nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2014‒09‒05
four papers chosen by
Fulvio Castellacci
Norsk Utenrikspolitisk Institutt

  1. The Determinants of Total Factor Productivity in the EU: Insights from Sectoral Data and Common Dynamic Processes By Agnieszka Gehringer; Inmaculada Martinez-Zarzoso; Felicitas Nowak.Lehmann Danziger
  2. The relationship between innovation, exports and economic performance. Empirical evidence for 21 EU countries By Fabian Unterlass
  3. Innovation, exports and technical efficiency in Spain By Rosario Sanchez; Angeles Díaz
  4. Did Bank Distress Stifle Innovation During the Great Depression? By Ramana Nanda; Tom Nicholas

  1. By: Agnieszka Gehringer; Inmaculada Martinez-Zarzoso; Felicitas Nowak.Lehmann Danziger
    Abstract: This paper examines the development of total factor productivity (TFP) and the drivers of TFP for a panel of 17 EU countries in the period of 1995-2007. We estimate aggregated and sectoral TFP for 17 EU countries by means of the augmented mean group estimator to control for endogeneity, cross-section dependence and heterogeneous production technology. We find that although wages are the main driver of TFP, ICT, extra-EU trade and human capital also play a role.
    Keywords: 17 EU countries , Growth, Sectoral issues
    Date: 2013–06–21
  2. By: Fabian Unterlass
    Abstract: This paper discusses the interplay between exports and innovation and both their effects on economic performance. The European Union makes major efforts to improve the innovation performance of its companies with the aim to improve the global competitive position of the Union and create jobs and wealth. Firms that are involved in international activities through exports or foreign direct investment are typically top performers in terms of their capability to generate value added as well as employment and productivity (see e.g. Mayer and Ottaviano 2007). From the policy point of view this implies that more of Europe's innovative companies should compete and be competitive on global markets and create revenue and jobs at home. However, the relationship between innovation, exporting and economic performance is by no means unidirectional. It is difficult to show whether superior export performance is determined by a superior innovation performance, or whether internationalisation supports innovation. The major issue here is to control for endogeneity between these two dimensions. Exporting might positively affect innovation via learning effects, resource effects and / or incentive effects. On the other hand, innovation improves productivity and therefore increases a company's competitiveness such that it selects itself into the export market. Alternatively, product innovations might also create (temporary) monopolies in niche markets. Testing these issues emerging from the literature we use firm level data from the 3rd European Community Innovation Survey (CIS3) for 21 countries for the years 1998-2000 accessed at the Eurostat Safe Centre in Luxemburg. In order to overcome problems referring to endogeneity, we empirically investigate the effects of exporting in the first year of the observed time frame on innovation input, while we explain in a second model exports in the final observed year by innovation output indicators. We find strong evidence that innovation improves the export performance of companies, whereas this pattern varies with the stage of economic development. While firms in highly innovative sectors in the more advanced member states need high degrees of appropriability, i.e. the possibility to protect their innovations, and have to continuously improve their knowledge base to participate in export markets, it is productivity and price-based competitiveness for low innovation-intensive sectors. This reflects the alternative patterns of niche markets on one hand, and self-selection on the other, that allow firms to export. While the nature of the data does not allow us to draw satisfactory conclusions on the causal link between exports and innovation, we could find positive effects of exporting on innovation activities only for small companies, while large companies are not more likely to innovate when they are exporting. We therefore conclude that the positive impact of exports results from additional financial resources available for exporting SMEs, while learning effects are comparably small. However, we only investigated exports but did not consider different kinds of internationalisation due to data constraints. The picture might change in this case. Finally, we argue that both innovation and exports have positive effects on a firm's economic performance. We find strong evidence that innovation is an important driver for productivity growth, whereas the positive effect increases when a company (and the country the firm is located in) approaches the technology frontier. Furthermore, our results indicate that in the medium to low innovation intensive sectors productivity growth is mainly driven by process innovations, while in high-technology sectors in the more advanced member states productivity growth is strongly driven by product innovations. This is in line with the idea that in high-tech niche markets it is product quality which leads to higher prices. Competition in these markets is not based on prices but on product quality. In the low-technology sectors, competition is mainly based on prices and therefore process innovation plays a decisive role. In addition, we also find evidence that the effects of innovation and exporting on employment and turnover growth follow patterns that are dependent of the stage of technological development. The impact of exports on employment growth increases with an increasing distance of the company's home country from the technological frontier. Companies in these countries have a comparative advantage in wage levels. Interestingly, exporting has positive effects on labour productivity mainly in highly innovation-intensive sectors in the more advanced countries on the one hand, and in less innovation-intensive sectors in countries that are further away from the technological frontier. Probably, this result reflects comparative advantages and volume effects (economies of scale) of exporting. The prior companies increase their export share by increased competitiveness based on high-quality products, the latter based on wage levels. Finally, the joint effects of exporting and innovation on turnover growth and therefore also productivity growth are positive for high-tech sectors in technologically advanced countries. This indicates that companies that are active in these sectors have to internationalise their economic activities to reap the benefits from their innovation efforts. Domestic markets tend to be too small and niche. This result claims for supporting innovative companies in these sectors to start exporting. See above See above
    Keywords: EU, Impact and scenario analysis, Impact and scenario analysis
    Date: 2013–06–21
  3. By: Rosario Sanchez; Angeles Díaz
    Abstract: The main purpose of this work is to analyse the effect of exports intensity and R & D activities in technical efficiency using data of Spanish manufacturing firms during the period 2004-2009. In a previous work, Diaz and Sanchez (2008) found that size was an important determinant of technical efficiency. Also, in Sánchez and Díaz (2013) innovation was an important determinant of efficiency for large firms but not for small and medium sized firms. Perhaps because large firms are more easily able to obtain external financing and thus finance their R & D activities and obtain product and process innovation that allows them to gain competitiveness in foreign markets. Size is also related to the ability of firms to compete in foreign markets. So we will focus on exporting companies to investigate the relationship between exports, and efficiency. As it is well known the exporting firms are more competitive than those that are not focused on foreign markets. To obtain empirical evidence we estimate a value added production function following the methodology of the Stochastic Frontier Approach, first developed by Farrell (1957) and widely used in empirical works. Using this methodology several works have analysed technical inefficiency: Caves and Barton (1990) analyse technical efficiency for manufacturing firms in United States; Green and Mayes (1991) analyse technical inefficiency for United Kingdom; and Patibandla (1998) proves the relevance of capital market imperfections on the structure of an industry; Dilling-Hansen et al. (2003), and Kumbhakar et al., (2011) analyse the effect of R&D investment on relative efficiency; Diaz and Sánchez (2008) analyse the impact of size on efficiency; and Sánchez and Diaz (2013) focus in the effect of product and process innovation over technical efficiency, obtaining that large firms’ innovation are more efficient than the small one. The inefficiency determinants can be due to environmental or firm specific factors. Here we focus on these firms specific factors to provide an explanation to the differences in technical inefficiency across Spanish manufacturing firms. Inefficiency tends to be smaller for firms with a higher ratio of gross investment over capital. Firms that account for this kind of investment become more competitive as a consequence of having a higher efficiency in their production process. Also, we found that exporting firms are closer to the stochastic frontier. They have to be more competitive to sell in international markets. Only the most efficient firms survive in the highly competitive international market. Size is another determinant of technical efficiency. Even though the impact of size in technical efficiency is not clearly determined in empirical and theoretical frameworks, here we obtain a positive and significant effect over efficiency. What it means that large firms are closer to the efficient frontier. In addition, efficiency tends to be smaller for those firms with a higher proportion of external funds over value added.
    Keywords: Spain, Trade issues, Sectoral issues
    Date: 2014–07–03
  4. By: Ramana Nanda; Tom Nicholas
    Abstract: We find a negative relationship between bank distress and the level, quality and trajectory of firm-level innovation during the Great Depression, particularly for R&D firms operating in capital intensive industries. However, we also show that because a sufficient number of R&D intensive firms were located in counties with lower levels of bank distress, or were operating in less capital intensive industries, the negative effects were mitigated in aggregate. Although Depression era bank distress was associated with the stifling of innovation, our results also help to explain why technological development was still robust following one of the largest shocks in the history of the U.S. banking system.
    JEL: G21 N22 O30
    Date: 2014–08

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