nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2016‒05‒14
eight papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Global firms By Andrew B. Bernard; J. Bradford Jensen; Stephen J. Redding; Peter K. Schott
  2. Swimming upstream: input-output linkages and the direction of product adoption By Johannes Boehm; Luca Fornaro; Swati Dhingra
  3. Concentration on the few? R&D and innovation in German firms between 2001 and 2013 By Rammer, Christian; Schubert, Torben
  4. Are in-house and outsourcing innovation strategies interlinked? Evidence from the European agri-food sector By Materia, Valentina; Pascucci, Stefano; Dries, Liesbeth
  5. Why do patents facilitate trade in technology? Testing the disclosure and appropriation effects By Gaetan de Rassenfosse; Alfons Palangkaraya; Elizabeth Webster
  6. Quality of government and social capital as drivers of regional diversification in Europe By Nicola Cortinovis; Jing Xiao; Ron Boschma; Frank van Oort
  7. Do tax incentives for research increase firm innovation? An RD Design for R&D By Elias Einiö; Dechezleprêtre; - Martin Antoine; - Nguyen Ralf; - Van Reenen Kieu-Trang; John
  8. Migration and Innovation Diffusion : An Eclectic Survey By Francesco LISSONI

  1. By: Andrew B. Bernard; J. Bradford Jensen; Stephen J. Redding; Peter K. Schott
    Abstract: Research in international trade has changed dramatically over the last twenty years, as attention has shifted from countries and industries towards the firms actually engaged in international trade. The now standard heterogeneous firm model posits a continuum of firms that compete under monopolistic competition (and hence are measure zero) and decide whether to export to foreign markets. However, much of international trade is dominated by a few “global firms,” which participate in the international economy along multiple margins and are large relative to the markets in which they operate. We outline a framework that allows firms to be of positive measure and to decide simultaneously on the set of production locations, export markets, input sources, products to export, and inputs to import. We use this framework to interpret features of U.S. firm and trade transactions data and highlight interdependencies across these margins of firm international participation. Global firms participate more intensively along each margin, magnifying the impact of underlying differences in firm characteristics, and explaining their dominance of aggregate international trade.
    Keywords: firm heterogeneity; international trade; multinationals; multi-product firms
    JEL: E21 E24 F53 O32 O47
    Date: 2016–04
  2. By: Johannes Boehm; Luca Fornaro; Swati Dhingra
    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: J1 N0
    Date: 2016–02
  3. By: Rammer, Christian; Schubert, Torben
    Abstract: [Introduction] Innovation expenditures in Germany have increased at an impressive rate in the course of the last two decades. Between 1995 and 2013, businesses in Germany raised their spending for developing and introducing new products and new processes from €60.8bn to €144.6bn resulting in a compound annual growth rate of 4.9% (Rammer et al. 2015). While these numbers suggest that German firms have become ever more focused on innovation, they hide the fact that this rise has mainly been driven by large firms belonging to a few sectors. When we look at the above numbers by firm size we find that firms with fewer than 500 employees experienced only a very modest increase in their innovation expenditures (€25.7bn in 1995 vs. €34.5bn in 2013, i.e. 1.6% per year) whereas large firms with more than 500 employees increased their spending from €35.1bn in 1995 to €110.1bn in 2013 (6.6% per year). In line with these observations we also find a concentration of the activities on fewer firms. In particular, the share of innovators – firms that have introduced at least one product or process innovation during the preceding three years – has similarly declined since the late 1990s. Having reached a peak in 1999 at 55.5%, it dropped to 43.7% in 2007 and further declined to 37.1% in 2013. A look at the sector distribution conveys a similar concentration. In 1995, the R&D intensive manufacturing sectors (pharmaceuticals, chemicals, electronics, machinery & equipment, vehicles) spent €30.9bn on innovation and increased that figure to €92.6bn in 2013 (+6.3% per year). Low-tech manufacturing and service sectors expanded their innovation expenditure by an average annual rate of 3.1%. These developments would not be problematic if they were due to firms from high-tech sectors growing at an above-average rate. While some well-known examples of this phenomenon also exist in Germany, e.g. the software company SAP, the absolute numbers of such cases is very limited. Moreover, the share of value added of highly R&D-intensive sectors has remained fairly stable in Germany. This makes this explanation implausible. [...]
    Date: 2016
  4. By: Materia, Valentina; Pascucci, Stefano; Dries, Liesbeth
    Abstract: The paper investigates the determinants of innovation strategies in the agri-food sector and the potential complementarity of these strategies. Innovation strategies are distinguished as in-house and outsourcing. The choice between strategies is motivated by transaction cost minimization, property rights appropriation and optimization of firms’ resources and competences. A bivariate probit model is implemented using cross-section data on 1,393 agri-food firms in seven EU countries. Results show that: decisions to innovate in-house or to outsource are not interlinked; high quality human resources and the use of ICT influence both the decision to innovate in-house and outsourcing, while organizational aspects, especially those related to decision-making within the firm, are relevant only for in-house innovation. Finally, we also find that large and internationalized firms are more likely to innovate in-house.
    Keywords: Consumer/Household Economics, Food Consumption/Nutrition/Food Safety,
    Date: 2015
  5. By: Gaetan de Rassenfosse (Ecole polytechnique federale de Lausanne); Alfons Palangkaraya (Swinburne University of Technology); Elizabeth Webster (Swinburne University of Technology)
    Abstract: Evidence suggests that patents facilitate technology transactions but the reasons for the effect are unclear. Patents may assist trade in technology by either: (i) protecting buyers against the expropriation of the idea (the 'appropriation effect'); or (ii) increasing information sharing during the negotiation phase through publication of technical details contained in the patent document (the 'disclosure effect'). We estimate the strength of both effects using exact matching analysis on a novel dataset of 860 technology transaction negotiations. We find evidence for the appropriation but not the disclosure effect. Technology transaction negotiations involving a granted patent instead of a pending patent (our test for the appropriation effect) are significantly more likely to be successfully completed. The appropriation effect is stronger in technology fields where patent protection is known to be more effective such as biotech, chemicals, drugs and medical.
    Keywords: appropriability, disclosure, licensing, market for technology, patent
    JEL: O34 O38
    Date: 2016–04
  6. By: Nicola Cortinovis; Jing Xiao; Ron Boschma; Frank van Oort
    Abstract: Industrial diversification is considered crucial for economies to prosper. Recent studies have shown that regional economies tend to diversify into sectors that are related to those already present in the region. However, no study yet has investigated the impact of regional institutions. The objective of the paper is to bring together the literatures on related diversification and institutions by analyzing how formal and informal institutions influence regional diversification. Analyzing 118 European regions in the period 2004 and 2012, we find evidence that institutions matter for regions to diversify into new industries. Bridging social capital is a key driver of regional diversification, in addition to relatedness, in contrast to quality of government in regions. Bonding social capital has a negative impact in regions with a low quality of government. This suggests that regional institutions relevant for structural change in regions are predominantly informal in character rather than formal, and bridging rather than bonding.
    Keywords: regional diversification, social capital, quality of government, institutions
    JEL: R11 O14
    Date: 2016–05
  7. By: Elias Einiö; Dechezleprêtre; - Martin Antoine; - Nguyen Ralf; - Van Reenen Kieu-Trang; John
    Abstract: We present the first evidence showing causal impact of research and development (R&D) tax incentives on innovation outcomes. We exploit a change in the asset-based size thresholds for eligibility for R&D tax subsidies and implement a Regression Discontinuity Design using administrative tax data on the population of UK firms. There are statistically and economically significant effects of the tax change on both R&D and patenting, with no evidence of a decline in the quality of innovation. R&D tax price elasticities are large at about 2.6, probably because the treated group is from a sub-population subject to financial constraints. There does not appear to be pre-policy manipulation of assets around the thresholds that could undermine our design, but firms do adjust assets to take advantage of the subsidy post-policy. We estimate that over 2006-11 business R&D would be around 10% lower in the absence of the tax relief scheme.
    Keywords: R&D, patents, tax, innovation, Regression Discontinuity design
    JEL: H32 O31 H23 O32 H25
    Date: 2016–04–13
  8. By: Francesco LISSONI
    Abstract: In the new era of mass migration, with highly skilled individuals playing a key role, the role of migration in innovation diffusion is a topical issue. The paper organizes several strands of literature, from the history of religious minorities to the spatial analysis of knowledge flows. Three main themes emerge: the distinction between mobility and migration, the directions of flows, and their contents. Migration supports diffusion from origin to host countries, but also in the opposite direction, as well as within and across destinations. Distinguishing between information access and knowledge exchanges remain a major item of the research agenda.
    Keywords: migration ; innovation ; diffusion
    JEL: O33 F22 J61
    Date: 2016

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