nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2016‒09‒18
fifteen papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. River deep, mountain high: Of long-run knowledge trajectories within and between innovation clusters By Nomaler, Onder; Verspagen, Bart
  2. Product switching and the business cycle By Andrew B. Bernard; Toshihiro Okubo
  3. Competition, Product Proliferation and Welfare: A Study of the U.S.\ Smartphone Market By Chenyu Yang; Ying Fan
  4. Productivity and reallocation: evidence from the universe of Italian firms By Andrea Linarello; Andrea Petrella
  5. Firm size distortions and the productivity distribution: evidence from France By Luis Garicano; Claire Lelarge; John Van Reenen
  6. Tax evasion, firm dynamics and growth By Emmanuele Bobbio
  7. Labour Market Regulations and Capital Intensity By Gilbert Cette; Jimmy Lopez; Jacques Mairesse
  8. Quality Growth: From Process to Product Innovation Along the Path of Development By Esteban Jaimovich
  9. Do Stronger Patents Stimulate or Stifle Innovation? The Crucial Role of Financial Development By Chu, Angus C.; Cozzi, Guido; Pan, Shiyuan; Zhang, Mengbo
  10. Bridging the Gap: Do Fast Reacting Fossil Technologies Facilitate Renewable Energy Diffusion? By Verdolini, Elena; Vona, Francesco; Popp, David
  11. The effect of entry on R&D networks By Emmanuel Petrakis; Nikolas Tsakas
  12. International Research Networks: Determinants of Country Embeddedness By Holger Graf; Martin Kalthaus
  13. Innovation and Interactions: A Bibliometrics Study on intra‐firm Coordination By de Avila Santos, João Heitor; de Barcellos, Marcia Dutra; Sauvée, Loïc
  14. Global Value Chain and the Competitiveness of Asian Countries By KIYOTA Kozo; OIKAWA Keita; YOSHIOKA Katsuhiro
  15. Who buys what, where: Reconstruction of the international trade flows by commodity and industry By Yuichi Ikeda; Tsutomu Watanabe

  1. By: Nomaler, Onder (UNU-MERIT, and Eindhoven University of Technology); Verspagen, Bart (UNU-MERIT, and Maastricht University, SBE)
    Abstract: We bring together the topics of geographical clusters and technological trajectories, and shift the focus of the analysis of regional innovation to main technological trends rather than firms. We define a number of inventive clusters in the US space and show that long chains of citations mostly take place between these clusters. This is reminiscent of the idea of global pipelines of knowledge transfer that is found in the geographical literature. The deep citations are used to identify technological trajectories, which are the main directions along which incremental technological progress accumulates into larger changes. While the origin and destination of these trajectories are concentrated in space, the intermediate nodes travel long distances and cover many locations across the globe. We conclude by calling for more theoretical and empirical attention to the "deep rivers" that connect the "high mountains" of local knowledge production.
    Keywords: patent citations, regional concentration of inventive activities, technological trajectories, regional clusters, technological trends
    JEL: O33 O31 R11
    Date: 2016–09–14
  2. By: Andrew B. Bernard; Toshihiro Okubo
    Abstract: This paper explores role of product adding and dropping within manufacturing firms over the business cycle. While a substantial body of work has explored the importance of the extensive margins of firm entry and exit in employment and output flows, only recently has research begun to examine the adjustment across products within firms and its importance for firm and aggregate output and employment flows. Using a novel, annual firm-product data set covering all Japanese manufacturing firms with more than 4 employees from 1992 to 2006, we provide the first evidence on annual changes in product adding and dropping by continuing firms over the business cycle. We find very high rates of product adding and dropping by continuing firms between the last year of the recession and the first year of the subsequent expansion and offer an explanation and supporting evidence based on a “trapped factors” model of firm behavior.
    Keywords: product adding; product dropping; multi-product firms; trapped factors
    JEL: E32 L11 L21 L25 L60
    Date: 2016–05
  3. By: Chenyu Yang (University of Michigan, Ann Arbor); Ying Fan (University of Michigan)
    Abstract: We develop and estimate a structural model of the U.S. smartphone market. Based on the estimates, we study (1) whether there are too few or too many products in the market from a welfare point of view; and (2) how competition affects product offerings in the market. We find that there are too few products and a reduction in competition further decreases the product offerings. These results suggest that merger policies should be stricter when we take into account the effect of merger on firms' product choices in addition to its effect on prices.
    Date: 2016
  4. By: Andrea Linarello (Banca d'Italia); Andrea Petrella (Banca d'Italia)
    Abstract: This paper investigates the contribution of allocative efficiency to aggregate labor productivity growth in Italy between 2005 and 2013. Exploiting a unique dataset that covers the universe of active firms, we find that allocative efficiency accounted for 35 per cent of aggregate productivity in 2005 and its weight increased by almost 7 percentage points during the period of observation. We show that the dynamics of aggregate labor productivity benefited from the reallocation of resources among continuing firms and from the net effect of business demography. Among industries, we find that reallocation has been stronger in industries that are more exposed to import competition from developing countries. Moreover, we document that the observed adjustments have not evenly affected all firms across the productivity distribution: selection has become tougher for firms belonging to the lower tail, forcing the exit of the least productive firms and favoring the reallocation of the workforce to the best performing firms.
    Keywords: aggregate labor productivity, allocative efficiency
    JEL: L25 O47
    Date: 2016–09
  5. By: Luis Garicano; Claire Lelarge; John Van Reenen
    Abstract: We show how size-contingent laws can be used to identify the equilibrium and welfare effects of labor regulation. Our framework incorporates such regulations into the Lucas (1978) model and applies it to France where many labor laws start to bind on firms with 50 or more employees. Using population date on firms between 1995 and 2007, we structurally estimate the key parameters of our model to construct counterfactual size, productivity and welfare distributions. We find that the cost of these regulations is equivalent to that of a 2.3% variable tax on labor. In our baseline case with French levels of partial real wage inflexibility welfare costs of the regulations are 3.4% of GDP (falling to 1.3% if real wages were perfectly flexible downwards). The main losers from the regulation are workers – and to a lesser extent, large firms – and the main winners are small firms.
    Keywords: firm size; productivity; labor regulation; power law
    JEL: J8 L11 L25 L51
    Date: 2016–06
  6. By: Emmanuele Bobbio (Banca d'Italia)
    Abstract: Italy's growth performance has been lacklustre in the last two decades. The economy has a low R&D intensity; firms are smaller and less likely to grow or exit than firms in other advanced countries; the shadow economy is large. I show how these features arise simultaneously in a Schumpeterian growth model with heterogeneous firms where the tax auditing probability increases with firm size. Tax evasion confers a cost advantage over competitors. In equilibrium, small firms invest less in innovation because growing entails a (shadow) cost of fiscal regularization. Unfair competition forces other firms to lower the mark-up they charge for their new products, reducing the incentive to innovate. Market selection is hampered, further lowering the aggregate growth rate along the extensive margin. I calibrate the model on Italian firm-level data for the period 1995-2006 and find that enforcing taxes would have increased the long-run growth rate from 0.9% to 1.1%. The market share of high type firms would have been 6 percentage points higher and average firm size 20% higher. Also, I find that lowering the tax burden can have a significant impact on growth when the shadow economy is large, while the effect is negligible when taxes are enforced.
    Keywords: growth, innovation, selection, firm dynamics, tax evasion, size dependent policies
    JEL: O30 O43 H26
    Date: 2016–09
  7. By: Gilbert Cette; Jimmy Lopez; Jacques Mairesse
    Abstract: On the basis of a country*industry unbalanced panel data sample for 14 OECD countries and 18 industries covering the years 1988 to 2007, this study proposes an econometric investigation of the effects of the OECD Employment Protection Legislation (EPL) indicator on capital intensity for four capital components, and on the share of employment for two skill components. Our results relying on a difference-in-difference approach are the following: i) positive and significant effects for non-ICT physical capital intensity and the share of high-skilled employment; ii) non-significant effects for ICT capital intensity; and (iii) negative and significant effects for R&D capital intensity and the share of low-skilled employment. These results suggest that firms consider that the strengthening of Employment Protection Legislation is equivalent to a rise in the cost of labor, resulting in capital-to-labor substitution in favor of non-ICT capital and working at the disadvantage of low-skill relatively to high-skill workers. They indicate to the contrary that structural reforms for more labor flexibility weakening this legislation could have a favorable impact on firms’ R&D investment and their hiring of low-skill workers.
    JEL: C23 E22 E24 L50 O30 O43 O47
    Date: 2016–09
  8. By: Esteban Jaimovich (University of Surrey)
    Abstract: We propose a demand-driven growth theory where process innovations and product innovations fulfil sequential roles along the growth path. Process innovations must initially set the economy on a positive growth path. However, process innovations alone cannot fuel growth forever, as their benefits display an inherent tendency to wane. Product innovations are therefore also needed for the economy to keep growing in the long run. When the economy fails to switch from a growth regime steered by process innovation to one driven by product innovation, R&D effort and growth will eventually come to a halt. However, when the switch to a product innovation growth regime does take place, a virtuous circle gets ignited. This happens because product innovation effort not only keeps growth alive when incentives to undertake process innovation diminish, but it also regenerates profit prospects from further process innovation effort.
    JEL: O30 O31 O41
    Date: 2016–07
  9. By: Chu, Angus C.; Cozzi, Guido; Pan, Shiyuan; Zhang, Mengbo
    Abstract: This study explores the effects of patent protection in a distance-to-frontier R&D-based growth model with financial frictions. We find that whether stronger patent protection stimulates or stifles innovation depends on credit constraints faced by R&D entrepreneurs. When credit constraints are non-binding (binding), strengthening patent protection stimulates (stifles) R&D. The overall effect of patent protection on innovation follows an inverted-U pattern. An excessively high level of patent protection prevents a country from converging to the world technology frontier. A higher level of financial development influences credit constraints through two channels: decreasing the interest-rate spread and increasing the default cost. Via the interest-spread (default-cost) channel, patent protection is more likely to have a negative (positive) effect on innovation under a higher level of financial development. We test these results using cross-country regressions and find supportive evidence for the interest-spread channel.
    Keywords: Patent protection, credit constraints, economic growth, convergence
    JEL: E44 O31 O34
    Date: 2016–09
  10. By: Verdolini, Elena; Vona, Francesco; Popp, David
    Abstract: The diffusion of renewable energy in the power system implies high supply variability. Lacking economically viable storage options, renewable energy integration has so far been possible thanks to the presence of fast-reacting mid-merit fossil-based technologies, which act as back-up capacity. This paper discusses the role of fossil-based power generation technologies in supporting renewable energy investments. We study the deployment of these two technologies conditional on all other drivers in 26 OECD countries between 1990 and 2013. We show that a 1% percent increase in the share of fast-reacting fossil generation capacity is associated with a 0.88% percent increase in renewable in the long run. These results are robust to various modifications in our empirical strategy, and most notably to the use of system-GMM techniques to account for the interdependence of renewable and fast-reacting fossil investment decisions. Our analysis points to the substantial indirect costs of renewable energy integration and highlights the complementarity of investments in different generation technologies for a successful decarbonization process.
    Keywords: Renewable Energy Investments, Fossil Energy Investments, Complementarity, Energy and Environmental Policy, Research and Development/Tech Change/Emerging Technologies, Q42, Q48, Q55, O33,
    Date: 2016–08–30
  11. By: Emmanuel Petrakis; Nikolas Tsakas
    Abstract: We investigate the effect of potential entry on the formation and stability of R&D networks considering farsighted firms. We show that the presence of a potential entrant often alters the incentives of incumbent firms to establish an R&D link. In particular, incumbent firms may choose to form an otherwise undesirable R&D collaboration in order to deter the entry of a new firm. Moreover, an incumbent firm may refrain from establishing an otherwise desirable R&D collaboration, expecting to form a more profitable R&D link with the entrant. Finally, potential entry may lead an inefficient incumbent to exit the market. We also perform a welfare analysisand show that market and societal incentives are often misaligned.
    Keywords: R&D Networks; Entry; Farsighted stability
    JEL: D85 L24 O33
    Date: 2016–09
  12. By: Holger Graf (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Martin Kalthaus (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: We analyze the evolution of the international collaboration network in photovoltaic research. Using data on scientific publications for the period 1980-2015, we apply social network analysis to trace the evolution of the global network of countries and national research networks of organizations. Our objective is to identify the determinants of countries' international research embeddedness by looking at national policies and structural properties of the national research networks. We observe a steady increase of publications and collaboration within the global research network. While there is a small group of countries that remains central throughout all years, several countries emerge and catch up while others lose their relative position.We find that cohesion and connectedness of the national system positively affect research output as well as international embeddedness, whereas centralized systems are less embedded. Policy, especially demand side instruments, has a positive effect on publication output and embeddedness.
    Keywords: International Collaboration, Research Network, Photovoltaics, Instrument Mix, Bibliographic Data
    JEL: L14 O31 O38 Q42
    Date: 2016–09–13
  13. By: de Avila Santos, João Heitor; de Barcellos, Marcia Dutra; Sauvée, Loïc
    Abstract: The way the firm uses its technological resources and competences, the ability to combine/recombine components, methods, processes and techniques to offer products and services plays a central role on the innovation process (AFUAH, 2002). As Indarti (2010) points out, the interactions are a key element in the process of gaining access to, acquire, and develop knowledge for the stimulation of a firm’s activities in the field of innovation. From the intra‐firm perspective, to innovate, Paruchuri (2010) argues that a firm that can improve the diffusion of knowledge internally will benefit from enhanced innovative activity. Aalbers (2015) reflecting on the governance of knowledge sharing inside organizations, suggest that knowledge may come to be difficult to transfer because of the boundaries dynamics. In light of these authors insights the aim of this paper is to present an overview of the research regarding Interactions, Innovation and Intra‐firm Coordination. For that, we performed a bibliometrics study within the Web of Science (WoS) and the Elsevier’s Scopus libraries. A final sample of 111 papers were built after several refinements. The results suggest a growing tendency of the publications on the subject. The most cited papers have a gap of almost twelve years in between it, which shows that the construction of knowledge, about the topics innovation interactions and intra‐firm coordination are still attached to what was published a long time ago, for the initiators of this research field, but the works of Dolfsma et al (2008) and Leendert et al (2015) shows us a new trend and that new researchers are using these brand new works as references to perform new studies.
    Keywords: Innovation, Interactions, Coordination, Intra‐firm, Bibliometrics, Agribusiness,
    Date: 2016–05
  14. By: KIYOTA Kozo; OIKAWA Keita; YOSHIOKA Katsuhiro
    Abstract: This paper examines the competitiveness of industries in six Asian countries—China, India, Indonesia, Japan, South Korea, and Taiwan—using the World Input-Output Database tables from 1995 to 2011. Competitiveness is measured by the value added that industries contribute to the production of final goods, which we refer to as global value chain (GVC) income, rather than by gross exports. We find that the competitiveness of manufacturing is increasing in China, India, and Indonesia, whereas it is decreasing in Japan, South Korea, and Taiwan. Even though we focus on the GVC income rather than gross exports, the increasing competitiveness of Chinese, Indian, and Indonesian manufacturing is remarkable. We also find that, unlike EU countries, Asian countries have generally been able to combine increasing GVC job opportunities with a rise in real income. The GVC income in Asian countries presents a different picture to that in European countries.
    Date: 2016–08
  15. By: Yuichi Ikeda (Graduate School of Advanced Integrated Studies in Human Survivability, Kyoto University); Tsutomu Watanabe (Graduate School of Economics, University of Tokyo)
    Abstract: We developed a model to reconstruct the international trade network by considering both commodities and industry sectors in order to study the effects of reduced trade costs. First, we estimated trade costs to reproduce WIOD and NBER- UN data. Using these costs, we estimated the trade costs of sector specific trade by types of commodities. We successfully reconstructed sector-specific trade for each types of commodities by maximizing the configuration entropy with the estimated costs. In WIOD, trade is actively conducted between the same industry sectors. On the other hand, in NBER-UN, trade is actively conducted between neighboring countries. This seems like a contradiction. We conducted community analysis for the reconstructed sector-specific trade network by type of commodities. The community analysis showed that products are actively traded among same industry sectors in neighboring countries. Therefore the observed features of the community structure for WIOD and NBER-UN are complementary.
    Date: 2016–09

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