nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2016‒10‒16
seven papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Industrial diversification in Europe: The differentiated role of relatedness By Jing Xiao; Ron Boschma; Martin Andersson
  2. Global Value Chains Mapping: Methodology and Cases for Policy Makers. Thematic Work on Value Chain Mapping in the Context of Smart Specialisation By Emanuela Todeva; Ruslan Rakhmatullin
  3. Intellectual Property Rights Protection, Ownership, and Innovation: Evidence from China By Lily Fang; Josh Lerner; Chaopeng Wu
  4. Does Higher Productivity Dispersion Imply Greater Misallocation?A Theoretical and Empirical Analysis By J. David Brown; Emin Dinlersoz; John S. Earle
  5. Interfirm Relationships and Business Performance By Adam Szeidl; Jing Cai
  6. Production Networks By Kenan Huremovic; Fernando Vega-Redondo
  7. Trade and the Size Distribution of Firms: Evidence from the German Empire By Marcus Biermann

  1. By: Jing Xiao; Ron Boschma; Martin Andersson
    Abstract: There is increasing interest in the drivers of industrial diversification, and how these depend on economic and industry structures. This paper contributes to this line of inquiry by analyzing the role of relatedness in explaining variations in industry diversification, measured as the entry of new industry specializations, across 173 European regions during the period 2004-2012. There are significant differences across regions in Europe in terms of industrial diversification. Relatedness has a robust positive influence on the probability that new industry specialization develops in a region. A novel finding is that the influence of relatedness on the probability of new industrial specializations depends on innovation capacity. We find that relatedness is a more important driver of diversification in regions with a weaker innovation capacity. The effect of relatedness appears to decrease monotonically as the innovation capacity of a local economy increases. This is consistent with the argument that high innovation capacity allows an economy to ‘break from its past’ and to develop, for the economy, truly new industry specializations. We infer from this that innovation capacity is a critical factor for economic resilience.
    Keywords: industrial diversification, related diversification, evolutionary economic geography, unrelated diversification, European regions, resilience
    JEL: B52 L16 O14 O18 R11
    Date: 2016–10
  2. By: Emanuela Todeva (BCNED - Business Clusters, Networks and Economic Development); Ruslan Rakhmatullin (European Commission - JRC)
    Abstract: This paper is a paper in a series of work on Global Value Chains (GVCs), developed under the auspices of the Joint Research Centre (JRC) of the European Commission. It builds upon the theoretical discussion presented in the first two papers and offers a new methodological approach for mapping GVCs, using a bespoke dataset of the most innovative biopharma MNEs. The paper takes the example of the global biopharma value chain and describes the step-by-step procedure for mapping interconnected capabilities at a global scale, the concentration of biopharma capabilities in Europe, and two cases of regional and national specialisation in this sector. The proposed methodological approach contains two distinctive methodologies – for top-down global value chain mapping of an established industry sector (such as biopharma), and for a bottom-up mapping of capabilities within the GVC that operate at specific locations. Both methodologies can be applied to emerging sectors and segments driven by key enabling technologies, such as photonics, advanced materials, 3D printing, or renewable energy, or any other cross-sectoral value chains. The paper includes two cases of application of this methodology at regional and national level. These are the cases of Bulgaria and the Greater South East of England in the UK. The novel methodology and methods for data collection and visualisation demonstrate the linkages across segments of the biopharmaceutical GVC and the position of firms at the cross-section of biotechnology discovery and pharmaceutical drug development and manufacturing activities, managing a complex network of outsourcing, insourcing and supply relationships, through a vast empire of subsidiaries around the world. Capturing and representing the value-chain within biopharma MNEs enables policy makers to understand the complexity of industry organisation across multiple locations around the world and the global knowledge and resource linkages that drive further growth in the sector.
    Keywords: regional policy, value chains, GVCs, case study, BioPharma, regional level, smart specialisation
    Date: 2016–10
  3. By: Lily Fang; Josh Lerner; Chaopeng Wu
    Abstract: Using a difference-in-difference approach, we study how intellectual property right (IPR) protection affects innovation in China in the years around the privatizations of state-owned enterprises (SOEs). Innovation increases after SOE privatizations, and this increase is larger in cities with strong IPR protection. Our results support theoretical arguments that IPR protection strengthens firms’ incentives to innovate and that private sector firms are more sensitive to IPR protection than SOEs.
    JEL: G24 J33 L26
    Date: 2016–09
  4. By: J. David Brown; Emin Dinlersoz; John S. Earle
    Abstract: Recent research maintains that the observed variation in productivity within industries reflects resource misallocation and concludes that large GDP gains may be obtained from market-liberalizing polices. Our theoretical analysis examines the impact on productivity dispersion of reallocation frictions in the form of costs of entry, operation, and restructuring, and shows that reforms reducing these frictions may raise dispersion of productivity across firms. The model does not imply a negative relationship between aggregate productivity and productivity dispersion. Our empirical analysis focuses on episodes of liberalizing policy reforms in the U.S. and six East European transition economies. Deregulation of U.S. telecommunications equipment manufacturing is associated with increased, not reduced, productivity dispersion, and every transition economy in our sample shows a sharp rise in dispersion after liberalization. Productivity dispersion under central planning is similar to that in the U.S., and it rises faster in countries adopting faster paces of liberalization. Lagged productivity dispersion predicts higher future productivity growth. The analysis suggests there is no simple relationship between the policy environment and productivity dispersion.
    Date: 2016–01
  5. By: Adam Szeidl; Jing Cai
    Abstract: We organize regular business meetings for randomly selected managers of young Chinese firms to study the effect of business networks on firm performance. We randomize 2,800 managers into several groups that hold monthly meetings for one year, and a "no-meetings" control group. We find that: (1) The meetings increase firm revenue by 7.8 percentage points, and also significantly increase profit, a management score, employment, and the number of business partners; (2) These effects persist one year after the conclusion of the meetings; and (3) Firms randomized to have better peers exhibit higher growth. We exploit additional interventions to document concrete channels: (4) Peers share exogenous business-relevant information, particularly when they are not competitors, showing that the meetings facilitate learning; (5) Managers create more business partnerships in the regular than in other one-time meetings, showing that the meetings improve firm-to-firm matching.
    Date: 2016
  6. By: Kenan Huremovic (Aix-Marseille University (Aix-Marseille School of Economics), CNRS, & EHESS); Fernando Vega-Redondo (Bocconi University & IGIER)
    Abstract: In this paper, we model the economy as a production network of competitive firms that interact in a general-equilibrium setup. First, we find that, at the unique Walrasian equilibrium, the profit of each active firm is proportional to (a suitable generalization of) its Bonacich centrality. We also determine consumer welfare at equilibrium and characterize efficient networks. Then we proceed to conduct a broad range of comparative-static analyses. These include the effect on profits and welfare of: (a) distortions (e.g. tax/subsidies) imposed on the whole economy or specific firms; (b) structural changes such as the addition of links and the elimination of nodes; (c) productivity and preference changes. We discover that the induced effects are in general nonmonotone, depend on global network features, and impinge on each sector depending on the pattern of incentralities displayed by its input providers and output users. Furthermore, the inter-sector “linkages” underlying these effects can usually be decomposed – following the heuristic dichotomy proposed by Hirschman (1958) – into a forward (push) component and a backward (pull) one. Finally, we undertake some preliminary analysis of firm dynamics and illustrate that, when evaluating policies of support and shock mitigation from a dynamic viewpoint, the reliance on strict market-based criteria can be quite misleading in terms of social welfare.
    Keywords: production, networks, distortions, centrality, profit
    JEL: C67 D51 D85
    Date: 2016–10
  7. By: Marcus Biermann
    Abstract: What is the effect of trade on the size distribution of firms? We collect historical data between 1882 and 1907 from the German Empire to address this question. Our data allow us to match three data sets according to the same geographic boundaries: industry census data, railway and waterway trade data. The key findings are that trade integration impacts the firm size distribution heterogeneously across three size categories. We find evidence of a stark shift in employment and firm share from small and medium firms towards larger firms. A "Bartik" instrument is proposed to argue that the correlations described are indeed causal. We provide evidence for a fall in transport costs and technology adoption as mechanisms to explain the stylized facts observed in the data
    Keywords: Firm size distribution, firm heterogeneity, technology adoption, German Empire
    JEL: F14 F15
    Date: 2016–10

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