problematic because the spillovers may not be forthcoming at all or may come in unrecognisable forms. Hence, third, this means that firms likely need more than usual RIS intermediation (including knowledge demonstration and transfer services) to avoid market failures of innovation. Assistance with identification of ‘modular’ policy elements is only one of the services required for DUI product, process and policy innovation. The complexity theory notion of 'transversality' has been advanced to capture the 'emergence' of novelty out of contexts of difference, unifying a solution to the three conceptual problem-issues raised in the paper.
    Date: 2013–10
  4. By: Heger, Diana
    Abstract: This paper examines the role of venture capital on a firm's innovation activities by using a data set of German technology-based firms founded between 1996 and 2005. Innovation is proxied by patent counts and an index of innovativeness which reflects the degree to which a young firm has developed new technologies based on its own or external resources. The results show that VC financing has a positive impact on both patenting and innovativeness, even if we account for endogeneity of VC financing. --
    Keywords: innovation,venture capital,young technology-based firms,discrete choice methods,count data models,endogeneity
    JEL: O31 G24 C31 C35 L20
    Date: 2013
  5. By: Pham Hoang Van (Associate Professor of Economics, Hankamer School of Business, Baylor University); David D. VanHoose (Professor of Economics and Herman Lay Professor of Private Enterprise, Hankamer School of Business, Baylor University)
    Abstract: We propose a theory of 'regulatory endogenous sunk costs'(RESC), in which a captured regulator raises minimum quality standards when market size increases in order to protect incumbent firms. Our RESC theory's predictions that market size is unrelated to industry concentration and positively related to product quality are observationally equivalent to those of Sutton's theory of `natural endogenous sunk costs' (NESC), in which incumbents increase qualityinvestments to compete for a share of a growing market. The NESC theory suggests that, with higher entry costs, incumbents jockey for increased market shares by increasing quality investments. The RESC theory, however, predicts that product quality should be lower with higher entry costs. Entry costs and minimum quality standards each provide incumbents with protection from prot erosions that entry otherwise would produce. A key implication of our analysis is the possibility that some industries might be misclassied as natural oligopolies. We provide a few examples of candidate RESC industries.
    Keywords: Regulatory compliance costs, endogenous sunk costs
    JEL: L13 L51
    Date: 2013
  6. By: Chen, Yongmin; Gayle, Philip
    Abstract: Retrospective studies of horizontal mergers have focused on their price effects, leaving the important question of how mergers affect product quality largely unanswered. This paper empirically investigates this issue for two recent airline mergers: Delta/Northwest and Continental/United. Consistent with the theoretical premise that mergers improve coordination but diminish competitive pressure for quality provision, we find: (i) each merger is associated with a quality increase in markets where the merging firms did not compete pre-merger, but with a quality decrease in markets where they did; and (ii) the quality change can be a U-shaped function of the pre-merger competition intensity.
    Keywords: Mergers; Product Quality; Airlines
    JEL: L13 L93
    Date: 2013–11–04
  7. By: Arjaliès , Diane-Laure; Goubet , Cécile; Ponssard , Jean Pierre
    Abstract: The ability of firms to transform an environmental constraint into a strategic opportunity has been a controversial issue in the literature. Based on a comparative study of CO2 strategies in the cement and chemical industries, the article shows that the capacity of firms to be proactive regarding sustainable development is largely constrained by the characteristics of the sector in terms of dependence on natural resources, flexibility in the composition of activities portfolio and structure of the downstream sector.
    Keywords: Innovation; Sustainable Development; Corporate Strategy
    JEL: M14 M21 Q25
    Date: 2013–07–01

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