nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2016‒04‒30
ten papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. The role of technological trajectories in catching-up-based development: An application to energy efficiency technologies By Zhong, Sheng; Verspagen, Bart
  2. Reconciling the Firm Size and Innovation Puzzle By Anne Marie Knott; Carl Vieregger
  3. Negative Skill Sorting across Production Chains By Yoko Asuyama; Hideaki Goto
  4. Incomplete contracts and the internal organization of firms By Philippe Aghion; Nick Bloom; John Van Reenen
  5. Trade and Labor Market Dynamics By Lorenzo CALIENDO; Maximiliano DVORKIN; Fernando PARRO
  6. “Innovation, heterogeneous firms, and the region” By Enrique López-Bazo; Elisabet Motellón
  7. China’s Pursuit of Environmentally Sustainable Development: Harnessing the New Engine of Technological Innovation By Jin, Wei; Zhang, ZhongXiang
  8. On regional innovator networks as hubs for innovative ventures By Uwe Cantner; Tina Wolf
  9. The Impact of Services on Economic Complexity: Service Sophistication as Route for Economic Growth By Viktor Stojkoski; Zoran Utkovski; Ljupco Kocarev
  10. Misallocation, Establishment Size, and Productivity By Pedro Bento; Diego Restuccia

  1. By: Zhong, Sheng (UNU-MERIT); Verspagen, Bart (UNU-MERIT & SBE, Maastricht University)
    Abstract: We argue that the analysis level of a technological trajectory is very suitable to analyse the decisions of firms in latecomer countries with regard to the technological area that they should focus on. Technological trajectories are the main focal points along which technological innovation develops, and they are more detailed than the common sectors, like electronics of pharmaceuticals, that are used in the analysis of catching-up based growth. We present a collection of methods that has been proposed in the literature to identify technological trajectories. These methods use patent citation networks, and are applied to two separate fields in energy efficiency technologies. We identify the relevant technological trajectories, and analyse how the main countries active in these fields can be classified as either latecomer or incumbent countries. We then present a measure for how much patents from a particular country contribute to the main technological trajectories in the field, and to what extent they are derived from these trajectories. We use an explorative regression model to establish that latecomer countries tend to contribute to a lesser extent than incumbents to the main technological trajectories in the fields we investigate.
    Keywords: technological trajectories, patent citation networks, latecomer innovation strategy
    JEL: O31 O33 O47
    Date: 2016–03–29
  2. 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
  3. By: Yoko Asuyama (Institute of Developing Economies, Japan External Trade Organization); Hideaki Goto (International University of Japan)
    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: Skill sorting, Input quality, Production chains
    JEL: J24 L23
    Date: 2016–03
  4. By: Philippe Aghion; Nick Bloom; John Van Reenen
    Abstract: We survey the theoretical and empirical literature on decentralization within firms. We first discuss how the concept of incomplete contracts shapes our views about the organization of decision-making. We then overview the empirical evidence on the determinants of decentralization and on the effects of decentralization on firm performance. A number of factors highlighted in the theory are shown to be important in accounting for delegation, such as heterogeneity and congruence of preferences as proxied by trust. Empirically, competition, human capital, and IT also appear to foster decentralization. There are substantial gaps between theoretical and empirical work and we suggest avenues for future research in bridging this gap (JEL O31, O32, O33, F23).
    JEL: L22 L23
    Date: 2014–05
  5. By: Lorenzo CALIENDO; Maximiliano DVORKIN; Fernando PARRO
    Abstract: We develop a dynamic trade model where production and consumption take place in spatially distinct labor markets with varying exposure to domestic and international trade. The model recognizes the role of labor mobility frictions, goods mobility frictions, geographic factors, and input-output linkages in determining equilibrium allocations. We show how to solve the equilibrium of the model without estimating productivities, migration frictions, or trade costs, which are usually difficult to identify. We calibrate the model to 38 countries, 50 U.S. states, and 22 sectors, and use the rise in China's import competition to quantify the effects across more than 1,000 U.S. labor markets. We find that China's trade shock resulted in a loss of 800,000 U.S. manufacturing jobs, about 50% of the change in the manufacturing employment share unexplained by a secular trend. We find aggregate welfare gains, but, due to trade and migration frictions, the welfare and employment effects vary across U.S. labor markets. Estimated transition costs to the new long-run equilibrium are also heterogeneous and reflect the importance of accounting for labor dynamics.
    Date: 2016–03
  6. By: Enrique López-Bazo (AQR Research Group-IREA. University of Barcelona); Elisabet Motellón (AQR Research Group-IREA. Universitat Oberta de Catalunya)
    Abstract: This paper investigates the role of regional determinants on innovation performance controlling by the firm’s absorptive capacity and other sources of firm heterogeneity. The findings for a sample of firms in Spain support the hypothesis that regional determinants matter, though their role is subtler than the one frequently assumed. Rather than a direct influence on firm’s innovation, the regional context moderates the effect of internal determinants. In the case of product innovation the most important mechanism of interaction seems to be operating through cooperation in innovation, whereas for process innovation it seems to be through highly skilled labour.
    Keywords: product innovation; process innovation; firm; multilevel modelling; Spanish regions. JEL classification: D21; O31; R10; R15
    Date: 2016–04
  7. By: Jin, Wei; Zhang, ZhongXiang
    Abstract: Whether China continues its business-as-usual investment-driven, environment-polluting growth pattern or adopts an investment and innovation-driven, environmentally sustainable development holds important implications for both national and global environmental governance. Building on a Ramsey-Cass-Koopmans growth model that features endogenous technological change induced by R&D and knowledge stock accumulation, this paper presents an exposition, both analytically and numerically, of the mechanism underlining China’s economic transition from an investment-driven, pollution-intensive to an investment and innovation-driven, environmentally sustainable growth path. We show that if R&D technological innovation is incorporated into China’s growth mechanism, then at some tipping point in time when marginal welfare gain of R&D for knowledge accumulation becomes equalized with that of investment for physical asset deployment, China’s economy will launch capital investment and R&D simultaneously and make a transition to a sustainable growth path along which consumption, capital investment, and R&D have a balanced share of 5: 4: 1, consumption, capital stock, and knowledge stock all grow at a rate of 4.9%, and environmental quality improves at a rate of 2.5%. In contrast, if R&D technological innovation is not harnessed as a new growth engine, then China’s economy will follow its business-as-usual investment-driven growth path along which standalone accumulation of dirty physical capital stock will lead to an more than 200-fold increase in environmental pollution.
    Keywords: Endogenous Technological Change, Sustainable Development, Economic Growth Model, China’s Economic Transition, Resource /Energy Economics and Policy, Q55, Q58, Q43, Q48, O13, O31, O33, O44, F18,
    Date: 2016–03–18
  8. By: Uwe Cantner (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Tina Wolf (University of Southern Denmark, Odense)
    Abstract: At least since Schumpeter published his work 'The Theory of Economic Development' (1912), a wide body of literature has focused on the evolutionary process behind firm growth and survival. Recently a growing interest is devoted to the variable 'location' as a critical factor, shaping firm performance. However, less attention has been paid to the region-specific characteristics that may play a relevant role in determining the growth and survival of a firm. Some works see university-based knowledge spillovers as one such factor (Audretsch and Lehmann 2005, Cassia et al. 2009). This paper extends this approach to the regional innovator network, promoting region-specific knowledge spillovers. Two data bases are applied. First, patent data delivers the innovator network for Thuringia. The second data base contains firm specific information on innovative ventures founded in Thuringia in the period between 1990 and 2006. The results show that the firm's individual probability to be innovative and connected to the innovator network positively influences the chances of this firm to survive.
    Keywords: Innovation, Entrepreneurship, Networks, Inventor, Patents, Survival
    JEL: L26 D85 P25 O31
    Date: 2016–04–15
  9. By: Viktor Stojkoski; Zoran Utkovski; Ljupco Kocarev
    Abstract: Economic complexity reflects the amount of knowledge that is embedded in the productive structure of an economy. By combining tools from network science and econometrics, a robust and stable relationship between a country's productive structure and its economic growth has been established. Here we report that not only goods but also services are important for predicting the rate at which countries will grow. By adopting a terminology which classifies manufactured goods and delivered services as products, we investigate the influence of services on the country's productive structure. In particular, we provide evidence that complexity indices for services are in general higher than those for goods, which is reflected in a general tendency to rank countries with developed service sector higher than countries with economy centred on manufacturing of goods. By focusing on country dynamics based on experimental data, we investigate the impact of services on the economic complexity of countries measured in the product space (consisting of both goods and services). Importantly, we show that diversification of service exports and its sophistication can provide an additional route for economic growth in both developing and developed countries.
    Date: 2016–04
  10. By: Pedro Bento; Diego Restuccia
    Abstract: We construct a new dataset using census, survey, and registry data from hundreds of sources to document a clear positive relationship between development and average establishment size in manufacturing across 134 countries. We rationalize this relationship using a standard model of heterogeneous production units that features endogenous entry and productivity investment. The model connects small operational scales to the prevalence in poor countries of higher productivity elasticities of distortions. The model also rationalizes the finding in poor countries of low establishment-level productivity and low aggregate productivity investment. The model provides a tractable framework to decompose the importance of factor misallocation, life-cycle productivity investment, and entry-level productivity in accounting for aggregate productivity differences across countries. A calibrated version of the model implies that when the productivity elasticity of distortions increases from 0.09 in the U.S. to 0.5 in India, aggregate productivity falls by 53 percent and average establishment size by 86 percent. Establishment productivity at entry and factor misallocation roughly account equally for the entire reduction in aggregate productivity, whereas the reduction in life-cycle productivity growth is fully offset by its effect on establishment entry.
    Keywords: misallocation, establishment size, productivity, investment, idiosyncratic distortions.
    JEL: O1 O4
    Date: 2016–04–06

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