nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2017‒07‒02
sixteen papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Dynamic Increasing Returns and Innovation Diffusion: bringing Polya Urn processes to the empirical data By Giovanni Dosi; Alessio Moneta; Elena Stepanova
  2. The Great Divergence(s) By Giuseppe Berlingieri; Patrick Blanchenay; Chiara Criscuolo
  3. The Determinants of Growth in the Information and Communication Technology (ICT) Industry: A Firm-Level Analysis By Giorgio Canarella; Stephen M. Miller
  5. The Aggregate Productivity Effects of Internal Migration: Evidence from Indonesia By Gharad Bryan; Melanie Morten
  6. It pays to be active on many foreign markets Profitability in German multi-market exporters and importers from manufacturing industries By Joachim Wagner
  7. Product Market Competition and Financial Market Screening By Yuichiro Matsumoto
  8. Labour market adjustment in Europe during the crisis: microeconomic evidence from the Wage Dynamics Network survey By Izquierdo, Mario; Jimeno, Juan Francisco; Kosma, Theodora; Lamo, Ana; Millard, Stephen; Rõõm, Tairi; Viviano, Eliana
  9. Does social inducement lead to higher open innovation investment? An experimental study By Dai, Shuanping; Yang, Guanzhong
  10. Innovation and Inequality in a Small World By Ines Lindner; Holger Strulik
  11. Large Firm Dynamics and Secular Stagnation: Evidence from Japan and the U.S. By Yoshihiko Hogen; Ko Miura; Koji Takahashi
  12. Political Power, Resistance to Technological Change and Economic Development: Evidence from the 19th century Sweden By Tyrefors Hinnerich, Bjorn; Lindgren, Erik; Pettersson-Lidbom, Per
  13. Does Assigning More Women to Managerial Positions Enhance Firm Productivity? Evidence from Sweden By Sato, Yoshihiro; Ando, Michihito
  14. Agricultural Production and Technical Change Around the World, 1961-2010 By Malacarne, Janet Horsager; Artz, Georgeanne M.; Orazem, Peter
  15. Employment Effect of Innovation By d'Artis Kancs; Boriss Siliverstovs
  16. The impact of service and goods offshoring on employment : Firm-level evidence By Carmine Ornaghi; Ilke Van Beveren; Stijn vanormelingen,

  1. By: Giovanni Dosi; Alessio Moneta; Elena Stepanova
    Abstract: The patterns of innovation diffusion are well approximated by the logistic curves. This is the robust empirical fact confirmed by many studies in innovations dynamics. Here we show that the logistic pattern of innovation diffusion can be replicated by the time-dependent stochastic process with positive feedbacks along the diffusion trajectory. The dynamic increasing returns process is modeled by generalized Polya urns. So far, urn models have been mostly used to study the [path-dependent] limit properties. On the contrary, this work focuses on the transient [finite time] properties studying the conditions under which urn models capture the logistic trajectories which often track empirical diffusion process. As examples, we calibrate the process to match several cases of diffusion of motor ships in European countries.
    Keywords: Polya urn schemes, Innovation diffusion, Logistic diffusion pattern, Dynamic increasing returns
    Date: 2017–06–26
  2. By: Giuseppe Berlingieri; Patrick Blanchenay; Chiara Criscuolo
    Abstract: This report provides new evidence on the increasing dispersion in wages and productivity using novel micro-aggregated firm-level data from 16 countries. First, the report documents an increase in wage and productivity dispersions, for both manufacturing and market services (excluding the financial sector). Second, it shows that these trends are driven by differences within rather than across sectors, and that the increase in dispersion is mainly driven by the bottom of the distribution, while divergence at the top occurs only in the service sector, and only after 2005. Third, it suggests that between-firm wage dispersion is linked to increasing differences between high and low productivity firms. Fourth, it suggests that both globalisation and digitalisation imply higher wage divergence, but strengthen the link between productivity and wage dispersion. Finally, it offers preliminary analysis of the impact of minimum wage, employment protection legislation, trade union density, and coordination in wage setting on wage dispersion and its link to productivity dispersion.
    Keywords: dispersion, productivity, sorting, wages
    JEL: D2 J3
    Date: 2017–06
  3. By: Giorgio Canarella (University of Nevada, Las Vegas); Stephen M. Miller (University of Nevada, Las Vegas)
    Abstract: Why do some firms grow faster than others? This question has become the focus of a large number of empirical studies in industrial organization, strategic management, and entrepreneurship since the publications of Gibrat (1931) and Penrose (1959). Using an unbalanced panel data set of 85 U.S. information and communication technology (ICT) firms that survived over the period from 1990 to 2013, we examine the effect of firm size, agency costs, R&D investments, capital structure, profitability, and the Great Recession of 2007-2009 on firm growth. Adopting the two-step, system, generalized-method-of-moments estimator for linear dynamic panel models (Blundell and Bond, 1998), we document that growth in the ICT industry is not stochastic, as predicted by Gibrat (1931), but driven by systematic factors. We find compelling evidence that in the ICT industry: (i) firm growth exhibits positive persistence, which endorses the controversial "success-breeds-success" evolutionary hypothesis; (ii) agency costs and financial leverage exert a negative effect on firm growth; (iii) R&D investment and financial performance generate a positive effect on firm growth; (iv) the Great Recession (2007-2009) produced a negative effect on firm growth; (v) a nonlinear, inverted U-shaped relationship exists between firm size and firm growth; and (vi) Gibrat’s law does not hold. Our findings remain robust to transformations using first differences and forward orthogonal deviations as well as principal components reductions. These results are new to the literature, since the dynamics of firm growth has not been documented at the ICT industry level. Noteworthy policy implications emerge because the growth dynamics of the ICT industry move this sector toward more concentration and less competition.
    Keywords: ICT industry; Agency costs; Firm growth; Panel data; system-GMM
    JEL: G21 G28 G32 G34
    Date: 2017–06
  4. By: Jeremiah, Rupin (Dept. of Management and Organization)
    Abstract: This is a study of Swedish firms that have offshored their innovation functions to India. How managers view offshoring decision choices within and across firms and how can we evaluate the decision making is the subject of this study. The sample is a set of Swedish firms with some R&D facility in India. Data are collected from interviews with managers and decision makers from both the Swedish and the Indian sides, responsible for implementing the offshoring decisions. The result is the development of a decision quality evaluation framework which can be used to possibly make better quality decisions when offshoring innovation.
    Keywords: Decision quality; Innovation offshoring
    Date: 2017–03–29
  5. By: Gharad Bryan; Melanie Morten
    Abstract: We estimate the aggregate productivity gains from reducing barriers to internal labor migration in Indonesia, accounting for worker selection and spatial differences in human capital. We distinguish between movement costs, which mean workers will only move if they expect higher wages, and amenity differences, which mean some locations must pay more to attract workers. We find modest but important aggregate impacts. We estimate a 22% increase in labor productivity from removing all barriers. Reducing migration costs to the US level, a high mobility benchmark, leads to an 8% productivity boost. These figures hides substantial heterogeneity. The origin population that benefits most sees an 104% increase in average earnings from a complete barrier removal, or a 37% increase from moving to the US benchmark.
    JEL: J61 O18 O53 R12 R23
    Date: 2017–06
  6. By: Joachim Wagner (Leuphana University Lueneburg, Germany)
    Abstract: This paper provides the first empirical evidence on the link between the number of foreign markets (where a market is defined as the combination of one traded good and one country traded with) a firm is active on and its profitability. We find that in German manufacturing industries the profitability of a firm increases when the number of markets a firm exports to or imports from increases. The extra costs associated with being active on more foreign markets tend to be smaller than the extra benefits. It pays to be active on many foreign markets.
    Keywords: Exports, Imports, Number of foreign markets, Profitability, Germany
    JEL: F14
    Date: 2017–03
  7. By: Yuichiro Matsumoto (Graduate School of Economics, Osaka University)
    Abstract: How are the financial market and the product market interrelated? Product market selection affects the default rate and screening incentive of financial intermediaries. In contrast to previous studies, bad screening technology implies a low interest rate and a low default rate: i.e. intermediaries are successfully repaid more often when the country has a bad screening technology. When a country has an underdeveloped financial market, then the product market is also inefficient. This product market inefficiency means that the selection effect of the market is weak. In this case, many entrepreneurs successfully enter the market. Financially underdeveloped countries suffer from low productivity not only for inefficient screening technology but also for weak product market selection. Many firms in financially developed countries tend to choose exports, merely because firms in such countries are more productive. Financially developed countries have a comparative advantage in a financially dependent sector.
    Keywords: Financial Development; Default Rate; Firm Heterogeneity; Selection; International Trade
    JEL: E22 E44 F12 O11 O16 O31
    Date: 2017–06
  8. By: Izquierdo, Mario; Jimeno, Juan Francisco; Kosma, Theodora; Lamo, Ana; Millard, Stephen; Rõõm, Tairi; Viviano, Eliana
    Abstract: Against the backdrop of continuing adjustment in EU labour markets in response to the Great Recession and the sovereign debt crisis, the European System of Central Banks (ESCB) conducted the third wave of the Wage Dynamics Network (WDN) survey in 2014-15 as a follow-up to the two previous WDN waves carried out in 2007 and 2009. The WDN survey collected information on wage-setting practices at the firm level. This third wave sampled about 25,000 firms in 25 European countries with the aim of assessing how firms adjusted wages and employment in response to the various shocks and labour market reforms that took place in the European Union (EU) during the period 2010-13. This paper summarises the main results of WDN3 by identifying some patterns in firms’ adjustments and labour market reforms. It seeks to lay out the main lessons learnt from the survey in terms of both the general response of EU labour markets to the crisis and how these responses varied across the countries that took part in the survey. JEL Classification: E24, J30, J52, J68
    Keywords: labour market adjustment, labour market reforms, survey data, wage dynamics network
    Date: 2017–06
  9. By: Dai, Shuanping; Yang, Guanzhong
    Abstract: Open innovation has attracted an avalanche of interests from many practitioners and scholars, and is gradually becoming an acceptable scientific and managerial paradigm over the past few decades. Traditionally, however, innovative activities ought to be confidential within certain groups or individuals before the marketing process, and will be protected strictly by the intellectual property rights laws, for the sake of innovators' economic benefits and encouraging further innovation attempts. This paper aims at addressing the question of how to stimulate firms and managers to invest more resources to open innovation, and focuses on social inducement's effectiveness, in the art of a pre-recorded video, using an experimental approach. We established two open innovation investment models in which investors decide to allocate resources to open and traditional innovation projects. In the first model, we introduce the spillover effect and assume that traditional innovation projects may profit from open innovation investment. We then consider uncertainty to make the investment more realistic in the second model. The effect of social inducement on open innovation provision has been investigated in all the three settings, i. e. No Video, Full Video and Half Video. The striking result is that social inducement increases open innovation investment, but only if both induced subjects and non-induced subjects exist; meanwhile, economic uncertainty also matters.
    Keywords: open innovation,social inducement,conditional cooperation,economic uncertainty
    JEL: C92 H41 O31
    Date: 2017
  10. By: Ines Lindner (VU Amsterdam and Tinbergen Institute, The Netherlands); Holger Strulik (University of Goettingen, Germany)
    Abstract: We present a multi-country theory of economic growth and R&D-driven technological progress in which countries are connected by a network of knowledge exchange. Technological progress in any country depends on the state of technology in the countries it exchanges knowledge with. The diffusion of knowledge throughout the world explains a period of increasing world inequality after the take-off of the forerunners of the industrial revolution, followed by decreasing relative inequality. Knowledge diffusion through a Small World network produces an extraordinary diversity of country growth performances, including the overtaking of individual countries and the replacement of the technologically leading country in the course of world development.
    Keywords: networks, knowledge diffusion, economic growth, world income distribution
    JEL: O10 O40 D85 F43
    Date: 2017–06–23
  11. By: Yoshihiko Hogen (Bank of Japan); Ko Miura (Bank of Japan); Koji Takahashi (Bank of Japan)
    Abstract: Focusing on the recent secular stagnation debate, this paper examines the role of large firm dynamics as determinants of productivity fluctuations. We first show that idiosyncratic shocks to large firms as well as entry, exit, and reallocation effects account for 30 to 40 percent of productivity fluctuations in Japan and the U.S. Second, since the mid-2000s, the slowdown in large foreign firm entry into the U.S. has led to a decline in business dynamics and downward pressures on productivity growth. Third, we identify demand and supply shocks by matching idiosyncratic large-firm shocks in the granular residual (Gabaix, 2011) and changes in sectoral inflation rates and show that the prolonged slowdown in productivity growth in Japan and the U.S. was mostly driven by supply shocks. Overall, our results support the supply-side views of Gordon (2012, 2015, 2016) in the secular stagnation debate.
    Keywords: Granular Hypothesis; Entry-Exit; Productivity Growth; Secular Stagnation
    JEL: E13 E23 E32 D21
    Date: 2017–06–21
  12. By: Tyrefors Hinnerich, Bjorn (Dept. of Economics, Stockholm University); Lindgren, Erik (Dept. of Economics, Stockholm University); Pettersson-Lidbom, Per (Dept. of Economics, Stockholm University)
    Abstract: This paper empirically tests the hypothesis that landed elites may block technological change and economic development if they fear that they will lose future political power (Acemoglu and Robinson (2002, 2006, and 2012). It exploits a plausible exogenous change in the distribution of political power of the landed elites, i.e., a Swedish suffrage reform in 1862 which extended the voting rights to industrialists at the local level. Importantly, the votes were also weighted according to taxes paid. Thus, the higher taxes paid the more votes received. As a result, the landed elites had an incentive to block industrialization and technological progress since they otherwise would be “political losers”. We find that the change in political power from the landed elites to industrialists, through the extension of suffrage rights, lead to more investments in railways, faster structural change, and higher firm productivity. We also find that the change of political power affected both labor coercion and the adaption of labor-saving technologies within the agriculture sector along the lines suggested by Acemoglu and Wolitzky (2011) and Acemoglu (2010). Specifically, we find that is more labor coercion and less investments in labor-saving technologies in areas were landowners have more political power. We also provide evidence that many demographic outcomes were affected by the change in political power. Moreover, we find strong evidence of persistence in both extractive economic and political institutions even after the weighted voting system was abolished and universal suffrage introduced in 1919. Specifically, local governments that were previously political controlled by the landed elites were still using both extractive economic and political institutions (Acemoglu and Robinson (2008)).
    Keywords: Economic development and growth; Political institutions; Technological change; Industrialization; Labor coercion; Labor-saving technologies; Persistence of extractive economic and political institutions
    JEL: E22 E23 E24 E62 F15 H41 H52 H53 H70 J10 J21 J22 J23 J24 J31 J32 J41 J43 J47 N10 N33 N53 N63 N73 N93 O10 O14 O15 O18 O33 O40 O52 R10 R42
    Date: 2017–06–26
  13. By: Sato, Yoshihiro (European Institute of Japanese Studies); Ando, Michihito (National Institute of Population and Social Security Research)
    Abstract: We analyze whether gender composition at non-board managerial levels has any impact on firm productivity and other related outcomes in the service sector using a linked employer-employee dataset from Sweden. Exploiting within-firm variation, we apply a difference-in-differences propensity score matching method to address an endogeneity issue. Our results suggest no significant effects on productivity but significant positive effects on firms' growth in terms of value added and labor inputs when a firm “replaces” a male manager with a woman. We do not observe any impact when a firm “appoints” a woman instead of a man to a new managerial position.
    Keywords: Gender; Gender diversity; Firm productivity; Manager; Difference-in-differences matching; Propensity score matching
    JEL: J16 J24 J71 J82
    Date: 2017–01–09
  14. By: Malacarne, Janet Horsager; Artz, Georgeanne M.; Orazem, Peter
    Abstract: This paper extends the induced innovation research of Hayami and Ruttan by including 129 more countries, extending the time frame to 50 years and explaining the production process for those countries using a Cobb-Douglas function. From this data, the paper illustrates trade-offs between five inputs in agricultural production in empirical isoquants, and measures the progress of agricultural productivity by the magnitude of the shift in isoquants toward the origin. We can further test the implications of technical change on the productivity of the inputs: labor, land, fertilizer, and capital. We illustrate the response of input demands to rising agricultural wages and estimate scale and substitution effects using the fundamental law of derived demand. Lastly, we explore possible explanations for variation in agricultural productivity increases across countries by examining the relationship between countries’ trade protection policies and democracy level and unit labor costs.
    Date: 2017–05–20
  15. By: d'Artis Kancs; Boriss Siliverstovs (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: The present paper estimates and decomposes the employment e?ect of innovation by R&D intensity levels. Our micro-econometric analysis is based on a large international panel data set from the EU Industrial R&D Investment Scoreboard. Employing ?exible semi-parametric methods – the generalised propensity score – allows us to recover the full functional relationship between the R&D investment and ?rm employment, and to address important econometric issues, which is not possible in the standard estimation approach used in the previous literature. Our results suggest that modest innovators do not create and may even destruct jobs by raising their R&D expenditures. Most of the jobs in the economy are created by innovation followers: increasing innovation by 1% may increase employment up to 0.7%. The job creation e?ect of innovation reaches its peak when the R&D intensity is around 100% of the total capital expenditure, after which the positive employment e?ect declines and becomes statistically insigni?cant. Innovation leaders do not create jobs by further increasing their R&D expenditures, which are already very high.
    Date: 2017–02
  16. By: Carmine Ornaghi (University of Southampton); Ilke Van Beveren (CBS The Netherlands and KU Leuven); Stijn vanormelingen, (KU Leuven)
    Abstract: Advances in communication technology have led to a remarkable increase in the tradability of services, resulting in a substantial increase in offshoring of services over the last two decades. Research investigating how this surge in service offshoring affects employment, has been largely hampered by the paucity of suitable microdata. This paper tries to fill this gap by using a newly constructed database of Belgian firms that combines individual transaction-level data on international trade in goods and services with annual financial accounts. This unusually rich dataset allows us to produce fresh evidence on the impact of goods and service offshoring on total employment and employment by educational levels for both manufacturing industries and the service sectors. Our results show that: (i) goods offshoring has a positive impact on employment growth among workers with both low and high levels of education in the manufacturing industry but this effect disappears when controlling for scale effects; and (ii) service offshoring has a negative impact on employment growth among highly educated workers in the service sectors. This novel evidence suggests that globalization may threaten job security of higher educated workers too.
    Keywords: Offshoring, trade in services, labour markets
    Date: 2017–05

This nep-tid issue is ©2017 by Fulvio Castellacci. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.