nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2014‒06‒02
eight papers chosen by
Fulvio Castellacci
Norwegian Institute of International Affairs (NUPI)

  1. IT and Management in America By Bloom, Nicholas; Brynjolfsson, Erik; Foster, Lucia; Jarmin, Ron; Patnaik, Megha; Saporta-Eksten, Itay; Van Reenen, John
  2. The distinct effects of Information Technology and Communication Technology on firm organization By Bloom, Nicholas; Garicano, Luis; Sadun, Raffaella; Van Reenen, John
  3. Technology life cycle and specialization patterns of latecomer countries: The case of the semiconductor industry By Triulzi G.
  4. Profiting from Innovation: Firm Level Evidence on Markups By Cassiman, Bruno; Vanormelingen, Stijn
  5. Managerial capacity in the innovation process and firm profitability By Giovanni Cerulli; Bianca Potì
  6. Financial Dependence and Innovation: The Case of Public versus Private Firms By Acharya, Viral V; Xu, Zhaoxia
  7. Business Group Taxation and R&D Activities By Masanori Orihara
  8. The Australian multi-factor productivity growth illusion By John Foster

  1. By: Bloom, Nicholas; Brynjolfsson, Erik; Foster, Lucia; Jarmin, Ron; Patnaik, Megha; Saporta-Eksten, Itay; Van Reenen, John
    Abstract: The Census Bureau recently conducted a survey of management practices in over 30,000 plants across the US, the first large-scale survey of management in America. Analyzing these data reveals several striking results. First, more structured management practices are tightly linked to higher levels of IT intensity in terms of a higher expenditure on IT and more on-line sales. Likewise, more structured management is strongly linked with superior performance: establishments adopting more structured practices for performance monitoring, target setting and incentives enjoy greater productivity and profitability, higher rates of innovation and faster employment growth. Second, there is a substantial dispersion of management practices across the establishments. We find that 18% of establishments have adopted at least 75% of these more structured management practices, while 27% of establishments adopted less than 50% of these. Third, more structured management practices are more likely to be found in establishments that export, who are larger (or are part of bigger firms), and have more educated employees. Establishments in the South and Midwest have more structured practices on average than those in the Northeast and West. Finally, we find adoption of structured management practices has increased between 2005 and 2010 for surviving establishments, particularly for those practices involving data collection and analysis.
    Keywords: IT; management; organization; productivity
    JEL: M2
    Date: 2014–03
  2. By: Bloom, Nicholas; Garicano, Luis; Sadun, Raffaella; Van Reenen, John
    Abstract: Guided by theories of management by exception, we study the impact of Information and Communication Technology on worker and plant manager autonomy and span of control. The theory suggests that information technology is a decentralizing force, whereas communication technology is a centralizing force. Using a new dataset of American and European manufacturing firms, we find indeed that better information technologies (Enterprise Resource Planning for plant managers and CAD/CAM for production workers) are associated with more autonomy and a wider span, while technologies that improve communication (like data intranets) decrease autonomy for workers and plant managers. Using instrumental variables (distance from ERP's birthplace and heterogeneous telecommunication costs arising from regulation) strengthens our results.
    Keywords: communication technology; delegation; information technology; organization; theory of the firm
    JEL: F23 O31 O32 O33
    Date: 2013–11
  3. By: Triulzi G. (UNU-MERIT)
    Abstract: Catching-up, leapfrogging and falling behind in terms of output and productivity in high-tech industries crucially depends on firms ability to keep pace with technological change. In fast changing industries todays specialization does not guarantee tomorrows success as changes in the technological trajectories reward and punish firms specialization patterns. This highlights the importance of studying the relationship between technology life cycle and specialization patterns of new and incumbent innovators. From an empirical point of view life cycles have been extensively analysed at the industry and product level but not so deeply at the technology one even though plenty of theoretical contributions exist. We define a methodology to describe the life cycle stages of the main technological paradigm within an industry and of the technological areas it is composed of. The methodology is based on the analysis of the age composition of the different areas and of the characteristics of their technological trajectories. We use the classification of the life cycle stages of the single areas to investigate specialization patterns of new and incumbent innovators. Our results show that up to the end of the 1990s firms from Taiwan, Korea and Singapore specialized mainly in areas at the later stages of their life cycles, whereas US and Japanese firms were comparatively better in younger areas. Specialization patterns changed in the beginning of the 2000s, when the Asian Tigers started to become comparatively stronger in emerging areas. Keywords Technology Life Cycle, Industry Life Cycle, Product Life Cycle, Specialization Patterns, Technological Paradigms, Technological Trajectories, Main Path Analysis, Catching-up, Semiconductors, Citation networks, Community Detection
    Keywords: Development Planning and Policy: General; Management of Technological Innovation and R&D; Technological Change: Choices and Consequences; Diffusion Processes; Technological Change: Government Policy;
    JEL: O20 O32 O33 O38
    Date: 2014
  4. By: Cassiman, Bruno; Vanormelingen, Stijn
    Abstract: While innovation is argued to create value, private incentives of firms to innovate are driven by what part of the value created firms can appropriate. In this paper we explore the relation between innovation and the markups a firm is able to extract after innovating. We estimate firm-specific price-cost margins from production data and find that both product and process innovations are positively related to these markups. Product innovations increase markups on average by 5.1% points by shifting out demand and increasing prices. Process innovation increases markups by 3.8% points due to incomplete pass-through of the cost reductions associated with process innovation. The ability of the firm to appropriate returns from innovation through higher markups is affected by the actual type of product and process innovation, the firm's patenting and promotion behavior, the age of the firm and the competition it faces. Moreover, we show that sustained product innovation has a cumulative effect on the firm's markup.
    Keywords: markup; process innovation; product innovation; productivity
    JEL: D24 L11 O31
    Date: 2013–10
  5. By: Giovanni Cerulli (Ceris - Institute for Economic Research on Firms and Growth,Rome,Italy); Bianca Potì (Ceris - Institute for Economic Research on Firms and Growth,Rome,Italy)
    Abstract: This paper studies at firm level the relation between managerial capacity in doing innovation and profitability. Moving along the intersection between the evolutionary/neo-Schumpeterian theory and the Resource-Based-View of the firm, we prove econometrically that managerial efficiency in mastering the production of innovation is an important determinant of firm innovative performance and market success, and that it complements traditional Schumpeterian drivers. By using a Stochastic Frontier Analysis, we provide a “direct” measure of innovation managerial capacity, then plugged into a profit margin equation augmented by the traditional Schumpeterian drivers of profitability (size, demand, market size and concentration, technological opportunities, etc.) and other control-variables. We run both a OLS and a series of Quantile Regressions to better stress the role played by companies’ heterogeneous response of profitability to innovative managerial capacity at different points of the distribution of the operating profit margin.Results find evidence of an average positive effect of the innovation managerial capacity on firm profitability, although quantile regressions show that this “mean effect” is mainly driven by a stronger magnitude of the effect for lower quantiles (i.e., for firms having negative or low positive profitability). It means that lower profitable firms might gain more from an increase of managerial efficiency in doing innovation than more profitable businesses.
    JEL: O31 D22 C22
    Date: 2013–06
  6. By: Acharya, Viral V; Xu, Zhaoxia
    Abstract: This paper examines the relationship between innovation and firms' dependence on external capital by analyzing the innovation activities of privately-held and publicly-traded firms We find that public firms in external finance dependent industries generate patents of higher quantity, quality, and novelty compared to their private counterparts, while public firms in internal finance dependent industries do not have a significantly better innovation profile than matched private firms. The results are robust to various empirical strategies that address selection bias. The findings suggest that public listing is beneficial to the innovation of firms in industries with a greater need for external capital.
    Keywords: finance and growth; financial constraints; innovation; private firms; public firms; R&D
    JEL: G31 G32 O16 O30
    Date: 2014–02
  7. By: Masanori Orihara (Economist, Policy Research Institute, Ministry of Finance, Japan, University of Illinois at Urbana-Champaign)
    Abstract: Economic theory dating to Domar and Musgrave (1944) suggests that the tax treatment of gains and losses can affect firmsf incentives to undertake high-risk investments. Exploiting a 2002 tax law change in Japan that allows business groups to adopt a consolidated taxation system (CTS) and using an IV strategy, I identify the causal impact of mitigating tax loss asymmetry on R&D activities. With unique firm-level panel data between 1997 and 2011, I show that CTS adoption increases total R&D expenses among individual business groups. More specifically, CTS adoption increases the following, especially among parent companies of business groups: the number of employees engaging in R&D; expenses for property, plant, and equipment for R&D; and expenses for R&D outsourcing. Evidence of ex-ante efficiency of CTS adoption measured by market-to-book ratio is limited, while CTS adoption improves expost efficiency measured by income from patent transactions. These findings support that mitigating tax loss asymmetry facilitates efficient developments of high-risk investments in line with Domar and Musgrave.
    Keywords: business group, corporate income tax, loss treatment, R&D activity, instrumental variable method
    JEL: G30 H25 O30
    Date: 2013–11
  8. By: John Foster (School of Economics, The University of Queensland)
    Abstract: Multi-factor productivity growth is widely discussed in the media and among policymakers in Australia. Over the past decade it has been predominantly negative often leading to the view that there is a ‘productivity crisis.’ It is shown that such a measure is wholly misleading. Preliminary econometric investigation suggests that it is economies of scale and scope that are the primary drivers of productivity growth in Australia. However, much more research needs to be undertaken, with the inter-related processes of innovation and entrepreneurship at its core, before any new policies to promote productivity growth are designed and implemented.
    Date: 2014–05–08

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