nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2014‒04‒18
nine papers chosen by
Fulvio Castellacci
Norwegian Institute of International Affairs (NUPI)

  1. Industrial Policy for the Medium to Long-term By Crafts, Nicholas; Hughes, Alan
  2. Doing R&D in a Closed or Open Mode: Dynamics and Impacts on Productivity By Julio Rosa; Pierre Mohnen
  3. R&D investments and high-tech firms' stock return volatility By Sami Gharbi; Jean-Michel Sahut; Frédéric Teulon
  4. Beyond the R&D effects on innovation: the contribution of non-R&D activities to TFP growth in the EU By Jesus Lopez-Rodriguez; Diego Martinez
  5. Evolution of Standards and Innovation By Aoki, Reiko; Arai, Yasuhiro
  6. International trends in technological progress: stylized facts from patent citations, 1980-2011 By Soonwoo Kwon; Jihong Lee; Sokbae 'Simon' Lee
  7. Internationalization and Innovation of Firms: Evidence and Policy By Carlo Altomonte; Tommaso Aquilante; Gábor Békés; Gianmarco I. P. Ottaviano
  8. Reagan’s Innovation Dividend? Technological Impacts of the 1980s US Defense Build-Up By Draca, Mirko
  9. Diffusion of Green Technology: A Survey By Corey Allan; Adam B. Jaffe; Isabelle Sin

  1. By: Crafts, Nicholas (University of Warwick); Hughes, Alan (University of Cambridge)
    Abstract: This report reviews the market failure and systems failure rationales for industrial policy and assesses the evidence on part experience of industrial policy in the UK. In the light of this, it reviews options for reshaping the design and delivery of industrial policy towards UK manufacturing. These options are intended to encourage a medium- to long-term perspective across government departments and to integrate science, innovation and industrial policy.
    Keywords: UK manufacturing, industrial policy
    Date: 2014
  2. By: Julio Rosa; Pierre Mohnen
    Abstract: On the one hand, firms prefer to perform R&D in an open mode (letting R&D be performed extramurally or even selling their R&D services) to benefit from knowledge spillovers and complementarities between internal and external R&D. On the other hand, they may also like to perform R&D in a closed mode (funding and executing their R&D intramurally) to minimize outgoing externalities. We examine the dynamic process by which firms change the way of doing R&D and how these strategic choices of doing R&D affect their productivity growth. This study is based on the Statistics Canada Research and Development in Canadian Industry survey (RDCI), which collects data on R&D performed in the business sector in Canada. The paper is based on data for the period 1997 to 2006. The panel dimension of the data allows to control for unobserved characteristics of R&D performers by estimating a multinomial Logit model with unobserved heterogeneities using maximum simulated likelihood (MSL) method. Les firmes sont tiraillées entre deux façons de faire de la R-D. D’un côté, elles préfèrent faire la R-D de manière ouverte (en faisant faire de la R-D extramuros ou même en vendant des services de R-D) afin de bénéficier d’externalités de connaissance et de complémentarités entre la R-D interne et la R-D externe. D’un autre côté, elles préconisent de faire la R-D en mode fermé (en faisant de la recherche intramuros et en se finançant sur base de fonds propres ou de subventions) afin de minimiser les fuites de connaissance. Dans cette étude, nous examinons la dynamique des choix quant à la façon de faire de la recherche et l’effet de ces choix sur les rendements de celle-ci. Nous nous basons sur les données de l’enquête de Statistique Canada sur la recherche et développement dans l’industrie canadienne (RDIC) pour la période 1997-2006. La dimension panel de la base de données nous permet de contrôler pour l’hétérogénéité individuelle inobservée dans l’estimation d’un modèle Logit multinomial dynamique à partir de la méthode du maximum de vraisemblance simulé.
    Keywords: R&D; State Dependence; Dynamic Multinomial Logit; Panel-data; Maximum Simulated Likelihood; Open Innovation, persistance, modèle Logit multinomial dynamique, données panel, maximum de vraisemblance simulé, innovation ouverte
    Date: 2013–11–01
  3. By: Sami Gharbi; Jean-Michel Sahut; Frédéric Teulon
    Abstract: The empirical evidence suggests that firms in high-tech industries exhibit high stock return volatility. In this paper, we conceive of the R&D investment intensity as a possible explanation for the stock volatility behavior in these industries. We suggest that R&D activities generate information asymmetry about the prospects of the firm and make its stock riskier. Relying on Panel data models, we investigate this relationship for French high-tech firms. We find out a strong positive relationship between stock return volatility and R&D investment intensity. This finding suggests that R&D intensive firms should implement an efficient information disclosure policy to reduce information asymmetry and to avoid excessive stock return volatility.
    Keywords: R&D; Idiosyncratic idiosyncratic volatility; Riskrisk; Asymmetric asymmetric information; Stock stock return; Innovationinnovation; Highhigh-tech firms
    Date: 2014–04–10
  4. By: Jesus Lopez-Rodriguez (European Commission, Joint Research Centre, Institute for Prospective); Diego Martinez (University Pablo Olavide)
    Abstract: A significant part of the innovation efforts carried out across very heterogeneous economies in Europe is under the form of Non-R&D innovation activities. But the traditional macro approach to the determinants of TFP does not handle this issue appropiately. This paper has proposed and estimated an augmented macro-theoretical model to the determinants of total factor productivity (TFP) by jointly considering the effects of R&D endowments and the impact of Non-R&D innovation activities on …firms´ levels of productivity. The estimation of the model for a sample of EU26 countries covering the period 2004-2008 shows that the distinction between R&D and Non-R&D endowments really matters for a number of different issues. First, the results show a sizable differential impact of these endowments on TFP growth, being the impact of R&D twice as big as the impact of Non-R&D. Second, absorptive capacity is only linked to R&D endowments. And third, the two types of endowments cannot strictly been seen as complements at least for the case of countries with high R&D intensities or high Non-R&D intensities.
    Keywords: TFP, R&D, Non-R&D expenditures, EU countries
    JEL: O0 O3 O4
    Date: 2014
  5. By: Aoki, Reiko; Arai, Yasuhiro
    Abstract: We develop a framework to examine how a standard evolves when a standard consortium or firm (incumbent) innovates either to improve the standard or to strengthen the installed base, which increases switching costs. Both investments make it more difficult for another firm (entrant) to introduce a standard by investing in technology improvement. Our analysis shows that that incumbent’s strategy depends on whether the technology is in its infancy or has matured, and that entrants cannot supplant the existing standard. A standard consortium brings dynamic benefits by preventing replacement by an entrant. When the technology is in its infancy, the incumbent deters entry, but when the technology is mature, entry and the coexistence of two standards are tolerated. The dominance of a single standard, even for well-established technologies, suggests that incumbents have market power. Our results also suggest that having superior technology is not enough to enable entrants to supplant an existing standard.
    Keywords: standards, innovation, technology, upgrades, standardization, replacement effect
    Date: 2014–03
  6. By: Soonwoo Kwon; Jihong Lee; Sokbae 'Simon' Lee (Institute for Fiscal Studies and Seoul National University)
    Abstract: We analyze cross-country trends in technological progress over the period of 1980-2011 by examining citations data from almost 4 million utility patents granted by the US Patent and Trademark Oce (USPTO). Our estimation results on patent quality and distance to the knowledge frontier reveal the following stylized facts. The emerging Asian economies of Korea, Taiwan and China have indeed achieved substantial catch-up towards the technology frontier. In the case of Korea and Taiwan, progress has been made in terms of patent quality as well as distance to the frontier. Chinese patents are of higher quality now than before but Chinese inventors have yet to reduce the citation lag relative to the frontier. In contrast, advanced economies of Europe and Japan have displayed steady decline in their patent quality. Finally, the US has maintained, and in some cases strengthened, its position as the world technology frontier.
    Date: 2014–03
  7. By: Carlo Altomonte; Tommaso Aquilante; Gábor Békés; Gianmarco I. P. Ottaviano
    Abstract: We use a representative and cross-country comparable sample of manufacturing firms (EFIGE) to document patterns of interaction among firm-level internationalization, innovation and productivity across seven European countries (Austria, France, Germany, Hungary, Italy, Spain, United Kingdom). We find strong evidence of positive association among the three firm-level characteristics across countries and sectors. We also find that the positive correlation between internationalization and innovation survives after controlling for productivity, with some evidence of causality running from the latter to the former. Our analysis suggests that export promotion per se is unlikely to lead to sustainable internationalization because internationalization goes beyond export and because, in the medium-to-long term, internationalization is driven by innovation. We recommend coordination and integration of internationalization and innovation policies 'under one roof' at both the national and EU levels, and propose a bigger coordinating role for EU institutions.
    Keywords: Internationalization, innovation, firm-level data, exports, foreign direct investment, outsourcing
    JEL: F13 F23 O31 O38
    Date: 2014–04
  8. By: Draca, Mirko (University of Warwick)
    Abstract: US government spending since World War II has been characterized by large investments in defense related goods, services and R&D. In turn, this means that the Department of Defense (DoD) has had a large role in funding corporate innovation in the US. This paper looks at the impact of military procurement spending on corporate innovation among publicly traded firms for the period 1966-2003. The study utilizes a major database of detailed, historical procurement contracts for all Department of Defense (DoD) prime contracts since 1966. Product-level spending shifts – chiefly centered around the Reagan defense build-up of the 1980s – are used as a source of exogenous variation in firm-level procurement receipts. Estimates indicate that defense procurement has a positive absolute impact on patenting and R&D investment, with an elasticity of approximately 0.07 across both measures of innovation. In terms of magnitudes, the contribution of defense procurement to innovation peaked during the early Reagan build-up, accounting for 11.4% of the total change in patenting intensity and 6.5% for R&D. This compares to a defense sector share in output of around 4%. The later defense cutbacks under Bush Senior and Clinton then curbed the growth in technological intensity by around 2%.
    Keywords: Regan, Military, procurement
    Date: 2013
  9. By: Corey Allan (Motu Economic and Public Policy Research); Adam B. Jaffe (Motu Economic and Public Policy Research and National Bureau of Economic Research); Isabelle Sin (Motu Economic and Public Policy Research)
    Abstract: This paper surveys the existing literature on diffusion of environmentally beneficial technology. Overall, it confirms many of the lessons of the larger literature on technology diffusion: diffusion often appears slow when viewed from the outside; the flow of information is an important factor in the diffusion process; networks and organisations can matter; behavioural factors such as values and cognitive biases also play a role. With respect to policy instruments, there is some evidence that the flexibility of market-based instruments can have a beneficial impact on technology diffusion, but there are also numerous cases in which regulations have forced the adoption of new technologies. There would be significant benefit to increased investment in studies that look at questions such as the role of information provision, networks and framing issues in households’ and firms’ adoption decisions.
    Keywords: technology diffusion; technology transfer; policy instruments; green technology
    JEL: O33 Q55 Q56
    Date: 2014–04

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