nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2015‒01‒31
four papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. "Building the Entrepreneurial State: A New Framework for Envisioning and Evaluating a Mission-oriented Public Sector" By Mariana Mazzucato
  2. An Innovation Policy Framework: Bridging the gap between industrial dynamics and growth By Braunerhjelm, Pontus ; Henrekson, Magnus
  3. Lack of Selection and Poor Management Practices: Firm Dynamics in Developing Countries By Michael Peters ; Ufuk Akcigit
  4. Exporting, Innovation and the Role of Immigrants By Isabelle Sin ; Richard Fabling ; Adam B. Jaffe ; David C. Maré ; Lynda Sanderson

  1. By: Mariana Mazzucato
    Abstract: Today, countries around the world are seeking "smart" innovation-led growth, and hoping that this growth is also more "inclusive" and "sustainable" than in the past. This paper argues that such a feat requires rethinking the role of government and public policy in the economy--not only funding the "rate" of innovation, but also envisioning its "direction." It requires a new justification of government intervention that goes beyond the usual one of "fixing market failures." It also requires the shaping and creating of markets. And to render such growth more "inclusive," it requires attention to the ensuing distribution of "risks and rewards." To approach the innovation challenge of the future, we must redirect the discussion, away from the worry about "picking winners" and "crowding out" toward four key questions for the future: 1. Directions: how can public policy be understood in terms of setting the direction and route of change; that is, shaping and creating markets rather than just fixing them? What can be learned from the ways in which directions were set in the past, and how can we stimulate more democratic debate about such directionality? 2. Evaluation: how can an alternative conceptualization of the role of the public sector in the economy (alternative to MFT) translate into new indicators and assessment tools for evaluating public policies beyond the microeconomic cost/benefit analysis? How does this alter the crowding in/out narrative? 3. Organizational change: how should public organizations be structured so they accommodate the risk-taking and explorative capacity, and the capabilities needed to envision and manage contemporary challenges? 4. Risks and Rewards: how can this alternative conceptualization be implemented so that it frames investment tools so that they not only socialize risk, but also have the potential to socialize the rewards that enable "smart growth" to also be "inclusive growth"?
    Keywords: Finance; Industrial Policy; Mission-oriented Innovation
    JEL: L1 L5
    Date: 2015–01
  2. By: Braunerhjelm, Pontus (Swedish Entrepreneurship Forum, Department of Industrial Economics and Management, Centre of Excellence for Science and Innovation Studies (CESIS) & Royal Institute of Technology (KTH) ); Henrekson, Magnus (Research Institute of Industrial Economics (IFN) )
    Abstract: This paper examines policy measures that foster the creation of innovations with high inherent potential and that simultaneously provide the right incentives for individuals to create and expand firms that disseminate such innovations in the form of highly valued products. In so doing, we suggest an innovation policy framework based on two pillars: (i) the accumulation, investment, and upgrading of knowledge and (ii) the implementation of mechanisms that enable knowledge to be exploited such that growth and societal prosperity are encouraged. Knowledge is a necessary but far from sufficient condition for growth. To secure industrial dynamics and growth in the long term, institutions must be designed both to encourage sophisticated knowledge investments and to stimulate the creation, diffusion and productive use of knowledge in all sectors of the economy. We argue that the latter area has been overlooked in the policy discussion and that a coherent innovation policy framework must include tax policy, labor market regulation, savings channeling, competition policy, housing market regulation, and infrastructure to foster growth and future prosperity.
    Keywords: Entrepreneurship; Innovation; Institutions; Innovation policy; R&D; Technology transfer; University-industry relations
    JEL: J24 O31 O32 O57
    Date: 2015–01–13
  3. By: Michael Peters (London School of Economics ); Ufuk Akcigit (University of Pennsylvania )
    Abstract: As recently shown by Hsieh and Klenow (2012), rm dynamics dier substantially across countries. While firms in the US experience substantial growth during their life-cycle, firms in developing countries, especially in India, barely expand. We present a tractable microfounded endogenous growth model to explain these differences. At the heart of the theory are two sources of heterogeneity across countries. First, we explicitly allow firms to register as formal firms or stay in the informal sector. While informality comes with the benefit of not being subject to taxes and regulation, informal firms are subject to government audits and the risk of being shut down. This lowers the marginal return of technology adoption and informal firms have an incentive to stay small. Second, we incorporate the recent state-of-the-art advances from Bloom and Van Reenen (2010) that managerial practices differ across countries and incorporate managers as a necessary input to run multi-product establishments. Better managers will induce a steeper life-cycle profile as it allows firms to scale up easily and to expand into new product lines. While the model has rich implications for firms' life-cycle, it still has a tractable analytic solution, which we can easily confront with the micro-evidence and calibrate successfully to the data of Hsieh and Klenow (2012).
    Date: 2014
  4. By: Isabelle Sin (Motu Economic and Public Policy Research ); Richard Fabling (Motu Economic and Public Policy Research ); Adam B. Jaffe (Motu Economic and Public Policy Research ); David C. Maré (Motu Economic and Public Policy Research ); Lynda Sanderson (New Zealand Treasury )
    Abstract: This research uses Statistics New Zealand’s Integrated Data Infrastructure and data from the Business Operations Survey to investigate the correlations at the firm level between a) employee characteristics and firm international engagement, and b) firm international engagement and innovation. The main findings on employee characteristics and international engagement are: • Firms that employ a higher fraction of high-ability foreigners (and thus a lower fraction of high-ability natives) are more likely to export. • Firms that employ a higher proportion of people who previously worked for an exporter are more likely to export. • The proportions of foreign employees and employees with export experience are correlated with many other types of international engagement by firms. • Employees from Australia and the Pacific and from Europe are positively correlated with firm exporting. The correlations are absent for foreign employees from Asia. • The probability that a firm earns income in a given country is more correlated with its fraction of employees from that country than with its total fraction of foreign employees. • A firm with a higher fraction of employees from a given country is more likely to earn income in that country only if the country is developed. The main findings on international engagement and innovation are: • Firms that export innovate more, even after controlling for size. • Among exporters, the proportion of firm sales that comes from exports shows little correlation with innovation. • Firms that export to more countries innovate more. • Exports of raw goods have little correlation with innovation; exports of manufactured goods or services have a strong correlation. • Firms that recently entered a new export market report especially high innovation, and firms that began earning overseas income in the previous two years report higher innovation than those that have earned overseas income for a longer period. • Not all export destinations are correlated with higher innovation. Exports to the Americas are positively correlated with innovation, but there is no evidence that firms that export more to Asia are more likely to innovate. • In addition to exporting, most other types of international engagement, such as inward and outward foreign direct investment, are positively correlated with innovation. • Firms' sources of ideas for innovation vary with the types of international engagement in which they are involved. The patterns are consistent with exporters gaining ideas from their international customers, firms gaining ideas from their foreign owners, and importers gaining ideas from their foreign suppliers. Although these relationships are correlations only and should not be interpreted as proof of causality, they do suggest that the experience and specialized knowledge of employees may be relevant to firms’ decisions to engage internationally, and that such engagement may act as a conduit for foreign knowledge to enter the country.
    Keywords: exporting, innovation, migrants, international engagement, workforce composition
    JEL: O31 F16 F22 J61 J24
    Date: 2014–12

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