nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2018‒06‒11
eighteen papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. The Impact of Exports on Innovation: Theory and Evidence By Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc J. Melitz
  2. Public Procurement, Local Labor Markets and Green Technological Change: Evidence from US Commuting Zones. By Orsatti, Gianluca; Perruchas, François; Consoli, Davide; Quatraro, Francesco
  3. R&D financing and growth By Luca, Spinesi; Mario, Tirelli
  4. Outside Board Directors and Start-Up Firms’ Innovation By Baum, Christopher F; Lööf, Hans; Stephan, Andreas; Viklund-Ros, Ingrid
  5. Investing in People: The Case for Human Capital Tax Credits By Rui Costa; Nikhil Datta; Stephen Machin; Sandra McNally
  6. Offshoring and Innovation Capabilities: Evidence from Swedish Manufacturing By Baum, Christopher F; Lööf, Hans; Perez, Luis; Stephan, Andreas
  7. Corporate returns to subsidized R&D projects: Direct grants vs tax credit financing By Møen, Jarle
  8. R&D Expenditure in the EU: Convergence or Divergence? By Francisco A. Blanco; Francisco J. Delgado; Maria J. Presno
  9. Team-specific capital and innovation By Jaravel, Xavier; Petkova, Neviana; Bell, Alex
  10. Resource Misallocation and Productivity: Evidence from Mexico By Florian Misch; Christian Saborowski
  11. Structural Change and Global Trade By Logan T. Lewis; Ryan Monarch; Michael J. Sposi; Jing Zhang
  12. The Wider Impacts of High-Technology Employment: Evidence from U.S. Cities By Thomas Kemeny; Taner Osman
  13. Micro and macro policies in the Keynes +Schumpeter evolutionary models By Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Tania Treibich
  14. Should We Fear the Robot Revolution? (The Correct Answer is Yes) By Andrew Berg; Edward F Buffie; Luis-Felipe Zanna
  15. Innovation and business performance for Spanish SMEs: new evidence from a multi-dimensional approach. By Alfonso Expósito; Juan A. Sanchis-Llopis
  16. Industrial Relatedness and Regional Resilience in the European Union By Giulio Cainelli; Roberto Ganau; Marco Modica
  17. Understanding the Decline of U.S. Manufacturing Employment By Susan N. Houseman; Brad J. Hershbein
  18. An international comparison of the contribution to job creation by high growth firms By Anyadike-Danes, Michael; Bjuggren, Carl Magnus; Dumont, Michel; Gottschalk, Sandra; Hölzl, Werner; Johansson, Dan; Maliranta, Mika; Myrann, Anja; Nielsen, Kristian; Zheng, Guanyu

  1. By: Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc J. Melitz
    Abstract: This paper investigates the effect of export shocks on innovation. On the one hand a positive shock increases market size and therefore innovation incentives for all firms. On the other hand it increases competition as more firms enter the export market. This in turn reduces profits and therefore innovation incentives particularly for firms with low productivity. Overall the positive impact of the export shock on innovation is magnified for high productivity firms, whereas it may negatively affect innovation in low productivity firms. We test this prediction with patent, customs and production data covering all French manufacturing firms. To address potential endogeneity issues, we construct firm-level export proxies which respond to aggregate conditions in a firm's export destinations but are exogenous to firm-level decisions. We show that patenting robustly increases more with export demand for initially more productive firms. This effect is reversed for the least productive firms as the negative competition effect dominates.
    JEL: D12 F13 F14 F41 O30 O47
    Date: 2018–05
  2. By: Orsatti, Gianluca; Perruchas, François; Consoli, Davide; Quatraro, Francesco (University of Turin)
    Abstract: The present paper investigates whether and through which channels green public procurement (GPP) stimulates local environmental innovation capacity. To this end, we use detailed data sources on green patents and procurement expenditure at the level of US Commuting Zones for the period 2000-2011. We also check for the moderating effects of local labor market composition in the relation between green public procurement and green innovation capacity. Lastly, we exploit the richness of patent information to test for differential effects of green public procurement on different classes of green technologies. The main finding is that GPP is an important driver in explaining the growth of local green-tech stock. The positive effect of GPP is mainly driven by expenditures for procured green services and is magnified by the local presence of high shares of abstract- intensive occupations. When separately considering diverse kinds of green technologies, we do find evidence of a more pronounced effect of GPP on the growth of local knowledge stocks of mitigation technologies.
    Date: 2018–04
  3. By: Luca, Spinesi; Mario, Tirelli
    Abstract: R&D investment are an important engine of growth and development. Yet economists have often claimed underinvestment, also due to the asymmetric information between inside investors and outside investors and financiers, and the consequent capital and financial market imperfections. Some recent empirical evidence robustly supports these claims. Motivated by this evidence, we study the effects of asymmetric information and financial frictions on R&D investment within a dynamic GE economy of Shumpeterian tradition. The model and equilibrium concept we propose is rich enough to represent investment and innovation decisions, financial decisions and decisions regarding technology adoption/diffusion through patent licensing. Qualitative predictions indicate that the financial policy of the firm matters in explaining both entrepreneurial production and innovation decisions. Young R&D-intensive firms might rely more heavily on internal sources and equity than on debt financing, relatively to what would otherwise be observed in absence of frictions. These findings contribute to explain the type of financial hierarchy recently highlighted in the empirical studies.
    Keywords: Innovation, R&D, Shumpeterian growth, firm financial structure, asymmetric information, financial markets, general equilibrium.
    JEL: D5 D53 D92 O31 O33 O34 O4
    Date: 2018–04–30
  4. By: Baum, Christopher F (Boston College and DIW Berlin); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Stephan, Andreas (Jönköping International Business School (JIBS) & Centre of Excellence for Science and Innovation Studies (CESIS)); Viklund-Ros, Ingrid (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: We exploit increased access to detailed employer-employee data to assess whether outside board members affect innovation performance among start-up firms. Using data for all new limited companies in Sweden born during 1999–2013 which have no more then 10 employees when formed, we provide structural equation estimates that deal with the endogenous selection of board directors. Our empirical findings show that an increase in the board’s expertise, measured by the relative productivity of the firms where outsiders are employed, has a significant and positive impact on the new firm’s propensity to apply for both patents and trademarks.
    Keywords: Start-ups; outside directors; innovation; patents; trademarks; productivity; endogeneity
    JEL: D24 O33
    Date: 2018–06–01
  5. By: Rui Costa (London School of Economics); Nikhil Datta (London School of Economics); Stephen Machin (University College London); Sandra McNally (London School of Economics)
    Abstract: Estimates from the US suggest that increasing levels of human capital over the second half of the last century accounted for approximately one third of productivity growth, while some estimates of the social rate of return to R&D in the manufacturing sector have exceeded one hundred percent. Despite the contribution of both human capital and R&D to economic growth, the UK fiscal system does not treat the two equally when it comes to employer incentives to invest. Firms that invest in R&D are able to claim generous tax relief on their investments whereas there is no such across-the-board incentive to invest in the training of their workers. This is despite the fact that the rationale for government support to firm investment in human capital is similar to that for R&D and both are important for economic growth. We explain the economic rationale for government support in the form of tax credits, discuss current practice in the UK in relation to R&D, and address the evidence on effectiveness. We then discuss how the policy might be adapted to provide similar incentives for investing in human capital.
    Keywords: human capital, research and development, r&d, tax relief, United Kingdom
    JEL: H23 J24 O30
    Date: 2018–05
  6. By: Baum, Christopher F (Boston College and DIW Berlin); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Perez, Luis (University of Minnesota); Stephan, Andreas (Jönköping International Business School (JIBS) & Centre of Excellence for Science and Innovation Studies (CESIS))
    Abstract: This paper examines the impact of global value chains on rms' innovation capabilities. Using the United Nations Broad Economic Categories (BEC) system to identify offshoring-related intermediate imports, we study contracting out production over the period 2001-2014 from about 7,000 mainly small Swedish manufacturing frms to six different destinations and test hypotheses on improvements and outcomes of innovation capabilities. Our empirical fndings show that the strategy to participate in global value chains increases frms' innovative capability regardless of frms' technology intensity. The results are robust to a wide set of controls and in line with predictions in recent models of directed technical change.
    Keywords: Innovation Capabilities; Technical Change; Skill Premium; Panel Data
    JEL: F14 L23 O22 O32
    Date: 2018–06–01
  7. By: Møen, Jarle (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: According to theory, direct R&D grants should be used for projects with low private returns, high social returns and high risk. R&D tax credits, on the other hand, allow firms to choose projects freely according to their private returns. Building on the standard R&D capital model, I develop a framework for estimating private returns to R&D projects with different types of funding. I apply the framework to estimate the corporate returns to subsidized R&D projects in Norway. Consistent with theory and a high quality grant allocation process, I find that projects funded through direct grants have private returns that are not significantly different from zero and with high variance, while the return to R&D projects financed by tax credits is just slightly below the return to R&D projects financed by own funds. The latter two return estimates are 16 % and 19 % respectively. I find that SMEs and small R&D performers have somewhat higher returns to R&D than larger firms. The overall return estimate across all types of finance is 15 %. This is in line with recent meta-regression results in the international literature.
    Keywords: Returns to R&D; R&D capital model; Knowledge capital model; R&D subsidies; R&D grants; R&D tax credit; Innovation Policy; Technology policy; Norway
    JEL: H25 O32 O38
    Date: 2018–05–31
  8. By: Francisco A. Blanco; Francisco J. Delgado; Maria J. Presno
    Abstract: This article examines the convergence of the R&D expenditure in the EU28 for 2004–2015. We initially run a sigma convergence analysis and conclude with a club convergence approach. The overall results show convergence in the total expenditure, due to the behaviour of the business and higher education sectors, despite government sector divergence. However, noticeable differences between the EU15 and 13 EU countries are apparent. The business enterprise sector is the principle driver of EU15 R&D convergence, whereas for the EU13 this role is played by the government expenditure. The club convergence approach allows us to explore these insights through individualized analysis and clusterization. Results for the EU28 show two clubs for the total expenditure, but the analysis of its components reveals a larger grouping. Results evidence the necessity of revising the EU R&D policies towards greater coordination due to the impact of this expenditure on growth, development and integration.
    Keywords: convergence, R&D, expenditure, European Union
    JEL: H5 O3 O4
    Date: 2018–06
  9. By: Jaravel, Xavier; Petkova, Neviana; Bell, Alex
    Abstract: We establish the importance of team-specific capital in the typical inventor's career. Using administrative tax and patent data for the population of US patent inventors from 1996 to 2012, we find that an inventor's premature death causes a large and long-lasting decline in their co-inventor's earnings and citation-weighted patents (–4 percent and –15 percent after 8 years, respectively). After ruling out firm disruption, network effects, and top-down spillovers as main channels, we show that the effect is driven by close-knit teams and that team-specific capital largely results from an "experience" component increasing collaboration value over time.
    JEL: J24 J31 M54 O31 O34
    Date: 2018–04
  10. By: Florian Misch; Christian Saborowski
    Abstract: This paper explores the role for specific structural distortions in explaining Mexico’s weak productivity growth through the resource misallocation channel. The paper makes two contributions. First, we validate the approach of measuring misallocation indirectly (Hsieh and Klenow, 2009) by illustrating a close correlation between misallocation and per capita incomes across Mexican states. Second, we exploit the large variation in resource misallocation within industries and across states together with unusually rich data at the firm, local, and industry level to shed light on its determinants. We identify several well-defined distortions that have a statistically and economically meaningful effect on productivity via resource misallocation.
    Date: 2018–05–15
  11. By: Logan T. Lewis; Ryan Monarch; Michael J. Sposi; Jing Zhang
    Abstract: Services, which are less traded than goods, rose from 50 percent of world expenditure in 1970 to 80 percent in 2015. Such structural change restrained "openness"—the ratio of world trade to world GDP—over this period. We quantify this with a general equilibrium trade model featuring non-homothetic preferences and input-output linkages. Openness would have been 70 percent in 2015, 23 percentage points higher than the data, if expenditure patterns were unchanged from 1970. Structural change is critical for estimating the dynamics of trade barriers and welfare gains from trade. Ongoing structural change implies declining openness, even absent rising protectionism.
    Keywords: Globalization ; Structural change ; International trade
    JEL: F41 L16 O41
    Date: 2018–04–10
  12. By: Thomas Kemeny (Queen Mary, University of London); Taner Osman (University of California, Los Angeles)
    Abstract: Innovative, high-technology industries are commonly described as drivers of regional development. ‘Tech’ workers earn high wages, but they are also said to generate knock-on effects throughout the local economies that host them, spurring growth in jobs and wages in nontradable activities. At the same time, in iconic high-tech agglomerations like the San Francisco Bay Area, the home of Silicon Valley, the success of the tech industry creates tensions, in part as living costs rise beyond the reach of many non-tech workers. Across a large sample of U.S. cities, this paper explores these issues systematically. Combining annual data on wages, employment and prices from the Quarterly Census of Employment and Wages, the Department of Housing and Urban Development and the Consumer Price Index, it estimates how growth in tradable tech employment affects the real, living-cost deflated wages of local workers in nontradable sectors. Results indicate that high-technology employment has significant, positive, but modest effects on the real wages of workers in nontradable sectors. These effects appear to be spread consistently across different kinds of nontradable activities. In terms of substantive wider impacts, tech appears benign, though fairly ineffectual.
    Keywords: high-technology, inequality, real wages, nontradable services; specialization, housing
    JEL: E24 J21 J31 L86 O18 R11 R31
    Date: 2018–05
  13. By: Giovanni Dosi (Laboratory of Economics and Management); Mauro Napoletano (Observatoire français des conjonctures économiques); Andrea Roventini (Laboratory of Economics and Management (LEM)); Tania Treibich (Maastricht University)
    Abstract: Abstract This paper presents the family of the Keynes+Schumpeter (K+S, cf. Dosi et al, J Econ Dyn Control 34 1748–1767 2010, J Econ Dyn Control 37 1598–1625 2013, J Econ Dyn Control 52 166–189 2015) evolutionary agent-based models, which study the effects of a rich ensemble of innovation, industrial dynamics and macroeconomic policies on the long-term growth and short-run fluctuations of the economy. The K+S models embed the Schumpeterian growth paradigm into a complex system of imperfect coordination among heterogeneous interacting firms and banks, where Keynesian (demand-related) and Minskian (credit cycle) elements feed back into the meso and macro dynamics. The model is able to endogenously generate long-run growth together with business cycles and major crises. Moreover, it reproduces a long list of macroeconomic and microeconomic stylized facts. Here, we discuss a series of experiments on the role of policies affecting i) innovation, ii) industry dynamics, iii) demand and iv) income distribution. Our results suggest the presence of strong complementarities between Schumpeterian (technological)
    Keywords: Keynes; Schumpeter; Evolutionary models
    Date: 2017–01
  14. By: Andrew Berg; Edward F Buffie; Luis-Felipe Zanna
    Abstract: We may be on the cusp of a “second industrial revolution” based on advances in artificial intelligence and robotics. We analyze the implications for inequality and output, using a model with two assumptions: “robot” capital is distinct from traditional capital in its degree of substitutability with human labor; and only capitalists and skilled workers save. We analyze a range of variants that reflect widely different views of how automation may transform the labor market. Our main results are surprisingly robust: automation is good for growth and bad for equality; in the benchmark model real wages fall in the short run and eventually rise, but “eventually” can easily take generations.
    Date: 2018–05–21
  15. By: Alfonso Expósito (Department of Economic Analysis and Political Economy, University of Seville, Calle San Fernando 4, 41004 Sevilla (Spain).); Juan A. Sanchis-Llopis (Department of Economic Structure, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain).)
    Abstract: This paper examines the impacts of product, process, and organisational innovations on two alternative dimensions of business performance: finance and operations. Two indicators capture financial performance: sales increase and production cost reduction. Operational firm performance is captured by two alternative indicators: productive capacity augmentation and quality improvement of product/service provided by the firm. Using a wide-ranging sample of Spanish SMEs, our findings highlight the existence of significant impacts of innovation on both these dimensions of business performance, although these impacts differ regarding the type of innovation and the performance indicator considered. Furthermore, our results indicate that the relationship between innovation choices in SMEs and business performance should be analysed from a multidimensional approach. These findings reveal significant implications for innovation policies and innovation strategies for SMEs.
    Keywords: innovation, business performance, multi-dimensional analysis, SME, Spain
    JEL: O32 L25 C25
    Date: 2018–05
  16. By: Giulio Cainelli; Roberto Ganau; Marco Modica
    Abstract: The 2008 Great Recession prompted interest in the concept of regional resilience. This paper discusses and empirically investigates the relationship between industrial relatedness and economic resilience across European Union regions over the 2008-2012 crisis period. The analysis focuses on two types of industrial relatedness: technological and vertical (i.e. market-based). The empirical analysis is performed on a sample of 209 NUTS-2 regions in 16 countries. Our results highlight a positive effect of technological relatedness on the probability of resilience in the very short run (i.e. the 2008-2009 period), while the negative effect of vertical relatedness seems to persist for longer.
    Keywords: Technological Relatedness; Vertical Relatedness; Regional Resilience; European Union
    JEL: B52 C25 O52 R11
    Date: 2018–05
  17. By: Susan N. Houseman (W.E. Upjohn Institute for Employment Research); Brad J. Hershbein
    Abstract: U.S. manufacturing experienced a precipitous and historically unprecedented decline in employment in the 2000s. Many economists and other analysts—pointing to decades of statistics showing that manufacturing real (inflation-adjusted) output growth has largely kept pace with private sector real output growth, that productivity growth has been much higher, and that the sector’s share of aggregate employment has been declining—argue that manufacturing’s job losses are largely the result of productivity growth (assumed to reflect automation) and are part of a long-term trend. Since the 1980s, however, the apparently robust growth in manufacturing real output and productivity have been driven by a relatively small industry—computer and electronic products, whose extraordinary performance reflects the way statistical agencies account for rapid product improvements in the industry. Without the computer industry, there is no prima facie evidence that productivity caused manufacturing’s relative and absolute employment decline. This paper discusses interpreting labor productivity statistics, which capture many factors besides automation, and cautions against using descriptive evidence to draw causal inferences. It also reviews the research literature to date, which finds that trade significantly contributed to the collapse of manufacturing employment in the 2000s, but finds little evidence of a causal link to automation.
    Keywords: manufacturing, productivity, price deflators, trade, offshoring, outsourcing, automation
    JEL: J21 J24
    Date: 2018–06
  18. By: Anyadike-Danes, Michael (Aston Business School and Enterprise Research Centre, UK); Bjuggren, Carl Magnus (Research Institute of Industrial Economics (IFN), Sweden); Dumont, Michel (Federal Planning Bureau and Ghent University, Belgium); Gottschalk, Sandra (ZEW, Germany); Hölzl, Werner (Austrian Institute of Economic Research (WIFO)); Johansson, Dan (Örebro University School of Business); Maliranta, Mika (ETLA and University of Jyväskylä, Finland); Myrann, Anja (Ragnar Frisch Centre for Economic Research, Norway); Nielsen, Kristian (Aalborg University, Denmark); Zheng, Guanyu (Productivity Commission, New Zealand)
    Abstract: This paper addresses three simple questions: how should the contribution of HGFs to job creation be measured? how much does this contribution vary across countries? to what extent does the cross-country variation depend on variation in the proportion of HGFs in the business population? The first is a methodological question which we answer using a more highly articulated version of the standard job creation and destruction accounts. The other two are empirical questions which we answer using a purpose-built dataset assembled from national firm-level sources and covering nine countries, spanning the ten three year periods from 2000/03 to 2009/12. The basic principle governing the development of the accounting framework is the choice of appropriate comparators. Firstly, when measuring contributions to job creation, we should focus on just job creating firms, otherwise we are summing over contributions from firms with positive, zero, and negative job creation numbers. Secondly, because we know growth depends in part on size, the ’natural’ comparison for HGFs is with job creation by similar-sized firms which simply did not grow as fast as HGFs. However, we also show how the measurement framework can be further extended to include, for example, a consistent measure of the contribution of small job creating firms. On the empirical side, we find that the HGF share of job creation by large job creating firms varies across countries by a factor of two, from around one third to two thirds. A relatively small proportion of this cross-country variation is accounted for by variations in the influence of HGFs on job creation. On average HGFs generated between three or four times as many jobs as large non-HGF job creating firms, but this ratio is relatively similar across countries. The bulk of the cross-country variation in HGF contribution to job creation is accounted for by the relative abundance (or rarity) of HGFs. Moreover, we also show that the measurement of abundance depends upon the choice of measurement framework: the ’winner’ of a cross-national HGF ’beauty context’ on one measure will not necessarily be the winner on another.
    Keywords: high-growth firms; firm growth; job creation
    JEL: D22 E24 L11 L25 L26 M13
    Date: 2018–05–08

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