nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2016‒04‒09
ten papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. On the robustness of the fat-tailed distribution of firm growth rates: a global sensitivity analysis By Giovanni Dosi; Marcelo C. Pereira; Maria Enrica Virgillito
  2. Rethinking Deindustrialization By Andrew B. Bernard; Valerie Smeets; Frederic Warzynski
  3. Management Practices, Workforce Selection,and Productivity By Bender, Stefan; Bloom, Nicholas; Card, David; Van Reenen, John; Wolter, Stefanie
  4. Technology entry in the presence of patent thickets By Bronwyn H. Hall; Christian Helmers; Georg von Graevenitz
  5. Reconciling the Firm Size and Innovation Puzzle By Anne Marie Knott; Carl Vieregger
  6. No Country for Young Firms?: Start-up Dynamics and National Policies By Flavio Calvino; Chiara Criscuolo; Carlo Menon
  7. Outsourced R&D and GDP Growth By Anne Marie Knott
  8. The path of innovation: purchasing and supplier involvement into new product development By Davide Luzzini; Markus Amann; Federico Caniato; Michael Essig; Stefano Ronchi
  9. Inter-industry labor flows By Frank Neffke; Anne Otto; Antje Weyh
  10. Competition, Innovation, and the Number of Firms By Pedro Bento

  1. By: Giovanni Dosi; Marcelo C. Pereira; Maria Enrica Virgillito
    Abstract: Firms grow and decline by relatively lumpy jumps which cannot be accounted by the cumulation of small, 'atom-less', independent shocks. Rather 'big' episodes of expansion and contraction are relatively frequent. More technically, this is revealed by fat tail distributions of growth rates. This applies across different levels of sectoral disaggregation, across countries, over different historical periods for which there are available data. What determines such property? In Dosi et al. (2015) we implemented a simple multi-firm evolutionary simulation model, built upon the coupling of a replicator dynamic and an idiosyncratic learning process, which turns out to be able to robustly reproduce such a stylized fact. Here, we investigate, by means of a Kriging meta-model, how robust such 'ubiquitousness' feature is with regard to a global exploration of the parameters space. The exercise confirms the high level of generality of the results in a statistically robust global sensitivity analysis framework.
    Keywords: Firm Growth Rates, Fat Tail Distributions, Kriging Meta-Modeling, Near-Orthogonal Latin Hypercubes, Variance-Based Sensitivity Analysis
    Date: 2016–03–31
  2. By: Andrew B. Bernard; Valerie Smeets; Frederic Warzynski
    Abstract: Manufacturing in high-income countries is on the decline and Denmark is no exception. Manufacturing employment and the number of firms have been shrinking as a share of the total and in absolute levels. This paper uses a rich linked employer-employee dataset to examine this decline from 1994 to 2007. We propose a different approach to analyze deindustrialization and generate a series of novel stylized facts about the evolution. While most of the decline can be attributed to firm exit and reduced employment at surviving manufacturers, we document that a non-negligible portion is due to firms switching industries, from manufacturing to services. We focus on this last group of firms before, during, and after their sector switch. Overall this is a group of small, highly productive, import intensive firms that grow rapidly in terms of value-added and sales after they switch. By 2007, employment at these former manufacturers equals 8.7 percent of manufacturing employment, accounting for half the decline in manufacturing employment. We focus on the composition of the workforce as firms make their transition. In addition, we identify two types of switchers: one group resembles traditional wholesalers and another group that retains and expands their R&D and technical capabilities. Our findings emphasize that the focus on employment at manufacturing firms overstates the loss in manufacturing-related capabilities that are actually retained in many firms that switch industries.
    JEL: D21 L25
    Date: 2016–03
  3. By: Bender, Stefan; Bloom, Nicholas; Card, David; Van Reenen, John; Wolter, Stefanie
    Abstract: Recent research suggests that much of the cross-firm variation in measured productivity is due to differences in use of advanced management practices. Many of these practices - including monitoring, goal setting, and the use of incentives - are mediated through employee decision-making and effort. To the extent that these practices are complementary with workers' skills, better-managed firms will tend to recruit higher-ability workers and adopt pay practices to retain these employees. We use a unique data set that combines detailed survey data on the management practices of German manufacturing firms with longitudinal earnings records for their employees to study the relationship between productivity, management, worker ability, and pay. As documented by Bloom and Van Reenen (2007) there is a strong partial correlation between management practice scores and firm-level productivity in Germany. In our preferred TFP estimates only a small fraction of this correlation is explained by the higher human capital of the average employee at better-managed firms. A larger share (about 13%) is attributable to the human capital of the highest-paid workers, a group we interpret as representing the managers of the firm. And a similar amount is mediated through the pay premiums offered by better-managed firms. Looking at employee inflows and outflows, we confirm that better-managed firms systematically recruit and retain workers with higher average human capital. Overall, we conclude that workforce selection and positive pay premiums explain just under 30% of the measured impact of management practices on productivity in German manufacturing.
    Keywords: Management practices; productivity; wages
    JEL: L2 M2 O32 O33
    Date: 2016–03
  4. By: Bronwyn H. Hall (Institute for Fiscal Studies); Christian Helmers (Institute for Fiscal Studies and Santa Clara University); Georg von Graevenitz (Institute for Fiscal Studies and Queen Mary University of London)
    Abstract: We analyze the effect of patent thickets on entry into technology areas by firms in the UK. We present a model that describes incentives to enter technology areas characterized by varying technological opportunity, complexity of technology, and the potential for hold-up in patent thickets. We show empirically that our measure of patent thickets is associated with a reduction of first time patenting in a given technology area controlling for the level of technological complexity and opportunity. Technological areas characterized by more technological complexity and opportunity, in contrast, see more entry. Our evidence indicates that patent thickets raise entry costs, which leads to less entry into technologies regardless of a firm’s size.
    Keywords: IPR, patents, entry, technological opportunity, technological complexity, hold-up
    JEL: O34 O31 L20 K11
    Date: 2016–02
  5. By: Anne Marie Knott; Carl Vieregger
    Abstract: Since Schumpeter, there has been a long-standing debate regarding the optimal firm size for innovation. Empirical results have settled into a puzzle: R&D spending increasing with scale while R&D productivity decreases with scale. Thus large firms appear irrational. We propose the puzzle stems from the fact that product and patent counts undercount large firm innovation. To test that proposition we use recently available NSF BRDIS survey data of firms R&D practices as well as a broader measure of R&D productivity. Using the broader measure, we find that both R&D spending and R&D productivity increase with scale—thus resolving the puzzle. We further find that while large firms and small firms differ in the types of R&D they conduct, there is no type whose returns decrease in scale—there are merely types for which the small firm penalty is less severe.
    Date: 2016–03
  6. By: Flavio Calvino; Chiara Criscuolo; Carlo Menon
    Abstract: This paper provides new cross-country evidence on the links between national policies and the growth patterns of start-ups. In particular, it compares for the first time the heterogeneous effects of national policies on entrants and incumbents, within the same country, industry, and time period. A number of key facts emerge. First, start-ups in volatile sectors and in sectors that exhibit higher growth dispersion are significantly more exposed to national policies than start-ups in other sectors. Second, start-ups are systematically more exposed than incumbents to the policy environment and national framework conditions. Third, the results suggest that timely bankruptcy procedures and strong contract enforcement are key to establishing a dynamic start-up environment.
    Date: 2016–04–01
  7. By: Anne Marie Knott
    Abstract: Endogenous growth theory holds that growth should increase with R&D. However coarse comparison between R&D and US GDP growth over the past forty years indicates that inflation scientific labor increased 2.5 times, while GDP growth was at best stagnant. The leading explanation for the disconnect between theory and the empirical record is that R&D has gotten harder. I develop and test an alternative view that firms have become worse at it. I find no evidence R&D has gotten harder. Instead I find firms’ R&D productivity declined 65%, and that the main culprit in the decline is outsourced R&D, which is unproductive for the funding firm. This offers hope firms’ R&D productivity and economic growth may be fairly easily restored by bringing outsourced R&D back in-house.
    Date: 2016–03
  8. By: Davide Luzzini (Audencia Recherche - Audencia); Markus Amann (Bundeswehr University Munich); Federico Caniato (Politecnico di Milano [Milan]); Michael Essig (Bundeswehr University Munich); Stefano Ronchi (Politecnico di Milano [Milan])
    Abstract: This paper aims to investigate the effects of supplier collaboration on the firm innovation performance as well as the enabling characteristics of the purchasing function. This is an original contribution as few papers empirically test the effect of supplier collaboration (meant as supplier involvement, development, and integration) on innovation performance and –simultaneously – the contribution of strategic sourcing activities and purchasing knowledge. Also, we explore the technological uncertainty of the purchase as an important contingent factor that might influence the firm’s innovation strategy and the emphasis on supplier collaboration or strategic sourcing. Towards this end, we develop a theoretical framework and test it through a survey conducted on a sample of 498 companies worldwide. Results show that innovation, as a category priority, does lead to emphasize supplier collaboration and strategic sourcing which, in turn, ensure better innovation performance. Empirical evidence also shows that, on the one hand, adequate purchasing (managers) knowledge enables greater supplier collaboration and strategic sourcing; on the other hand, technological uncertainty put greater emphasis on innovation strategy as well as on strategic sourcing.
    Keywords: Innovation, Supplier collaboration, Strategic sourcing, Purchasing knowledge, Technological uncertainty
    Date: 2015
  9. By: Frank Neffke; Anne Otto; Antje Weyh
    Abstract: Labor flows across industries reallocate resources and diffuse knowledge among economic activities. However, surprisingly little is known about the structure of such inter-industry flows. How freely do workers switch jobs among industries? Between which pairs of industries do we observe such switches? Do different types of workers have different transition matrices? Do these matrices change over time? Using German social security data, we generate stylized facts about inter-industry labor mobility and explore its consequences. We find that workers switch industries along tight paths that link industries in a sparse network. This labor-flow network is relatively stable over time, similar for workers in different occupations and wage categories and independent of whether workers move locally or over larger distances. When using these networks to construct inter-industry relatedness measures they prove better predictors of local industry growth rates than co-location or input-based alternatives. However, because industries that exchange much labor typically do not have correlated growth paths, the sparseness of the labor-flow network does not necessarily prevent a smooth reallocation of workers from shrinking to growing industries. To facilitate future research, the inter-industry relatedness matrices we develop are made available as an online appendix to this paper.
    Keywords: labor mobility, relatedness, skills, regional growth, Germany, human capital specificity
    Date: 2016–04
  10. By: Pedro Bento (Texas A&M University, Department of Economics)
    Abstract: I look at manufacturing firms across countries and over time, and find that barriers to competition actually increase the number of firms. This finding contradicts a central feature of all current models of endogenous markups and free entry, that higher barriers should reduce competition and firm entry, thereby increasing markups. To rationalize this finding, I extend a standard model in two ways. First, I allow for multi-product firms. Second, I model barriers as increasing the cost of entering a product market, rather than the cost of forming a firm. Higher barriers to competition reduce the number of products per firm and per market, but increase markups and the total number of firms. Calibrating the model to U.S. data, I estimate cross-country differences in consumption as large as 65 percent from observed differences in barriers to competition. In addition, increasing barriers generates either a negative or inverted-U relationship between firm-level innovation and markups. While higher markups encourage product-level innovation through the usual Schumpeterian mechanism, firm-level innovation (at least eventually) drops as firms reduce their number of products. I provide new evidence supporting these two novel implications of the model - that product-level innovation increases with barriers to competition, while the number of products per firm decreases.
    Keywords: product market regulation, entry costs, firm size, productivity, innovation, markups, competition, multi-product firms, innovation, inverted-U
    JEL: L1 L5 O1 O3 O4
    Date: 2016–03–23

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