nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2018‒10‒29
nine papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Asymmetric information and heterogeneous effects of R&D subsidies: evidence on R&D investment and employment of R&D personel By Ugur, Mehmet; Trushin, Eshref
  2. What do we know about R&D spillovers and productivity? Meta-analysis on heterogeneity and statistical power By Ugur, Mehmet; Awaworyi Churchill, Sefa; Luong, Hoang Minh
  3. Faraway, so close! technology diffusion and firm heterogeneity in the medium term cycle of advanced economies By Mónica Correa-López; Beatriz de Blas
  4. Granular sources of the Italian business cycle By Nicolò Gnocato; Concetta Rondinelli
  5. How Can Intermediaries Promote Business Model Innovation: The Case of ‘Energiesprong’ Whole-House Retrofits in the United Kingdom (UK) and the Netherlands By Donal Brown; Paula Kivimaa; Steve Sorrell
  6. IT and productivity: A firm level analysis By Emannuel Dhyne; Joep Konings; Joep Konings; Stijn Vanormelingen,
  7. Innovation from science: the role of network content and legitimacy ties By D'Este, Pablo; Mc Kelvey, Maureen; Yegros-Yegros, Alfredo
  8. Neodualism in the Italian business firms: training, organizational capabilities and productivity distributions By Giovanni Dosi; Dario Guarascio; Andrea Ricci; Maria Enrica Virgillito
  9. How production networks amplify economic growth By James McNerney; Charles Savoie; Francesco Caravelli; J. Doyne Farmer

  1. By: Ugur, Mehmet; Trushin, Eshref
    Abstract: Public subsidies are expected to stimulate business R&D investment by correcting market failures. However, the existing evidence varies considerably and the causes of heterogeneous effect sizes remain largely unexplored. We draw on the theory of contracts to argue that effect-size heterogeneity is due to different levels of informational rents that heterogeneous firm types can extract in a second-best environment of asymmetric information, risk aversion and incomplete contracting. Using two estimators and a panel dataset of 43,650 R&D-active UK firms from 1998-2012, we report that the effect of the subsidy on innovation inputs (i) is smaller or even negative during economic downturns; (ii) is positive among start-ups, younger and smaller firms, but negative among older and larger firms; and (iii) follows an inverted-U pattern when evaluated against the firm’s R&D intensity. Our findings are consistent across two estimation methods (propensity score matching and double robust estimators) and two innovation inputs (privately-funded R&D investment and employment of scientists and technicians).
    Keywords: Contract theory; treatment effect; R&D subsidy; innovation; additionality;
    Date: 2018–10–16
  2. By: Ugur, Mehmet; Awaworyi Churchill, Sefa; Luong, Hoang Minh
    Abstract: Endogenous growth theory and the knowledge capital model predict that research and development (R&D) investment is associated with increasing returns and positive externalities. These insights have informed public support for R&D investment directly and indirectly. We aim to establish where the balance of the evidence lies, the extent to which the evidence has adequate statistical power, and which factors may explain the variation in the empirical findings. Drawing on 983 spillovers and 501 own-R&D effect-size estimates from 60 empirical studies, we find that the average productivity effect of spillovers: (i) is smaller than what is reported in most narrative reviews; (ii) is even smaller when only adequately-powered evidence is considered; (iii) differs by spillover types; and (iv) is not larger than that of own-R&D. We also report that the percentage of adequately-powered evidence is low (30%-55%). We highlight the implications of these findings for future research and public policy design.
    Keywords: Knowledge externalities; R&D spillovers; productivity; public policy; meta-analysis;
    JEL: C1 D24 O30 O32 O33
    Date: 2018–10–16
  3. By: Mónica Correa-López (Banco de España); Beatriz de Blas (Universidad autónoma de Madrid)
    Abstract: Large US firms, by diffusing embodied technology through trade in intermediates, appear to drive Europe’s output over the medium term. We develop a two-country model of endogenous growth in varieties, cross-country firm heterogeneity and trade to match this evidence. A US TFP slowdown generates a pronounced recession in Europe, while a negative investment-specific shock also imparts a protracted recession in the US, since GDP and firm productivity stay below trend beyond a decade. Heterogeneous firms, with endogenously changing productivity cut-offs, and the responses of innovators and adopters determine medium-term adjustment, as import switching processes unfold.
    Keywords: international business cycles, heterogeneous firms, embodied growth, trade
    JEL: E32 F14 L11 F44 O33
    Date: 2018–10
  4. By: Nicolò Gnocato (Bank of Italy); Concetta Rondinelli
    Abstract: A recent strand of literature has investigated the granular sources of the business cycle, i.e. to what extent firm-level dynamics have an impact on aggregate fluctuations. From a conceptual point of view, in the presence of fat-tailed firm-size distributions, shocks to large firms may not average out and may then have a direct effect on aggregate fluctuations; in addition, firm-to-firm linkages can propagate shocks to individual firms, leading to movements at the aggregate level. Using Cerved and INPS data, we test the granular hypothesis on a large sample of Italian firms, covering the period 1999-2014. Idiosyncratic Total Factor Productivity (TFP) shocks are found to explain around 30 per cent of aggregate TFP volatility; furthermore, the contribution of these linkages to firm-specific aggregate volatility is more important than that of the direct effect, especially for the manufacturing sector.
    Keywords: aggregate fluctuations, firm-level dynamics, productivity
    JEL: D24 E32 L25
    Date: 2018–09
  5. By: Donal Brown (SPRU, University of Sussex, UK; The University of Leeds, UK); Paula Kivimaa (SPRU, University of Sussex, UK; Finnish Environmental Institute, Finland); Steve Sorrell (The University of Leeds, UK)
    Abstract: Business model innovation is increasingly important for the diffusion of sustainable innovations - particularly those that are systemic in nature. In this paper we outline how systemic innovations, such as whole-house energy ‘retrofit’, may require new business models before they gain widespread adoption. Through a series of semi-structured interviews and document analysis, we undertake a case study of the ‘Energiesprong’ retrofit business model - contrasting this with the incumbent ‘atomised’ market model. We highlight the central role of an innovation intermediary - the Energiesprong ‘market development team’, in this business model innovation, and how Dutch policymakers sought to promote business model innovation through creation of this intermediary. In doing so we develop a novel framework - combining the components of business models with the functions of intermediaries to illustrate this case. Finally, the paper suggests this case and framework could provide lessons for how intermediaries and in turn policymakers might foster business model innovation in other sectors.
    Keywords: Business models, Energy efficiency retrofit, Systemic innovation, Business model innovation, Intermediaries, Innovation policy
    Date: 2018–10
  6. By: Emannuel Dhyne (Economics and Research Department, National Bank of Belgium); Joep Konings (KU Leuven, VIVES; University of Liverpool Management School and CEPR); Joep Konings (KU Leuven, VIVES); Stijn Vanormelingen, (KU Leuven, Campus Brussels)
    Abstract: Using a novel comprehensive data set of IT investment at the firm level, we find that a firm investing an additional euro in IT increases value added by 1 euro and 38 cents on average. This marginal product of IT investment increases with firm size and varies across sectors. IT explains about 10% of productivity dispersion across firms. While we find substantial returns of IT at the firm level, such returns are much lower at the aggregate level. This is due to underinvestment in IT (IT capital deepening is low) and misallocation of IT investments.
    Keywords: Information technology, total factor productivty
    JEL: D24 L10 O14 O49
    Date: 2018–10
  7. By: D'Este, Pablo; Mc Kelvey, Maureen; Yegros-Yegros, Alfredo
    Abstract: This study contributes to advance understanding on the micro-level foundations of the relationship between scientific research and innovation. We adopt a relational approach to scientific research networks through the analysis of the content of network ties, in contrast to more standard network approaches which are grounded on structural features of networks. We argue that the perceived legitimacy afforded through ties within research networks play a critical role in reconciling the conflicting logics of science and innovation. The proposed hypotheses are empirically tested in the context of the Spanish biomedical research system, drawing on a large scale survey of biomedical scientists. Our results indicate that the scientists’ acquisition of legitimacy through their research network play a critical role in the context of the translation from scientific research to technological achievements and innovations. Our findings also show that past scientific impact has a reinforcing effect on the relationship between legitimacy acquisition and technological achievements. On the contrary, we find that direct interaction with beneficiaries provides an alternative path to reconcile the conflicting logics of science and market, by compensating for the lack of acquired legitimacy from research network.
    Date: 2018–03–20
  8. By: Giovanni Dosi; Dario Guarascio; Andrea Ricci; Maria Enrica Virgillito
    Abstract: What has been the dynamics of productivity in the Italian business firms in the aftermath of the crisis? And what has been the impact of training efforts upon such dynamics? In this work we address these questions exploring a unique Italian microlevel dataset which links information on the amount and the nature of training and the balance-sheet data. First, we document what we call a neo-dualist tendency with a leader-laggard dynamics entailing a widening support of the productivity distributions. Second, we analyze the relationship between productivities and training intensities by means of quantile regression analysis, also controlling for additive fixed effects by means of Canay (2011) technique. There is indeed some relationship in the whole sample which however gets weaker when disaggregating by sector and by size. Moreover, hardly any dynamic relationship appears, either between initial training intensities and subsequent productivity changes, nor between changes in both variables. Our results do not imply of course that training is not important, but that its effectiveness must be shaped by other firm-specific characteristics, plausibly associated with idiosyncratic organizational capabilities.
    Keywords: productivity, firm-level heterogeneity, training, organizational capabilities
    Date: 2018–10–25
  9. By: James McNerney; Charles Savoie; Francesco Caravelli; J. Doyne Farmer
    Abstract: Technological improvement is the most important cause of long-term economic growth, but the factors that drive it are still not fully understood. In standard growth models technology is treated in the aggregate, and a main goal has been to understand how growth depends on factors such as knowledge production. But an economy can also be viewed as a network, in which producers purchase goods, convert them to new goods, and sell them to households or other producers. Here we develop a simple theory that shows how the network properties of an economy can amplify the effects of technological improvements as they propagate along chains of production. A key property of an industry is its output multiplier, which can be understood as the average number of production steps required to make a good. The model predicts that the output multiplier of an industry predicts future changes in prices, and that the average output multiplier of a country predicts future economic growth. We test these predictions using data from the World Input Output Database and find results in good agreement with the model. The results show how purely structural properties of an economy, that have nothing to do with innovation or human creativity, can exert an important influence on long-term growth.
    Date: 2018–10

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