nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2018‒04‒02
fifteen papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Intangible Investment and Firm Performance By Nathan Chappell; Adam B. Jaffe
  2. Is There a Role for Patents in the Financing of Innovative Firms? By Bronwyn H. Hall
  3. The Drivers of Life-cycle Growth of Manufacturing Plants By John Haltiwanger; Marcela Eslava
  4. Promoting structural transformation: strategic diversification vs. laissez-faire approach By Clovis Freire
  5. The impact of patent protection on R&D. Evidence using export markets. By Joel Blit; Mauricio Zelaya
  6. International Technology Sourcing and Knowledge Spillovers: Evidence from OECD Countries By Sophia Chen; Estelle Dauchy
  7. The Effect of R&D Growth on Employment and Self-Employment in Local Labour Markets By Tommaso Ciarli; Alberto Marzucchi; Edgar Salgado; Maria Savona
  8. The future of work: How G20 countries can leverage digital-industrial innovations into stronger high-quality jobs growth By Annunziata, Marco; Bourgeois, Hendrik
  9. The Impact of the French Policy Mix on Business R&D: How Geography Matters By Benjamin Montmartin; Marcos Herrera; Nadine Massard
  10. Reconciling the original Schumpeterian Model with the observed inverted-U relationship between competition and innovation By Roberto Bonfatti; Luis A. Bryce Campodonico; Luigi Pisano
  11. Can depleting technological opportunities explain the stagnation of productivity? Panel data evidence for 11 OECD countries By Schubert, Torben; Neuhäusler, Peter
  12. Lost Einsteins: who becomes an inventor in America? By Alex Bell; Raj Chetty; Xavier Jaravel; Neviana Petkova; John Van Reenen
  13. Beyond Traditional Theories of Structural Change By Marti Mestieri; Joseph Kaboski; Francisco Buera
  14. Structural Change in Times of Increasing Openness By Claudius Gräbner; Philipp Heimberger; Jakob Kapeller; Bernhard Schütz
  15. From “Structural Change” to “Transformative Change”: Rationale and Implications By S. Nazrul Islam; Kenneth Iversen

  1. By: Nathan Chappell; Adam B. Jaffe
    Abstract: We combine survey and administrative data for about 13,000 New Zealand firms from 2005 to 2013 to study intangible investment and firm performance. We find that firm size and moderate competition is associated with higher intangible investment, while firm age is associated with lower intangible investment. Examining firm performance, we find that higher investment is associated with higher labour and capital input, higher revenue, and higher firm-reported employee and customer satisfaction, but not with higher productivity or profitability. The evidence suggests that intangible investment is associated with growth and 'soft' performance objectives, but not with productivity or profitability.
    JEL: D22 D24 L21
    Date: 2018–03
  2. By: Bronwyn H. Hall
    Abstract: It is argued by many that one of the benefits of the patent system is that it creates a property right to invention that enables firms to obtain financing for the development of that invention. In this paper, I review the reasons why ownership of knowledge assets might be useful in attracting finance and then survey the empirical evidence on patent ownership and its impact on the ability of firms to obtain further financing at different stages of their development, both starting up and after becoming established. Studies that attempt to separately identify the role of patent rights and the underlying quality of the associated innovation(s) will be emphasized, although these are rather rare.
    JEL: G24 G32 L26 O34
    Date: 2018–03
  3. By: John Haltiwanger (University of Maryland); Marcela Eslava (Universidad de Los Andes)
    Abstract: We take advantage of rich microdata on Colombian manufacturing establishments to decompose growth over an establishment's life cycle into that attributable to fundamental sources of growth--physical productivity, demand shocks (firm appeal), and input prices--and distortions that weaken the link between those fundamentals and actual growth. We rely on a nested CES structure for preferences over products by multiproduct businesses, and data on quantities and prices for individual products for each manufacturing establishment, to decompose profitability shocks into physical productivity and demand shocks. Pooling all ages, measured fundamentals explain around 67% of the variability of output relative to birth level, with the remaining 33% explained by distortions and other unobserved factors. Demand shocks and TFPQ are equally important in the explained part, while input prices play a more minor role. Distortions explain more than 50% of growth up to age seven, but their contribution falls to less than 25% by around age 20. For the fraction explained by fundamentals, early life growth is explained by TFPQ with demand and input prices playing a minor role. But demand is the crucial factor in long-run growth, with a contribution that surpases that of TFPQ and unobserved factors by around age 15. In the 2000s compared to the 1980s, two decades separated by a wave of deep structural reforms, the contribution of TFPQ to the variance in life cycle growth grows by around 10 p.p , with demand and input prices falling in importance. Interestingly, that of distortions remains basically constant.
    Date: 2017
  4. By: Clovis Freire
    Abstract: Economic development is associated with structural transformation and the increase of complexity of production and exports. This paper examines whether strategic diversification is required to increase economic complexity or whether market incentives would be sufficient to drive this process of catching-up. The paper applies empirical methods of the strand of the literature on economic complexity to examine how path dependency and the demand for potential new products affect economic diversification. It argues that strategic diversification is required in cases when demand factors are very likely to create incentives for diversification towards less complex products, which hinders the increase of productive capacities of countries. The paper presents the results of analysis considering 221 economies and shows that less diversified economies would not be able to rely on market incentives alone. They have to strategically diversify towards more complex products, which require the selective promotion of economic activities through the use of targeted industrial, infrastructure, trade, investment and private sector development policies.
    Keywords: Diversification, Structural Transformation, Productive Capacities, Industrial Policy, Economic Development
    JEL: O11 O14 O33 O38 O53 O57
    Date: 2017–09
  5. By: Joel Blit (Department of Economics, University of Waterloo); Mauricio Zelaya (NERA Economic Consulting)
    Abstract: We examine whether stronger patent protection promotes private sector R&D, using changes in the patent rights regime of export destination countries as a quasi-exogenous source of variation. Constructing an export-weighted index of trade partner patent rights by country-industry-year, we find that R&D responds strongly to trade partner patent rights, and this after including country-industry, country-year, and industry-year fixed effects. This relationship is present in industries where patents are an effective way to protect innovation, but not in patent insensitive industries. Our results suggest a causal link between patent rights and firm R&D investments and support the inclusion of patent rights provisions in trade agreements.
    JEL: O34
  6. By: Sophia Chen; Estelle Dauchy
    Abstract: How much do firms benefit from foreign R&D and through what channel? We construct a global network of corporate innovation using more than 1.5 million patents granted to firms in OECD countries. We test the “international technology sourcing” hypothesis that foreign innovation activities tap into foreign R&D and improve home productivity through knowledge spillovers. We find that firms with stronger inventor presence in technology frontier countries benefit disproportionately more from their R&D. The strength of knowledge spillovers depends on the direction of technology sourcing. Knowledge externality is larger for firms in technology frontier countries than for firms in non-frontier countries.
    Date: 2018–03–12
  7. By: Tommaso Ciarli (SPRU, University of Sussex); Alberto Marzucchi (SPRU, University of Sussex); Edgar Salgado (SPRU, University of Sussex); Maria Savona (SPRU, University of Sussex)
    Abstract: The paper investigates the effects of firms’ investment in Research and Development (R&D) on employment dynamics in the British local labour markets (Travel to Work Areas). We distinguish between local areas characterised by the initial level of routinised employment of the workforce. We implement a instrumenting strategy to address endogeneity issues in the relation between innovation and employment. Our results suggest that increases in R&D investments mainly affect routinised areas, where the employment created is low skilled, concentrated in non-tradable sectors (like transport, construction) and services. A significant share of the jobs created is self-employment, concentrated in the 25-34 age cohort. We qualify the effect of R&D on self-employment by looking at local firms’ dynamics, which suggest that the increase in self-employment is reflected in a higher number of micro-firms. Rather, in non-routinized areas, R&D results in the expected increase in the demand of high-skilled workers and a reduced demand of low-skill employment.
    Keywords: Innovation; R&D investments; Employment; Self-employment; Local Labour Markets; Routinisation; Skills
    JEL: O33 J24 D3
    Date: 2018–03
  8. By: Annunziata, Marco; Bourgeois, Hendrik
    Abstract: A new wave of innovation is beginning to disrupt industry on a global scale. It constitutes a tremendous opportunity for faster productivity growth, but also a potential disruption to a number of economic sectors and to job markets. Academic research and the public debate have focused mostly on the threat that innovation poses to jobs and wages. This paper instead suggests that (i) these same technological disruptions make human capital more important than ever for companies' strategies; (ii) greater attention needs to be devoted to new forms of complementarity between new technologies and human capital. While some jobs will be displaced, the greatest impact of innovation will come in the way that many jobs will be transformed; the evidence to date supports the authors' view that innovation will once again result in more and better jobs - but much work needs to be done to optimize the transition. In particular, more effort should be devoted to (i) understanding what new skills will be needed, and how existing jobs will change; (ii) upgrading education and professional training schemes; (iii) reforming labor market institutions to support a future where a larger share of workers will change jobs and employers more frequently, and more people will work independently in a crowdsourcing or "gig economy" framework; (iv) reforming social benefits systems and bolstering social safety nets to smooth the economic transition and cushion the impact on the worst-affected workers. As innovation disrupts a growing number of industries, human capital strategies will need the collaboration of companies, educational institutions, governments and multilateral policy agencies. This paper presents an analysis of the challenges, addresses the key areas of action, and puts forward some specific proposals, including policy actions, industry initiatives, and further research projects. The authors argue that the G20 could and should champion a comprehensive approach to leverage digital-industrial innovations for faster job creation and growth, with measures to re-align demand and supply of skills, labor market reforms, redesigned social safety nets, measures to promote digital innovation and facilitate the adoption of skills-augmenting technologies. Private sector companies should strengthen training programs. International cooperation, standards harmonization and interoperability will be essential to maximize the benefits and minimize the disruptions - the G20 can therefore play a key role.
    Keywords: innovation,productivity,technological unemployment,training,education,manufacturing,R&D,investment
    JEL: J20 J23 J24 J62 J68 O32 O33 M5 I28 E24 D24
    Date: 2018
  9. By: Benjamin Montmartin (SKEMA Business School; Université Côte d’Azur; OFCE Sciences.Po; GREDEG CNRS); Marcos Herrera (CONICET - IELDE; National University of Salta, Argentina); Nadine Massard (GAEL UMR 1215; Université Grenoble Alpes, France)
    Abstract: Based on a spatial extension of an R&D investment model, this paper measures the macroeconomic impact of the French R&D policy mix on business R&D using regional data. Our measure takes into account not only the direct effect of policies but also indirect effects generated by the existence of spatial interaction between regions. Using a unique database containing information on the levels of various R&D policy instruments received by firms in French NUTS3 regions over the period 2001-2011, our estimates of a spatial Durbin model with structural breaks and fixed effects reveal the existence of a negative spatial dependence among R&D investments in regions. In this context, while a-spatial estimates would conclude that all instruments have a crowding-in effect, we show that national subsidies are the only instrument that is able to generate significant crowding-in effects. On the contrary, it seems that the design, size and spatial allocation of funds from the other instruments (tax credits, local subsidies, European subsidies) lead them to act (in the French context) as beggar-thy-neighbor policies.
    Keywords: Policy mix evaluation, R&D investment, Spatial panel, French NUTS3 regions
    JEL: H25 O31 O38
    Date: 2018–03
  10. By: Roberto Bonfatti; Luis A. Bryce Campodonico; Luigi Pisano
    Abstract: Empirical studies have uncovered an inverted-U relationship between product-market competition and innovation. This is inconsistent with the original Schumpeterian Model, where greater competition reduces the profitability of innovation. We show that the model can predict the inverted-U if the innovators’ talent is heterogenous, and privately observable. With competition low and profitability high, talented innovators are credit constrained, since others are eager to mimic them. As competition increases, the mimickers become less eager, and talented innovators can invest more. This generates the increasing part of the relationship. With competition high, talented innovators are unconstrained, and the relationship is decreasing.
    Keywords: Innovation, Competition, Schumpeterian Model of Growth, Asymmetric Information
    Date: 2018
  11. By: Schubert, Torben; Neuhäusler, Peter
    Abstract: We analyze the stagnating productivity levels observable across many Western economies during the last two decades. Relying on techniques to measure total factor productivities (TFP), we provide evidence for a set of 11 OECD countries observed over the period from 1993-2011 that TFP-levels exhibited growth rates of about 0.9% per year until 2000. In the period after 2000, the TFP levels almost stagnated with average annual growth rates declining to about 0.3%. The stagnating trends hold almost uniformly across the analyzed countries and across broad economic sectors. Following recently made claims in the literature, we analyze the hypothesis that the stagnating trend was due to generally declining technological opportunities. Our evidence suggests that the importance of intrasectoral innovation as measured by R&D remained relatively constant and was at best slightly decreasing. However, the importance of investments in the physical capital stock considerably declined after 2000. We take this as evidence that rather than a general depletion of technological opportunities, the possibilities to achieve TFP-growth via capital-embodied technical change became less abundant.
    Date: 2018
  12. By: Alex Bell; Raj Chetty; Xavier Jaravel; Neviana Petkova; John Van Reenen
    Abstract: Who are America's most successful inventors - and what can we learn from their experiences in designing policies to stimulate innovation? To answer these questions, former CEP director John Van Reenen and his colleagues have analysed data on the lives of more than one million inventors.
    Keywords: inventor, America, innovation
    Date: 2018–03
  13. By: Marti Mestieri (Northwestern University); Joseph Kaboski (University of Notre Dame); Francisco Buera (Federal Reserve Bank of Chicago)
    Abstract: We develop a generalized model of structural change that jointly considers the demand and production sides. Production is generalized to allow for factoraugmenting technical change and time-varying factor shares. Demand is generalized following the preferences in Comin, Lashkiari, and Mestieri (2015). We fit this model to data on sectoral value-added and labor allocations, price indexes, and income per capita in a large panel of 39 countries. We use the model as a diagnostic tool to examine the sources of unaccountd for development patterns by performing a wedge analysis and document systematic patterns in deviations from this model over development and time. We find falling deviations in agricultural productivity and rising deviations in service productivity relative to manufacturing over time, but the opposite pattern with income per capita. We then analyze potential sources of these measured wedges for various subsets of countries with available data. Candidates include systematic patterns in factor shares, measured human capitals, net export patterns, and unmeasured price, labor, and technology distortions that vary across sectors, development, and time.
    Date: 2017
  14. By: Claudius Gräbner; Philipp Heimberger (The Vienna Institute for International Economic Studies, wiiw); Jakob Kapeller; Bernhard Schütz
    Abstract: Assessing Path Dependency in European Economic Integration This paper analyses the dynamics of structural polarisation and macroeconomic convergence vs. divergence in the context of European integration, where the latter is understood primarily as an increase in economic and financial openness. In the process of estimating the dynamic effects of openness shocks on 26 EU countries, we develop a taxonomy of European economies that consists of core, periphery, financialised and Eastern European catch-up economies. As these four country groups have responded in a distinct way to the openness shocks imposed by European integration, we argue that the latter should be seen as an evolutionary process that has given rise to different path-dependent developmental trajectories. These trajectories relate to the sectoral development of European economies and the evolution of their technological capabilities. We propose a set of interrelated policy measures to counteract structural polarisation and to promote macroeconomic convergence in Europe.
    Keywords: Europe, path dependency, European integration, economic openness, competitiveness
    JEL: B5
    Date: 2018–03
  15. By: S. Nazrul Islam; Kenneth Iversen
    Abstract: This paper examines the relationship between “Transformative Change,” advocated by the 2030 Agenda for sustainable development, and “Structural Change,” which has been a longstanding and important concept in Development Economics. It shows that while structural change is still relevant, growing concerns for social development and environmental protection made it necessary to switch to the more encompassing concept of “Transformative Change” that provides greater space for inclusion and interaction of all three dimensions of sustainable development. The paper notes that, in the era of greater globalization, countries have followed more varied patterns of structural change, all of which are not equally suitable for sustainable development. The paper notes that Transformative Change subsumes structural change, and it discusses the modifications that structural change needs to be more compatible with sustainable development.
    Keywords: Structural change; Transformative change; 2030 Agenda; Sustainable development
    JEL: O14 O44 Q0 Q56 Q57 Q58
    Date: 2018–02

This nep-tid issue is ©2018 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.