nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2016‒03‒10
eight papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Does economic growth matter? Technology-push, demand-pull and endogenous drivers of innovation in the renewable energy industry By Sam, Aflaki; Syed Abul, Basher; Andrea, Masini
  2. Patents and the global diffusion of new drugs By Iain Cockburn; Jean O. Lanjouw; Mark Schankerman
  3. Swimming Upstream: Input-output Linkages and the Direction of Product Adoption By Johannes Boehm; Swati Dhingra; John Morrow
  4. Asymmetric information in the regulation of the access to markets By Simone Ghislandi; Michael Kuhn
  5. Replicator dynamics in value chains: Explaining some puzzles of market selection By Cantner, Uwe; Savin, Ivan; Vannuccini, Simone
  6. Negative skill sorting across production chains By Asuyama, Yoko; Goto, Hideaki
  7. Productivity effects from inter-industry offshoring and inshoring: Firm-level evidence from Belgium By Bruno Merlevede; Angelos Theodorakopoulos
  8. The promotion of renewable energy innovation: When state intervention and competition go hand in hand By Lionel Nesta; Francesco Vona

  1. By: Sam, Aflaki; Syed Abul, Basher; Andrea, Masini
    Abstract: This paper aims to contribute to the longstanding technology-push vs. demand-pull debate and to the literature on renewable energy policy assessment. We argue that in addition to the traditional push–pull dichotomy, the drivers of technological change must be differentiated by whether they are exogenous or endogenous to the economic system and must be assessed with respect to their contribution to both the creation and the diffusion of innovation. We apply this perspective to study innovation in the renewable energy (RE) industry in 15 European Union countries from 1990 to 2012. Using different panel data estimators, we find that public R&D investments, policies supporting RE and per capita income all have a positive effect on either innovation creation or diffusion, whereas the variability of policy support has a negative impact on diffusion. However, impacts are heterogeneous and differ depending on the innovation dimension considered. Most importantly, we find that economic growth is a stronger driver of RE diffusion than technology-push or exogenous demand-pull mechanisms, whereas it is relatively ineffective at stimulating innovation creation. The effect of economic growth on RE diffusion exhibits a nonlinear, U-shaped pattern that resonates with the Environmental Kuznets Curve hypothesis. RE penetration remains negligible at low levels of growth whereas it increases sharply only after income per capita has reached a given threshold. This effect has both a direct cause (with increased affluence demand for environmental quality rises) and an indirect cause (with increased affluence expensive RE policies become more affordable and get implemented more extensively). Our findings have implications for policy making. They suggest that for RE diffusion to increase, innovation policies should be carefully balanced. Government action should be directed not only at shielding renewables from competition with fossil fuel technologies, but also at stimulating aggregated demand and economic growth.
    Keywords: Deployment policy, Technological innovation, Renewable Energy, Environmental Kuznets Curve, Nonstationary Panel.
    JEL: C23 O31 O33 O38 O44
    Date: 2016–02–29
  2. By: Iain Cockburn; Jean O. Lanjouw; Mark Schankerman
    Abstract: Analysis of the timing of launches of 642 new drugs in 76 countries during 1983-2002 shows that patent and price regulation regimes strongly affect how quickly new drugs become commercially available in different countries. Price regulation delays launch, while longer and more extensive patent rights accelerate it. Health policy institutions and economic and demographic factors that make markets more profitable also speed up diffusion. The estimated effects are generally robust to controlling for endogeneity of policy regimes with country fixed effects and instrumental variables. The results highlight the important role of policy choices in driving the diffusion of new innovations.
    JEL: I18 L11 L51 L65 O31 O33 O34
    Date: 2016
  3. By: Johannes Boehm; Swati Dhingra; John Morrow
    Abstract: Multiproduct firms dominate production, and their product turnover contributes substantially to aggregate growth. Firms continually adapt their product mix, but what determines which products firms expand into? Theories of the firm propose that mulitproduct firms choose to make products which need the same know-how or inputs that can't be bought 'off the shelf'. We empirically examine this rationale by testing for firm-level capabilities that are shared across products and manifested through input-output (IO) linkages. We show that a firm's idiosyncratic horizontal and vertical similarity to a product's IO structure predicts product adoption. Using product-specific policy changes for a firm's inputs and outputs, we show that input linkages are the most important, suggesting that firms' product capabilities depend more on economies of scope rather than product market complementarities.
    Keywords: Multiproduct firms, product adoption, vertical linkages, horizontal linkages
    JEL: L1 L2 M2 O3
    Date: 2016–02
  4. By: Simone Ghislandi (Department of Socioeconomics, Vienna University of Economics and Business); Michael Kuhn (Wittgenstein Centre, Vienna Institute of Demography)
    Abstract: It is frequently argued that the high costs of clinical trials prior to the admission of new pharmaceuticals are stifling innovation. At the same time, regulation of the access to markets is often justified on the basis of consumers’ inability to detect the true quality of a product. We examine these arguments from an information economic perspective by setting a framework where the incentives to invest in R&D are influenced by the information structure prevailing when the product is launched in the market at a later stage. In this setting, by changing the information structure, regulation (or the lack of) can thus indirectly affect R&D efforts. More formally, we construct a moral hazard – cum – adverse selection model in which a pharmaceutical firm exerts an unobservable effort towards developing an innovative (high quality) drug (moral hazard) and then announces the (unobservable) quality outcome to an uninformed regulator and/or consumers (adverse selection). We compare the outcomes in regard to innovation effort and expected welfare under two regimes: (i) regulation, where products undergo a clinical trial designed to ascertain product quality at the point of market access; and (ii) laissez-faire with free entry, where the revelation of quality is left to the market process. Results show that whether or not innovation is greater in the presence of entry regulation crucially depends on the efficacy of the trial in identifying (poor) quality, on the probability that unknown qualities are revealed in the market process, and on the preference and cost structure. The welfare ranking of the two regimes depends on the differential effort incentive and on the net welfare gain from implementing full information instantaneously. For example, in settings of vertical monopoly, vertical differentiation and horizontal differentiation with no variable cost of quality, entry regulation tends to be the preferred regime if the effort incentive under pooling is relatively low and profits do not count too much towards welfare. A complementary numerical analysis shows how the outcomes vary with the market and cost structure.
    Keywords: adverse selection, (entry) regulation, moral hazard, pharmaceutical industry, R&D incentives
    JEL: D82 I18 L15 L51 O31
    Date: 2016–02
  5. By: Cantner, Uwe; Savin, Ivan; Vannuccini, Simone
    Abstract: The pure model of replicator dynamics though providing important insights in the evolution of markets has not found much of empirical support. This paper extends the model to the case of firms vertically integrated in value chains. We show that i) by taking value chains into account, the replicator dynamics may revert its effect. In these regressive developments of market selection, firms with low fitness expand because of being integrated with highly fit partners, and the other way around; ii) allowing partner's switching within a value chain illustrates that periods of instability in the early stage of industry life-cycle may be the result of an 'optimization' of partners within a value chain providing a novel and simple explanation to the evidence discussed by Mazzucato (1998); iii) there are distinct differences in the contribution to market selection between the layers of a value chain, causing strategic advantages to firms in partnering.
    Keywords: innovation,replicator dynamics,returns to scale,value chain
    JEL: C63 D24 L14 O32
    Date: 2016
  6. By: Asuyama, Yoko; Goto, Hideaki
    Abstract: Previous literature generally predicts that individuals with higher skills work in industries with longer production chains. However, the opposite skill-sorting pattern, a "negative skill-sorting" phenomenon, is also observed in reality. This paper proposes a possible mechanism by which both cases can happen and shows that negative skill sorting is more likely to occur when the quality of intermediate inputs degrade rapidly (or improves slowly) along the production chain. We empirically confirm our theoretical prediction by using country-industry panel data. The results are robust regardless of estimation method, control variables, and industry coverage. This study has important implications for understanding countries' comparative advantages and development patterns.
    Keywords: Labor market, Human resources, Manufacturing industries, Skill sorting, Input quality, Production chains
    JEL: J24 L23
    Date: 2016–03
  7. By: Bruno Merlevede; Angelos Theodorakopoulos
    Abstract: In this paper we confirm the existence of improvements of firm productivity when domestic upstream and downstream firms become more internationalized and therefore offshore (import intermediate inputs) and inshore (export final output for intermediate input usage) intensively. China’s accession to the WTO, which in the case of Belgium reduced trade barriers to China, help us confirm that these inter-industry productivity improvements can also be generated form a quasi-trade liberalization event. Upstream linkages are the dominant source of these productivity benefits and are reaped mainly from medium-low tech, labor intensive and upstream industries. Finally, we draw upon the importance of biases in our results from misspecifications common in the literature. From ignoring the dynamic nature of productivity, results appear overestimated or with sign reversals. From estimating a value-added instead of a gross-output production function, results become spurious.
    Keywords: Offshoring, supply chain, spillovers, productivity
    JEL: F2 F14 F15
    Date: 2016–02
  8. By: Lionel Nesta (OFCE); Francesco Vona (OFCE)
    Abstract: This policy brief addresses the issue of the complementarity of policies supporting renewable energy and market competition in fostering green innovation. Innovation is commonly regarded as the best answer to sustaining current life standards while overcoming severe environmental concerns. This is especially relevant in the case of energy, where increasing resource scarcity calls for the rapid development of alternative energy sources, notably renewable energy. 2) Although as of today, renewable energy (RE henceforth) cannot compete with fossil fuel in terms of production costs, impressive technological progress has paved the way to new promising sources such as biomass, solar and wind, among others. 3) Countries too have developed areas of specialization in specific types of renewable energy sources: for example, Denmark has established a strong technological advantage in wind technologies, Sweden and Germany have specialized in bioenergy, Germany and Spain in solar, Norway and Austria in Hydropower. France, with its specialization in nuclear energy, seems to be lagging behind in RE innovation, as compared with other major players such as the USA or Germany.
    Keywords: Renewable energy; Green innovation; Market competition
    JEL: Q2 Q4
    Date: 2014–10

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