nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2015‒08‒01
four papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Venture capital and innovation strategies By Da Rin, M.; Penas, M.F.
  2. The Dynamics of Development: Entrepreneurship, Innovation, and Reallocation By Roberto Fattal Jaef; Francisco Buera
  3. Global Structural Change And Value Chains In Services: A Reappraisal By Maria Savona
  4. Diffusion of Green Technology: A Survey By Allan, Corey; Jaffe, Adam B; Sin, Isabelle

  1. By: Da Rin, M. (Tilburg University, TILEC); Penas, M.F. (Tilburg University, TILEC)
    Abstract: Venture capital is a specialized form of financial intermediation that often provides funding for costly technological innovation. Venture capital firms need to exit portfolio companies within about five years from the investment to generate returns for institutional investors. This paper is the first to examine the association of venture capital funding with a company’s choice of innovation strategies. We employ a unique dataset of over 10,000 innovative Dutch companies, some of which received venture financing. The data include detailed information on patent applications, innovation activities, financing sources, and other company characteristics. We find that companies backed by venture capital focus on the buildup of absorptive capacity, by engaging in in-house R&D, while at the same time acquiring external knowledge. We interpret this finding as a consequence of the time horizon of venture capital firms. Our results suggest that the correlation between venture capital funding and the build-up of absorptive capacity is not only due to a selection effect. We derive implications of these findings for corporate strategy and public policy.
    Keywords: Venture Capital; Entrepreneurship; Innovation Strategy; Research & Development; Public Policy
    Date: 2015
  2. By: Roberto Fattal Jaef (The World Bank); Francisco Buera (Federal Reserve Bank of Chicago)
    Abstract: Development dynamics are characterized by sustained improvements in TFP, protracted increases in investment rates, and a broad transformation in the struc- ture of production. Low income countries are characterized by small average firm size, slow firm growth over the life-cycle, and significant dispersion of marginal products. In this paper we present a quantitative theory that jointly matches the behavior of firms in under-developed economies and key properties of develop- ment paths. We work with a model that features endogenous innovation decisions by entrepreneurs, reallocation of factors due to idiosyncratic productivity shocks, and selection in and out of entrepreneurship. We construct a low-TFP stationary equilibrium with dispersion in marginal products that is driven by idiosyncratic distortions. We then trigger development through a reform that liberalizes the economy from all frictions. Our quantitative theory can account well for cross- sectional and life-cycle patterns in distorted economies, and can generate develop- ment paths with rising TFP and investment dynamics, consistent with the data. Ignoring either endogenous innovation or selection in and out of entrepreneurship would lead to counter-factual transition paths, similar to those of the standard neoclassical growth model.
    Date: 2015
  3. By: Maria Savona (Science Policy Research Unit (SPRU), University of Sussex)
    Abstract: The scholarship on Global Value Chains is very recently recognising the increasing importance of fragmentation of production that involves services – and in particular business services – offshoring. A predominant stand by scholars emerges in this embryonic domain (Blinder, 2006; Gereffi and Fernandez-Stark, 2010; Ventura, 2014). Participation in GVC in business services might be considered a sort of ‘third unbundling’ of internationalisation of production, which opens up new opportunities for catching up in transition and developing countries. What are the theoretical and empirical bases for such a claim? Do these apply to both developed and developing contexts? Is the occurrence of “a flat world” (Friedman, 2005) ultimately responsible for a global sectoral structural change involving services? Is this process leading to smart and equitable catching up processes? This chapter selectively systematises the traditional and emerging literature on GVCs and claims the importance of domestic and local Hirschman-linked specialisation before joining GVCs as a catching-up strategy.
    Keywords: Business services; global value chains; Hirschman linkages; development
    JEL: L16 L80 O14
    Date: 2015–07
  4. By: Allan, Corey; Jaffe, Adam B; Sin, Isabelle
    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, Agricultural and Food Policy, Research and Development/Tech Change/Emerging Technologies, O33, Q55, Q56,
    Date: 2014–03

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