nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2018‒01‒15
sixteen papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Innovation, Reallocation, and Growth By Acemoglu, Daron; Akcigit, Ufuk; Alp, Harun; Bloom, Nicholas; Kerr, William R.
  2. Labour mobility, skill-relatedness and plant survival over the industry life cycle: Evidence from new Dutch plants By Ron Boschma; Riccardo Cappelli; Anet Weterings
  3. Older and Slower: The Startup Deficit's Lasting Effects on Aggregate Productivity Growth By Robert Dent; David Berger; Benjamin Pugsley; Titan Alon
  4. Recent Manufacturing Employment Growth: The Exception That Proves the Rule. By Robert Z. Lawrence
  5. Business Dynamic Statistics of Innovative Firms By Nathan Goldschlagy; Elisabeth Perlmanz
  6. Religious Tolerance as Engine of Innovation By Cinnirella, Francesco; Streb, Jochen
  7. Stock Market Overvaluation, Moon Shots, and Corporate Innovation By Ming Dong; David Hirshleifer; Siew Hong Teoh
  8. Innovation, Finance, and Economic Growth : an agent based approach By Giorgio Ffagiolo; Daniele Giachini; Andrea Roventini
  9. Knowledge spillovers and patent citations: trends in geographic localization, 1976-2015 By Hyuk-Soo Kwon; Jihong Lee; Sokbae Lee; Ryungha Oh
  10. Structural Change within the Service Sector and the Future of Baumol's Disease By Duernecker, Georg; Herrendorf, Berthold; Valentinyi, Akos
  11. Skill-biased technical change and Labor market polarization:the role of skill heterogeneity within occupations By Sevinç, Orhun
  12. Banking Crises and Investments in Innovation By Oana Peia
  13. Internationalisation of R&D: A Review of Drivers, Impacts, and new Lines of Research By Dachs, Bernhard
  14. ICT Capital Spending, ICT Sector, and Firm Productivity: Evidence from Indonesian Firm-Level Data By Chaikal Nuryakin; Faisal Rachman; Ashintya Damayati; Nia Kurnia; Moslem Afrizal
  15. How Does Firm Survival Differ between Business Takeovers and New Venture Start-ups? By Xi, Guoqian; Block, Jörn; Lasch, Frank; Robert, Frank; Thurik, Roy
  16. Innovation Activity of Firms in the Philippines By Quimba, Francis Mark A.; Albert, Jose Ramon G.; Llanto, Gilberto M.

  1. By: Acemoglu, Daron; Akcigit, Ufuk; Alp, Harun; Bloom, Nicholas; Kerr, William R.
    Abstract: We build a model of firm-level innovation, productivity growth and reallocation featuring endogenous entry and exit. A new and central economic force is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using US Census micro data on firm-level output, R&D and patenting. The model provides a good fit to the dynamics of firm entry and exit, output and R&D. Taxing the continued operation of incumbents can lead to sizable gains (of the order of 1.4% improvement in welfare) by encouraging exit of less productive firms and freeing up skilled labor to be used for R&D by high-type incumbents. Subsidies to the R&D of incumbents do not achieve this objective because they encourage the survival and expansion of low-type firms.
    Keywords: Entry; growth; industrial policy; Innovation; R&D; reallocation; selection
    JEL: E2 L1 O31 O32 O33
    Date: 2017–11
  2. By: Ron Boschma; Riccardo Cappelli; Anet Weterings
    Abstract: Labour mobility is often considered a crucial factor for regional development. However, labour mobility is not good per se for local firms. There is increasing evidence that labour recruited from skill-related industries has a positive effect on plant performance, in contrast to intra-industry labour recruits. However, little is known about which types of labour are recruited in different stages of the evolution of an industry, and whether that matters for plant performance. This paper attempts to fill these gaps in the literature using plant-level data for manufacturing and services industries in the Netherlands for the period 2001-2009. Our study focuses on the effects of different types of labour recruits on the survival of new plants. We show that the effects of labour recruits from the same industry and from skill-related and unrelated industries on plant survival vary between the life cycle stages of industries. We also find that inter-regional labour flows do not impact on plant survival.
    Keywords: labour mobility, skill-relatedness, industry life cycle, industrial dynamics, firm survival
    JEL: R11 R12 O18
    Date: 2017–12
  3. By: Robert Dent (University of Virginia); David Berger (Northwestern University); Benjamin Pugsley (Federal Reserve Bank of NY); Titan Alon
    Abstract: The more than thirty-year decline in the rate of new employer business creation, and with it the significant shift in the firm age distribution of U.S. employers have both slowed U.S. labor productivity growth. This gradually accumulating drag on productivity growth was obscured by the surge in TFP in the late 1990s and early 2000s (see Fernald 2014). Earlier work by Baily et al. (1992) and Foster et al. (2006) among others has shown the crucial role of reallocation among establishments, primarily from entry and exit, in explaining aggregate productivity growth within the manufacturing and retail trade sectors. In this paper, we use administrative Census data with near universal coverage of the non farm private sector to assess the effects on aggregate productivity from the direct effects of the decline in the business entry rate and its indirect effect on the age distribution. We follow the methodology of Haltiwanger et al. (2016) and merge the Census Longitudinal Business Database (LBD) with data on annual sales from IRS records in the Census Business Register to construct a revenue-enhanced LBD with annual firm level measures of real sales per worker. Using these measures as rough proxies for labor productivity within narrow NAICS industries, we quantify how the entire distribution of labor productivity evolves by firm age as well as other firm characteristics by extending the dynamic Olley-Pakes decomposition in Melitz and Polanec (2015). Looking across the entire private-sector economy, we have three main findings. First, we document that the age-profile of labor productivity growth of firms between the ages of 1 and 19 is downward sloping and convex. Productivity growth is highest among young firms and declines quickly with firm age. Since startups have higher productivity growth rates, a decline in the startup rate lowers aggregate productivity growth. Second, we document that this age profile of firms aged 1-19 and the pattern of selection is stable across our sample. This means that the slow down in aggregate productivity growth has not come from changes in the age profile of productivity growth for these age cohorts. Third, the contribution of mature firms (age 20+) to aggregate productivity growth has declined significantly since the mid-2000 and the source of this decline has been a slowdown in allocative efficiency (the most productivity mature firms have not gained market share relative to less productive firms). We use these cross sectional results to calibrate an equilibrium growth model with heterogeneous firms and to perform simple counterfactuals. The model allows us to estimate the aggregate consequences of the declines in entry for aggregate productivity in the time series. Using the model we quantify the total effect of the decades long startup deficit on aggregate productivity growth. Simple counterfactuals suggest that the decline in the startup rate can explain a significant fraction, though not all, of the aggregate productivity growth slowdown.
    Date: 2017
  4. By: Robert Z. Lawrence
    Abstract: This Paper challenges two widely held views: first that trade performance has been the primary reason for the declining share of manufacturing employment in the United States and other industrial economies, and second that recent productivity growth in manufacturing has actually been quite rapid but is not accurately measured. The paper shows that for many decades, relatively faster productivity growth interacting with unresponsive demand has been the dominant force behind the declining share of employment in manufacturing in the United States and other industrial economies. It also shows that since 2010, however, the relationship has been reversed and slower productivity growth in manufacturing has been associated with more robust performance in manufacturing employment. These contrasting experiences suggest a tradeoff between the ability of the manufacturing sector to contribute to productivity growth and its ability to provide employment opportunities. While some blame measurement errors for the recently recorded slowdown in manufacturing productivity growth, spending patterns in the United States and elsewhere suggest that the productivity slowdown is real and that thus far fears about robots and other technological advances in manufacturing displacing large numbers of jobs appear misplaced.
    JEL: D24 F16 J21 O14
    Date: 2017–12
  5. By: Nathan Goldschlagy; Elisabeth Perlmanz
    Abstract: A key driver of economic growth is the reallocation of resources from low to high productivity activities. Innovation plays an important role in this regard by introducing new products, services, and business methods that ultimately lead to increased productivity and rising living standards. Traditional measures of innovation, particularly those based on aggregate inputs, are increasingly unable to capture the breadth and depth of innovation in modern economies. In this paper, we describe an effort at the US Census Bureau, the Business Dynamics Statistics of Innovative Firms (BDS-IF) project, which aims to address these challenges by extending the Business Dynamics Statistics data to include new measures of innovative activity. The BDS-IF project will produce measures of firm, establishment, and employment flows by firm age, firm size, and industry for the subset of firms engaged in activities related to innovation. These activities include patenting and trademarking, the employment of STEM workers, and R&D expenditures. The exibility of the underlying data infrastructure allows this measurement agenda to be extended to include copyright activity, management practices, and high growth firms.
    Keywords: Firm dynamics, innovation, Longitudinal Business Database, Business Dynamics Statistics
    Date: 2017–01
  6. By: Cinnirella, Francesco; Streb, Jochen
    Abstract: We argue that, for a given level of scientific knowledge, tolerance and diversity are conducive to technological creativity and innovation. In particular, we show that variations in innovation within Prussia during the second industrial revolution can be ascribed to differences in religious tolerance that developed in continental Europe from the Peace of Westphalia onwards. By matching a unique historical dataset about religious tolerance in 1,278 Prussian cities with valuable patents for the period 1877-1890, we show that higher levels of religious tolerance are strongly positively associated with innovation during the second industrial revolution. Religious tolerance is measured through population's religious diversity, diversity of churches, and diversity of preachers and religious teachers, respectively. Endogeneity issues are addressed using local variation across cities, within counties. Estimates using preindustrial levels of religious tolerance address issues of reverse causality. As for the channels of transmission, we find significant complementarity between religious tolerance and human capital. Furthermore, we find that cities with higher levels of religious tolerance attracted a larger share of migrants. Finally, higher levels of religious diversity in the population translated into higher levels of religious diversity in the workforce by industrial sector. This result suggests that religious diversity did not generate labor market segmentation by denomination but might have fostered interaction of different denominations.
    Keywords: diversity; Innovation; openness; Patenting Activity; Pluralism; Tolerance
    JEL: N13 N33 O14 O31 Z12
    Date: 2017–11
  7. By: Ming Dong; David Hirshleifer; Siew Hong Teoh
    Abstract: We test how market overvaluation affects corporate innovative activities and success. Estimated stock overvaluation is very strongly associated with R&D spending, innovative output, and measures of innovative novelty, originality, and scope. R&D is much more sensitive than capital investment to overvaluation. The effects of misvaluation on R&D come more from a non-equity channel than via equity issuance. The sensitivity of R&D and innovative output to misvaluation is greater among growth, overvalued, and high turnover firms. This evidence suggests that market overvaluation may have social value by increasing innovative output and by encouraging firm to engage in ‘moon shots.’
    JEL: D22 D23 G14 G3 G31 G32 O32
    Date: 2017–12
  8. By: Giorgio Ffagiolo (Scuola Superiore Sant'Anna Pisa Italy); Daniele Giachini (Scuola Superiore Sant'Anna Pisa Italy); Andrea Roventini (Scuola Superiore Sant'Anna Pisa Italy also OFCE Sciences Po Paris)
    Abstract: This paper extends the endogenous-growth agent-based model in Fagiolo and Dosi (2003) to study the finance growthnexus. We explore industries where firms produce a homogeneous good using existing technologies, perform R&D activities to introduce new techniques, and imitate the most productive practices. Unlike the original model, we assume that both exploration and imitation require resources provided by banks, which pool agent savings and finance new projects via loans. We find that banking activity has a positive impact on growth. However,excessive financialization can hamper growth. In- deed, we find a significant and robust inverted-U shaped relation between financial depth and growth. Overall, our results stress the fundamental (and still poorly understood) role played by innovation in the finance-growth nexus.
    Keywords: Agent based models, Innovation, Exploration vs Exploitation, Endogenous Growth, Banking Sector, Finance Growth Nexus
    JEL: C63 G21 O30 O21
    Date: 2017–11–27
  9. By: Hyuk-Soo Kwon (Institute for Fiscal Studies); Jihong Lee (Institute for Fiscal Studies); Sokbae Lee (Institute for Fiscal Studies and Columbia University and IFS); Ryungha Oh (Institute for Fiscal Studies)
    Abstract: This paper examines the trends in geographic localization of knowledge spillovers via patent citations, considering US patents from the period of 1976-2015. Despite accelerating globalization and widespread perception of the "death of distance," our multi-cohort "matched-sample" study reveals signi cant and growing localization effects of knowledge spillovers at both intra- and international levels after the 1980s. We also develop a novel network index based on the notion of "farness," which an instrumental variable estimation shows to be a signifi cant and sizable determinant of the observed trends at the state-sector level.
    Keywords: Innovation, knowledge spillovers, patent citation, agglomeration, network index, farness
    JEL: C36 C81 O33 O34 O51
    Date: 2017–12–06
  10. By: Duernecker, Georg; Herrendorf, Berthold; Valentinyi, Akos
    Abstract: Structural change reduces aggregate productivity growth when it leads to the reallocation of production to industries with low productivity growth. We document that this so-called Baumol's disease considerably reduced productivity growth in the postwar U.S. We capture the effect of Baumol's disease on productivity growth with a novel model of structural change that disaggregates the service sector into services with low and high productivity growth. The data imply that the two service subsectors are substitutes. We find that the substitutability limits how important services with low productivity growth may become, which bounds the future effect of Baumol's disease.
    Keywords: Baumol's Disease; Productivity Growth Slowdown; Service Sector; structural change
    JEL: O41 O47 O51
    Date: 2017–11
  11. By: Sevinç, Orhun
    Abstract: I document that employment share change and wage growth of occupations tend to increase monotonically with various measures of skill intensity since 1980 in the US, in contrast to the existing interpretation of labor market polarization along occupational wages. The observation is not particularly driven by a specific decade, gender, age group, or occupation classification. The evidence suggests that polarization by wages does not imply polarization of skills that have cross-occupation comparability. Skill-biased and polarizing occupation demand coexist as a result of the weak connection of wage and observable skill structure particularly among the low-wage jobs in the 1980. The empirical findings of the paper can be reconciled in an extended version of the canonical skill-biased technical change model which incorporates many occupations and within-occupation heterogeneity of skill types.
    JEL: J1
    Date: 2017–06–01
  12. By: Oana Peia
    Abstract: This paper proposes a new channel to explain the medium- to long-term effects of banking crises on the real economy. It embeds a banking sector prone to runs in a stylized growth model to show that episodes of bank distress affect not only the volume, but also the composition of firm investment, by disproportionally decreasing investments in innovation. Thishypothesis is confirmed empirically employing industry-level data on R&D spending around 13 recent banking crises episodes. Using difference-in-difference identification strategies, I show that industries that depend more on external finance, in more bank-based economies, invest disproportionally less in R&D following systemic banking crises. These industries also have a lower share of R&D spending in total investment, suggesting a shift in the composition of investment that is specific to recessions following banking crises and not other business cycle recessions.
    Keywords: Banking crises; R&D investment; Financial dependence; Global games
    JEL: G01 G21 E22
    Date: 2017–12
  13. By: Dachs, Bernhard
    Abstract: This paper reviews the growing literature on the internationalisation of R&D in the business sector. By internationalisation of R&D, this paper means the fact that firms conduct research and development at locations outside their home countries. The survey focuses on three issues: first, the drivers of the process at the country, the sectoral and the firm level – why firms go abroad with R&D activities. Second, evidence on the effects of the internationalisation of R&D on the host and home countries of multinational firms. So far, there is a consensus in the literature that R&D internationalisation benefits the host countries. Third, the paper discusses some new lines of research on R&D internationalisation related to the role of indirect funding for R&D, R&D internationalisation in services and multinationals from emerging economies.
    Keywords: Internationalisation, R&D, innovation, foreign-owned firms, outsourcing
    JEL: F23 O31
    Date: 2017–12
  14. By: Chaikal Nuryakin (Researcher, Institute for Economic and Social Research, Faculty of Economics, University of Indonesia, Jakarta); Faisal Rachman (Institute for Economic and Social Research, Faculty of Economics, University of Indonesia); Ashintya Damayati (Institute for Economic and Social Research, Faculty of Economics, University of Indonesia); Nia Kurnia (Researcher, Institute for Economic and Social Research, Faculty of Economics, University of Indonesia, Jakarta); Moslem Afrizal (Researcher, Institute for Economic and Social Research, Faculty of Economics, University of Indonesia, Jakarta)
    Abstract: This study examined the impact of ICT on firm productivity in Indonesia. Using unbalanced panel data of medium and large manufacturing firms, we performed two kinds of estimation. The first estimation is Cobb-Douglas production function with output as the dependent variable. Capital was grouped into non-ICT capital and ICT capital in order to determine the impact of ICT on firm’s output creation. The second estimation used total factor productivity as the dependent variable, where TFP was estimated using Levinsohn-Petrin productivity estimator. As other internal and external factors were added to the regression as control variable, the study provides early evidence that while the impact of R&D and innovation still needs to be further elaborated, ICT capital may have a positive, but not always significant, impact on firm’s production and productivity in Indonesia.
    Keywords: ICT — Productivity — TFP — R&D — Innovation
    JEL: E22 D24 O3
    Date: 2017–10
  15. By: Xi, Guoqian (University of Trier); Block, Jörn (University of Trier); Lasch, Frank (Montpellier Business School); Robert, Frank (Montpellier Business School); Thurik, Roy (Erasmus University Rotterdam)
    Abstract: Focusing on entrepreneurship entry modes, we investigate two research questions regarding firm survival: how does the survival probability differ between business takeovers and new venture start-ups? And how do the determinants of survival differ between the two entry modes? Using a large French dataset, we find that business takeovers have a higher survival chance than new venture start-ups. Yet, the differences between two entry modes partially disappear when controlling for differences in founder and firm characteristics. Moreover, we identify differences in the determinants of survival between the two groups, highlighting the distinction between the two forms of entrepreneurship.
    Keywords: new venture start-up, business takeover, firm survival
    JEL: L26 M13
    Date: 2017–11
  16. By: Quimba, Francis Mark A.; Albert, Jose Ramon G.; Llanto, Gilberto M.
    Abstract: Set against a rapidly changing global environment, Philippine industries now, more than ever, are facing new demands that will require more innovation for firms to remain competitive across the global market. The PIDS Survey on Innovation Activities (PSIA) conducted among firms in food manufacturing, other manufacturing, ICT, and BPO suggests that in 2015, about 43% of Philippines establishments were innovation-active. Strikingly, the BPO sector spends the most for innovation activities despite it being the least innovation-active among the various sectors at a rate of just 30%. Intellectual property applications have been very low across all industries following firms’ tendency to view their product innovations as trade secrets in order to maintain their competitive edge against rivals. The study also finds that the conduct of knowledge management activities is positively correlated with firm size. Moreover, larger firms tend to rely on internal sources for their information and innovation which is the case with the food processing and automotive sectors. Results of the panel data model explaining innovative behavior among 2015 PSIA firms, that were also part of a pilot survey in 2009, showed that knowledge management activities and firm size are adequate determinants of innovation behavior. Taking all these survey results into perspective, a national policy that is grounded on consultations with all stakeholders in the innovation ecosystem should be pursued. Enabling the business environment through stronger intellectual property rights can also encourage more firms to innovate especially among wary multinational companies.
    Keywords: innovation, Philippines, process innovation, product innovation, micro, small and medium enterprises, industry-academe collaboration
    Date: 2017

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