nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2017‒03‒26
seven papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Private versus Social Incentives for Pharmaceutical Innovation By Inés Macho-Stadler; David Pérez-Castrillo; Paula González
  2. Reconciling the Firm Size and Innovation Puzzle By ANNE MARIE KNOTT; CARL VIEREGGER
  3. Measuring Productivity Dispersion By Eric J. Bartelsman; Zoltan Wolf
  4. Estimation of Foreign MNEs spillovers in Spain By Barge-Gil, Andrés; López, Alberto; Núñez-Sánchez, Ramón
  5. Science Fiction and Economic Cycles. A Dialogue on Technological Expectations By Daniele Archibugi; Bengt-Åke Lundvall; Edward Steinmueller
  6. Characterizing Global Value Chains: Production Length and Upstreamness By Zhi Wang; Shang-Jin Wei; Xinding Yu; Kunfu Zhu
  7. The shaky start of the UK Small Business Research Initiative (SBRI) in Comparison to the US Small Business Innovation Research Programme (SBIR) By Emma Tredgett; Alex Coad

  1. By: Inés Macho-Stadler; David Pérez-Castrillo; Paula González
    Abstract: We provide a theoretical framework to contribute to the current debate regarding the tendency of pharmaceutical companies to direct their R&D toward marketing products that are ?follow-on? drugs of already existing drugs, rather than toward the development of breakthrough drugs. We construct a model with a population of patients who can be treated with drugs that are horizontally and vertically differentiated. In addition to a pioneering drug, a new drug can be marketed as the result of an innovative process. We analyze physician prescription choices and the optimal pricing decision of an innovative ?firm. We also characterize the incentives of the innovative firm to conduct R&D activities, disentangling the quest for breakthrough drugs from the firm effort to develop follow-on drugs. Our results offer theoretical support for the conventional wisdom that pharmaceutical firms devote too many resources to conducting R&D activities that lead to incremental innovations.
    Keywords: pharmaceuticals, R&D activities, me-too drugs, breakthrough drugs, incremental innovation, radical innovation
    JEL: I11 I18 O31 H51
    Date: 2015–12
    Abstract: Since Schumpeter, there has been a lively 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 and test two alternative resolutions of the puzzle: 1) that it arises from measurement problems, and 2) that firm size endogenously drives R&D strategy, and that the returns to R&D strategies depend on scale. To test both propositions we use recently available NSF BRDIS survey data of firms R&D practices (strategies) 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 offering one resolution to 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. Thus Schumpeter appears to be correct--large firms are the major engine of growth, they both spend more in aggregate than small firms, and are more productive with that spending.
    Date: 2016–01
  3. By: Eric J. Bartelsman (VU Amsterdam, The Netherlands); Zoltan Wolf (US Bureau of the Census, USA)
    Abstract: Measuring the dispersion of productivity or efficiency across firms in a market or industry is rife with methodological issues. Nevertheless, the existence of considerable dispersion now is well documented and widely accepted. Less well understood are the economic features and mechanisms underlying the magnitude of dispersion and how dispersion varies over time or across markets. On the one hand, selection mechanisms in both output and input markets should favor the most productive units through resource reallocation, thereby reducing dispersion. On the other hand, innovation and technological uncertainty tend to increase dispersion. This chapter presents a guide to measurement of dispersion and provides empirical evidence from a selection of countries and industries using a variety of methodologies.
    Keywords: Productivity; Firm-level data; dispersion; volatility
    JEL: D2 O3
    Date: 2017–03–20
  4. By: Barge-Gil, Andrés; López, Alberto; Núñez-Sánchez, Ramón
    Abstract: Using Spanish firrm-level data, we estimate productivity effects of spillovers from foreign multinationals to domestic firms in both manufacturing and service sectors. We find evidence of a positive productivity effect from multinationals on domestic firms operating in the same industry. Analyzing inter-industry linkages, we find evidence consistent with positive productivity spillovers from forward linkages (i.e., from suppliers to buyers) and negative productivity spillovers from backward linkages (i.e., from buyers to suppliers). Our main results hold when analyzing differences between multinational and domestic firms, and for periods of economic growth and recession, although some differences arise. Interestingly, we find evidence supporting a positive role of spillovers during the last recession period.
    Keywords: Multinational firms, FDI, spillovers, economic recession.
    JEL: F23 L53 O31 O33
    Date: 2017
  5. By: Daniele Archibugi (Italian National Research Council, Rome, and Department of Management, Birkbeck, University of London); Bengt-Åke Lundvall (Department of Business and Management, University of Aalborg); Edward Steinmueller (Science Policy Research Unit, Business and Management, School of Business, Management and Economics, University of Sussex)
    Abstract: Was the 2007-8 financial and economic crisis brought about by the exhaustion of the current techno-economic paradigm, and will a new paradigm will lead to eventual recovery? Lundvall and Steinmueller respond to Archibugi’s Blade Runner economics. Lundvall argues that whilst it is useful to think in terms of techno-economic paradigms to understand the uneven process of technological and social advancement, the main reason for the crisis and the main requirement for a new upswing are both socio-political rather than technological in nature. There is a link between the neoliberal deregulation regime that led to the crisis and ICTs. This regime might actually slow down the formation of a new techno-economic paradigm based around genetic engineering, artificial intelligence and nanotechnology. Steinmueller discusses what role science fiction might play in developing insights about possible futures. Might the present day equivalent for techno-economic paradigm change be more about the innovations necessary to rebuild or retrofit our existing technologies than about producing new growth sectors? Taking on board these insights, Archibugi contends that we need to understand why the economic crisis has been so long, so deep and so wide. An innovation-based recovery will need to take advantage of technological opportunities. Pro-active public intervention in science and technology will additionally be required, combined with new social imagination.
    Date: 2016–11
  6. By: Zhi Wang; Shang-Jin Wei; Xinding Yu; Kunfu Zhu
    Abstract: We develop a new set of country-sector level indicators of Global Value Chains (GVCs) characteristics in terms of average production length, and relative “upstreamness” on a production network, which we argue are better than the existing ones in the literature. We distinguish production activities into four types: those whose value added is both generated and absorbed within the country, those whose value-added crosses borders only once for consumption, those whose value added crosses borders only once for production, and those whose value added crosses borders more than once. Based on such an accounting framework, we further decompose total production length into different segments. Using these measures, we characterize cross-country production sharing patterns and their evolution for 56 sectors and 44 countries over 2000-2014. While the production chain has become longer for the world as a whole, there are interesting variations across countries and sectors.
    JEL: F14
    Date: 2017–03
  7. By: Emma Tredgett (Department of Management, Birkbeck College University of London); Alex Coad (SPRU, Freeman Centre, University of Sussex)
    Abstract: In this paper a comparison is made between data on the US Small Business Innovation Research programme (SBIR) and UK Small Business Research Initiative (SBRI) (Tredgett & Coad 2013). Quantitative data on the first three years of the UK SBRI (2009 – 2013) was compared to data on the first three years of the US SBIR (1983 – 1987) from the US Small Business Administration. The data includes numbers of competitions, applicants and money spent on research contracts. Some key differences in implementation of the two initiatives are identified and discussed in relation to the quantitative data. Quantitative data shows that while the US SBIR had steady growth, the UK SBRI has had a shaky start. Possible explanations for these results are suggested. Further work to strengthen the data and improve the validity of the evaluation is then outlined.
    Date: 2015–06

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