nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2017‒06‒18
fourteen papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Innovation, Skill, and Economic Segregation By Florida, Richard; Mellander, Charlotta
  2. Offshoring, industry heterogeneity and employment By Bramucci, Alessandro; Cirillo, Valeria; Evangelista, Rinaldo; Guarascio, Dario
  3. Innovating incumbents and technological complementarities: How recent dynamics in the HVDC industry can inform transition theories By Allan Dahl Andersen; Jochen Markard
  4. Founders f human capital and external knowledge sourcing: An absorptive capacity perspective for innovative start-ups By Masatoshi Kato
  5. Competition for Global Value Added: Export and Domestic Market Shares By R. Cezar; A. Duguet; G. Gaulier; V. Vicard
  6. Dutch Disease Resistance: Evidence from Indonesian Firms By James Cust; Torfinn Harding; Pierre-Louis Vezina
  7. How Much Product Variety is Required? Evidence from the Movie Theater Market By In Kyung Kim
  8. Total Factor Productivity Convergence in German States since Reunification: Evidence and Explanations By Burda, Michael C; Severgnini, Battista
  9. "Internet and enterprise productivity: evidence from Latin America" By Juan Jung; Enrique López-Bazo; Matteo Grazzi
  10. Estimating market power Evidence from the US Brewing Industry By Jan De Loecker; Paul T. Scott
  11. Young Innovative Firms, Investment-Cash Flow Sensitivities and Technological Misallocation By Oscar Mauricio Valencia-Arana; Jose Eduardo Gomez-Gonzalez; Andrés Garcia-Suaza
  12. Industry Evolution in Varieties of Capitalism: a Comparison of the Danish and US Wind Turbine Industries By Menzel, Max-Peter; Kammer, Johannes
  13. Product Architecture and Intra-Firm Coordination: Theory and Evidence By Morita, Hodaka; Nakajima, Kentaro; Tsuru, Tsuyoshi
  14. Trade Induced Structural Change and the Skill Premium By Javier Cravino; Sebastian Sotelo

  1. By: Florida, Richard (University of Toronto); Mellander, Charlotta (Jönköping University & Centre of Excellence for Science and Innovation Studies (CESIS))
    Abstract: Our research examines the role of innovation and skill on the level economic segregation across U.S. metro areas. On the one hand, economic and urban theory suggest that more innovative and skilled metros are likely to have higher levels of economic segregation. But on the other hand, theory also suggests that more segregated metros are likely to become less innovative over time. We examine the connection between innovation and economic segregation this via OLS regressions informed by a Principal Component Analysis to distill key variables related to innovation, knowledge and skills, while controlling for other key variables notably population size. Our findings are mixed. While we find evidence of an association between the level of innovation and skill and the level of economic segregation in 2010, we find little evidence of an association between the level of innovation and skill across metros and the growth of economic segregation between 2000 and 2010.
    Keywords: Economic segregation; inequality; innovation; high-tech; skill; talent; human capital
    JEL: J24 O30 R23
    Date: 2017–06–07
  2. By: Bramucci, Alessandro; Cirillo, Valeria; Evangelista, Rinaldo; Guarascio, Dario
    Abstract: Economies and production systems are subject to incessant processes of structural change fuelled by the dynamics of demand, technology and international competition. The increasing international fragmentation of production, also known as "offshoring", is an important element of such a (global in scale) process of structural change having important implications for employment and on the way employment gains and losses are distributed across firms, industries, national economies and components of the labour force. This paper assesses the employment impact of offshoring, in five European countries (Germany, Spain, France, Italy and the United Kingdom), distinguishing between different types of inputs/tasks offshored, different types of offshoring industries and types of professional groups affected by offshoring. Results provide a rather heterogeneous picture of both offshoring patterns and their effects on labour, and the presence of significant differences across industries. Along with this variety of employment outcomes, the empirical evidence suggests that offshoring activities are mainly driven by a cost reduction (labour saving) rationale. This is particularly the case for the manufacturing industry where offshoring is found to exert a negative impact among the less qualified (manual) or more routinized (clerks) types of jobs, while the main difference between high- and low-technology industries has to do with the type of labour tasks that are offshored and the types of domestic jobs that are affected. In hightech industries the negative effects of offshoring on employment are concentrated among the most qualified professional groups (managers and clerks). A specular pattern is found in the case of the low-tech industries where job losses are associated to the offshoring of the least innovative stages of production and manual workers are those most penalised.
    Keywords: Offshoring,Technological change,Employment
    JEL: F16 O33 F11
    Date: 2017
  3. By: Allan Dahl Andersen (TIK Center for Technology, Innovation and Culture, University of Oslo, Norway); Jochen Markard (Swiss Federal Institute of Technology Zurich (ETH Zurich), Switzerland)
    Abstract: It is a classic theme in the transitions literature that newcomers supporting a novel technology struggle for dominance against incumbent actors and ‘their’ established technologies. Our study challenges this picture in several aspects with the intention to improve conceptual frameworks in transition studies. We present a case study on high voltage direct current (HVDC) technology - a mature technology for electricity transmission that has remained in a niche for decades but recently gained new momentum in the course of the energy transition. This case highlights i) incumbent actors as key drivers for innovation, ii) coupled dynamics via interaction of multiple technologies, also across industry boundaries, as a central process in transition dynamics, and iii) the increasingly pervasive nature of the energy transition. We interpret our observations from the perspective of two established frameworks, technological innovation systems and the multi-level perspective, and discuss implications for conceptual refinement.
    Date: 2017–06
  4. By: Masatoshi Kato (School of Economics, Kwansei Gakuin University)
    Abstract: This study explores the role of founders f human capital in determining the external knowledge sourcing (licensing-in and joint R&D) of a firm during the start-up period using panel data drawn from original questionnaire surveys conducted in Japan. The results of a probit model with an endogenous regressor show that firms managed by founders with a high level of specific human capital, measured as prior work experience in a related field or as technological experience, tend to engage in external knowledge sourcing because of their absorptive capacity. The findings indicate that this type of human capital also promotes R&D investment. Contrariwise, this study finds that firms managed by founders with a high level of general human capital, measured as educational attainment, tend to invest more in R&D as an absorptive capacity-building activity, which may promote external knowledge sourcing. The implications of these findings are discussed from the perspective of economic policy.
    Keywords: Start-up, Founder, General human capital, Specific human capital, R&D investment, External knowledge sourcing.
    JEL: M13 L26 O32
    Date: 2017–06
  5. By: R. Cezar; A. Duguet; G. Gaulier; V. Vicard
    Abstract: We propose a new “global” market share indicator that complements the traditional export market share analysis by accounting for the foreign value added embodied in the production process and for the performance of national firms on their domestic market. We also consider all the income from activities used in the production to address the manufacturing final demand, namely all activities within the manufacturing value chain. Our results show that the role of services is growing in global value chains. Interestingly, considering our global indicator makes the dynamics of market shares converge among large economies, which can be explained by a de-correlation between national and export performances. This de-correlation appears to reflect greater specialization within global manufacturing value chains.
    Keywords: International trade, Market share, Value added, Global value chains, Globalization, Manufacturing industry.
    JEL: F10 F60 L60
    Date: 2017
  6. By: James Cust; Torfinn Harding; Pierre-Louis Vezina
    Abstract: Oil and gas extraction may lead to the Dutch disease, i.e. the crowding ot of the manufacturing sector due to rising wages when labor is drawn to the expanding extraction and services sectors. In this paper we exploit the fact that oil and gas discoveries contain an element of chance as well as oil price fluctuations to capture random variation in oil and gas windfalls across Indonesia and identify their effects on manufacturing firms. We find that oil and gas windfalls cause wage growth but that the firm exit rate is unaffected. Firms’ output and labor productivity increase along with wages suggesting where firms are able to respond to booming local demand, and raise productivity in response to upward wage pressures, they can overcome the crowding-out effects from resource windfalls.
    Keywords: Dutch disease, firm level, Indonesia, manufacturing firms, oil and gas
    JEL: O13 O14 Q32
    Date: 2017
  7. By: In Kyung Kim (Department of Economics, Nazarbayev University)
    Abstract: This paper empirically investigates the effect of the entry of new theaters on the number of movies playing in incumbent theaters and in the market as a whole, as well as its effect on consumer welfare via the change in product variety and availability. Estimation results suggest that whereas the entry of competitors to a market does not affect the number of movies playing in a theater, the total number of movies playing in the market increases after the entry of new theaters. These findings imply that a theater offers a movie lineup different from those of rivals in order to ease competition, which leads to an increase in market-wide movie variety. We also find robust evidence that the net effect of increased movie variety in the market after the entry of new theaters on consumer welfare is non-monotonic; it is positive only for the first few entrants to a monopoly market.
    Keywords: product variety, consumer welfare, movie theater industry
    JEL: L13 L22 L82
    Date: 2017–06
  8. By: Burda, Michael C; Severgnini, Battista
    Abstract: A quarter-century after reunification, labor productivity in the states of eastern Germany continues to lag systematically behind the West. Persistent gaps in total factor productivity (TFP) are the proximate cause; conventional and capital-free measurements confirm a sharp slowdown in TFP growth after 1995. Strikingly, eastern capital intensity, especially in industry, exceeds values in the West, casting doubt on the embodied technology hypothesis. TFP growth is negatively associated with rates of investment expenditures. The stubborn East-West TFP gap is best explained by low concentration of managers, low startup intensity and the distribution of firm size in the East rather than R&D activities.
    Keywords: Development accounting; German reunification; productivity; regional convergence
    JEL: D24 E01 E22 O33 O47
    Date: 2017–06
  9. By: Juan Jung (AQR-IREA, Universitat de Barcelona, Av. Diagonal 690, 08034 Barcelona, Spain.); Enrique López-Bazo (AQR-IREA, Universitat de Barcelona, Av. Diagonal 690, 08034 Barcelona, Spain.); Matteo Grazzi (Competitiveness, technology and innovation division - Inter-American Development Bank, 1300 New York Avenue, NW 20577 Washington DC, USA.)
    Abstract: This paper tests three hypotheses regarding the link between internet and firm productivity: i) internet adoption and use constitute a source of productivity growth for firms in Latin America, ii) the intensity of its use also matters, and iii) the link between the new technologies and productivity levels is not uniform over the whole productivity distribution. The evidence in this paper fills the gap of scarce and fragmented literature focused on Latin America, and is aligned with previous research for more developed regions which has generally recognized that Information and Communication Technologies (ICTs) have radically changed how modern business are conducted, benefitting firm performances through several channels, such as increasing the efficiency of internal processes, expanding market reach or increasing innovation. Our findings suggest that low-medium productive firms benefit more from an expansion in internet adoption and use, in comparison with the most productive ones. If this evidence is supposed to reflect long-term effects, then public policies oriented to massify internet adoption and promote internet use intensively will surely contribute to reduce inequalities of enterprise’s productivity levels, promoting a level playing field among Latin American firms, something especially relevant for the most unequal region of the world.
    Keywords: ICT, Internet, Productivity, firms, Latin America JEL classification:D22, O31, O33, O54.
    Date: 2017–05
  10. By: Jan De Loecker; Paul T. Scott
    Abstract: While inferring markups from demand data is common practice, estimation relies on difficult-to-test assumptions, including a specific model of how firms compete. Alternatively, markups can be inferred from production data, again relying on a set of difficult-to-test assumptions, but a wholly different set, including the assumption that firms minimize costs using a variable input. Relying on data from the US brewing industry, we directly compare markup estimates from the two approaches. After implementing each approach for a broad set of assumptions and specifications, we find that both approaches provide similar and plausible markup estimates in most cases. The results illustrate how using the two strategies together can allow researchers to evaluate structural models and identify problematic assumptions.
    Keywords: Markups, Demand systems, Production Functions, Conduct
    Date: 2017–01
  11. By: Oscar Mauricio Valencia-Arana (Banco de la República de Colombia); Jose Eduardo Gomez-Gonzalez (Banco de la República de Colombia); Andrés Garcia-Suaza (Universidad del Rosario)
    Abstract: Can technological misallocation generate financial frictions? We build a theoretical model with testable implications, in which the misallocation between R&D and production activities generates borrowing constraints. The investor offers the innovator a rent that is contingent to the success of its project in order to make them exert an incentive-compatible effort level. However, this rent distorts the allocation of effort between activities. Specifically, it leads to a suboptimal level of effort impulsing a reallocation of resources from production to R&D. Consequently, the investor cannot appropriate the surplus resulting from innovation. This distortion increases the cost of external financing for firms that have large amount of intangible assets. Using Compustat data for manufacturing firms in the United States between 1982 and 2007, we show that cash-flow sensitivities are positive and increasing in firms with high R&D intensities. Classification JEL: G11, 033, D86
    Keywords: Moral Hazard, Endogenous Borrowing Constraints, and Technological Misallocation
    Date: 2017–06
  12. By: Menzel, Max-Peter (University Bayreuth); Kammer, Johannes (University Hamburg)
    Abstract: In this study, we combine Klepper’s framework on the evolution of industries with the Varieties of Capitalism approach to argue that industry evolution is mediated by institutional differences. We expect that new industries will evolve with a stronger connection to established industries in coordinated marked economies than in liberal market economies. Our assumptions are supported by the survival analysis of US and Danish wind turbine manufacturers from 1974 to 2014.
    Keywords: industry evolution; varieties of capitalism; heritage theory; wind turbine industry; institutions
    JEL: L64 O15 P51
    Date: 2017–06–09
  13. By: Morita, Hodaka; Nakajima, Kentaro; Tsuru, Tsuyoshi
    Abstract: Product architecture plays a critical role in the product development process. How does the nature of product architecture affect the quality of the product? To address this question, we make a distinction between system-level and part-level quality, and then posit the existence of a key trade-off in which greater integrality of a product’s architecture enhances its system-level quality, but produces the undesirable side-effect of increasing the degree of interdependence in component design. We hypothesize that when engineers’ coordination capability is relatively high, the former (positive) effect outweighs the latter (negative) effect so that greater integrality increases the product’s overall quality; conversely, lower coordination capability results in reduced overall quality. We find empirical support for this hypothesis by analysing a set of unique data collected through a firm-level survey administered in Japan. We also present the implications of our findings for managers making decisions about product design.
    Keywords: Component interactions, system-level quality, integrality, intra-firm coordination, modularity, part-level quality, product architecture, product design
    JEL: M10 M50
    Date: 2017–05
  14. By: Javier Cravino; Sebastian Sotelo
    Abstract: We study how international trade affects manufacturing employment and the relative wage of unskilled workers when goods and services are traded with different intensities. Manufacturing trade reduces manufacturing prices worldwide, which reduces manufacturing employment if manufactures and services are complements. We document that manufacturing production is unskilled-labor intensive, so that these changes increase the skill-premium. We incorporate this mechanism in a quantitative trade model and show that trade has had a negative impact on manufacturing employment and the relative wage of unskilled workers. The impact on the skill premium was larger in developing countries where manufacturing is particularly unskilled-labor intensive.
    JEL: F16 F62 F63
    Date: 2017–06

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