nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2020‒04‒06
fourteen papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Industrial Policies, Patterns of Learning and Development: an Evolutionary Perspective By Mario Cimoli; Giovanni Dosi; Xiaodan Yu
  2. Mapping industrial patterns and structural change in exports By Guillard, Charlotte
  3. Induced Innovation: Evidence from China's Secondary Industry By Fleisher, Belton M.; McGuire, William H.; Wang, Xiaojun; Zhao, Min Qiang
  4. Productivity, Efficiency and Firm Size Distribution: Evidence from Vietnam By Hien Thu Pham; Nhan Buu Phan; Shino Takayama
  5. Can Direct Innovation Subsidies Relax SMEs' Credit Constraints? By Raphaël Chiappini; Samira Demaria; Benjamin Montmartin; Sophie Pommet
  6. Quantifying Sunk Costs and Learning Effects in R&D Persistence By Juan A. Máñez Castillejo; James H. Love
  7. Does working at a start-up pay off? By Fackler, Daniel; Hölscher, Lisa; Schnabel, Claus; Weyh, Antje
  8. The Innovation Premium to Soft Skills in Low-Skilled Occupations By Philippe Aghion; Antonin Bergeaud; Richard Blundell; Rachel Griffith
  9. International Patent Protection and Trade: Transaction-Level Evidence By Gaetan de Rassenfosse; Marco Grazzi; Daniele Moschella; Gabriele Pellegrino
  10. A sectoral anatomy of the spanish productivity puzzle By Pilar Cuadrado; Enrique Moral-Benito; Irune Solera
  11. STI-DUI innovation modes and firm performance in the Indian capital goods industry: Do small firms differ from large ones? By Mathew, Nanditha; Paily, George
  12. The Micro-Level Anatomy of the Labor Share Decline By Matthias Kehrig; Nicolas Vincent
  13. Determinants of Global Value Chain Participation : Cross-Country Evidence By Fernandes,Ana Margarida; Kee,Hiau Looi; Winkler,Deborah Elisabeth
  14. An Industry-Based Estimation Approach for Measuring the Cloud Economy By Christopher Hooton

  1. By: Mario Cimoli; Giovanni Dosi; Xiaodan Yu
    Abstract: This work discusses the role of industrial policies within an evolutionary view of innovation and learning as drivers of economic development. Building on the notions of technological paradigms and trajectories, it links the processes of catching-up with the dynamics of capability accumulation within and across firms. In turn such processes are embedded in broader national systems of innovation wherein industrial policies play a pivotal role.
    Keywords: Technological paradigms; Catching up; Theory of production; Absolute and Comparative Advantages; National systems of innovation; Industrial Policies; Economic Evolution and Development.
    Date: 2020–03–30
  2. By: Guillard, Charlotte (UNU-MERIT, BETA, Universite de Strasbourg, and Institute for Innovation and Public Purpose, UCL.)
    Abstract: This paper proposes a new methodology for identifying patterns in the organisation of industries and their evolution over time, based on the temporal network structure of the product space. To do this, I apply a community detection algorithm on 5-year snapshots of the product space from 1975 to 2000. This exercise enables us to identify different clusters of related products and to follow their evolution over time. I find that the product space is highly modular, that is it contains well delimited clusters of products. The community structure and its evolution show that the factors explaining industrial patterns and structural change are more complex than the traditional divide between low, medium and high-tech industries. Several common drivers can be identified to explain the emergence and evolution of different communities including the experience in a technological domain, factor abundance, scale economies as well as global value chains and vertical integration. Moreover, I find that technological domains and boundaries between industries are not always clear-cut and can evolve over time.
    Keywords: Structural change, Capabilities, Economic Complexity, Networks, Community Structure, Exports
    JEL: O11 O14 O33 O25 P40 E14
    Date: 2020–01–23
  3. By: Fleisher, Belton M. (Ohio State University); McGuire, William H. (University of Washington Tacoma); Wang, Xiaojun (University of Hawaii at Manoa); Zhao, Min Qiang (Xiamen University)
    Abstract: We investigate the effect of rising labor costs on induced technological change in China's secondary industry. While previous studies have focused primarily on induced technology change in agriculture and in energy production/environmental protection, there has been little evidence relating to China's adjustments as rising labor costs affect its global competitiveness in the manufacturing sector. Building on insights developed in a rich literature, we propose a model linking changes in labor productivity to changes in labor costs, and the availability of physical capital. Importantly, we derive testable hypotheses to distinguish induced innovation from standard substitution of capital for labor under fixed technology. These hypotheses are tested using both firm- and provincial-level data. Our empirical results support the hypothesis that rising wages have induced labor-saving innovation in China, at least in the decade of the 1990s, but less so or not at all after the middle of the next decade.
    Keywords: induced innovation, labor productivity growth, China
    JEL: O30 D22 D24 D33
    Date: 2020–03
  4. By: Hien Thu Pham (CSIRO, QLD, Australia); Nhan Buu Phan (School of Economics, University of Queensland); Shino Takayama (School of Economics, University of Queensland)
    Abstract: By applying recently developed methodologies to Vietnamese data from 2000 to 2016, this paper studies production efficiencies and total factor productivity in manufacturing industries, using two separate empirical methodologies. The paper shows that middle-sized firms’ production efficiencies tend to be lower than those of small-sized or large-sized firms in most of the manufacturing industries, and that the middle-sized firms are quite diverse in terms of efficiencies. Further, we show that the level of productivity is also quite diverse across different firm sizes in most industries. Given these observations, we present a simple theoretical analysis to indicate how our empirical findings could affect a firm’s decision in expanding business size. Over the past few decades, the Vietnamese government has conducted policies to promote small-sized and middlesized firms. Our findings indicate the importance of adopting policies that reduce the uncertainty that those firms may possibly face, such as financial support.
    Date: 2020–03–26
  5. By: Raphaël Chiappini (Université de Bordeaux; LAREFI); Samira Demaria (Université Côte d'Azur, France; GREDEG CNRS); Benjamin Montmartin (SKEMA Business School; Université Côte d'Azur, France); Sophie Pommet (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: Credit constraints hamper the ability of SMEs to undertake innovative activities. Promoting access to external funding for SMEs represents therefore an important challenge for policymakers. This paper investigates whether innovation subsidies provided by the French public investment bank to SMEs have translated into better access to bank and other external financing through an indirect certification effect. We exploit a unique database covering the period 2000-2010 to construct a quasi-natural experiment and evaluate the causal impact of these subsidies on SMEs' financial constraints. If we find a significant improvement in the access to bank financing for subsidized firms, the effect is heterogeneous and mainly concentrated on small firms operating in high-tech sectors. Moreover, such public support does not seem to improve the access to other external sources of financing which can be explained by the low development risk-capital markets in France.
    Keywords: Credit constraints, innovation policy, certification effect, Mahalanobis distance matching, difference-in difference
    JEL: O33 O38
    Date: 2020–03
  6. By: Juan A. Máñez Castillejo (University of Valencia and ERICES); James H. Love (Unviersity of Leeds)
    Abstract: This paper analyzes and quantifies the fundamental factors that are likely to cause persistence in performing R&D activities: the existence of sunk costs associated with R&D activities and the process of learning that characterizes this type of activity. We estimate our model with Spanish manufacturing firms for the period 1991-2014. By decomposing the effects of sunk costs and learning effects, we find that both are important determinants of R&D persistence, and that failing to allow for learning systematically overestimates sunk cost effects. Both large firms and SMEs benefit from direct and indirect (via productivity) effects of R&D experience, but in large firms this is more likely to be manifest through productivity improvements while in smaller firms the effect is more skewed towards a direct effect on R&D likelihood. Further, our results suggest that whereas the impact of sunk costs in R&D persistence is greater for large firms than for SMEs, the scope for direct learning from continuous R&D engagement is greater for SMEs than for larger firms.
    Keywords: R&D persistence, sunk costs; learning effects
    JEL: O32 L60
    Date: 2019–12
  7. By: Fackler, Daniel; Hölscher, Lisa; Schnabel, Claus; Weyh, Antje
    Abstract: Using representative linked employer-employee data for Germany, this paper analyzes short- and long-run differences in labor market performance of workers joining start-ups instead of incumbent firms. Applying entropy balancing and following individuals over ten years, we find huge and long-lasting drawbacks from entering a start-up in terms of wages, yearly income, and (un)employment. These disadvantages hold for all groups of workers and types of start-ups analyzed. Although our analysis of different subsequent career paths highlights important heterogeneities, it does not reveal any strategy through which workers joining start-ups can catch up with the income of similar workers entering incumbent firms.
    Keywords: startups,young firms,wages,linked employer-employee data
    JEL: J31 J63 L26 M51
    Date: 2020
  8. By: Philippe Aghion; Antonin Bergeaud; Richard Blundell; Rachel Griffith
    Abstract: Matched employee-employer data from the UK are used to analyze the wage premium to working in an innovative firm. We find that firms that are more R&D intensive pay higher wages on average, and this is particularly true for workers in some low-skilled occupations. We propose a model in which a firm's innovativeness is reflected in the degree of complementarity between workers in low-skill and high-skilled occupations, and in which non-verifiable soft skills are an important determinant of the wages of workers in low-skilled occupations. The model yields additional predictions on training, tenure and outsourcing which we also find support for in data.
    Keywords: : Innovation, Skill-biased Technological Change, Wage, Complementarity.
    JEL: O33 L23 J31
    Date: 2019
  9. By: Gaetan de Rassenfosse; Marco Grazzi; Daniele Moschella; Gabriele Pellegrino
    Abstract: This paper investigates the extent to which international trade hinges on patents. We analyze the export and patenting activities of the universe of French exporting firms over the period 2002-2011. The noticeable feature of our study is that we observe export and patenting activities worldwide and at the product level. We exploit how heterogeneity of patent coverageacross (and within) product-country relates to exports. We find a patent premium of at least 10 percent, which is mainly associated with a quantity effect. A modest price effect emerges in specific sectors, notably pharmaceuticals.
    Keywords: Export; Patents; Products; Intellectual property rights; Innovation.
    Date: 2020–03–30
  10. By: Pilar Cuadrado (Banco de España); Enrique Moral-Benito (Banco de España); Irune Solera (Banco de España)
    Abstract: Income per capita in Spain relative to that of other advanced EU countries held stable at around 90% from 2000 to 2016. Stagnant abour productivity is at the root of this lack of convergence. This paper examines these developments from a sectoral perspective based on recently released EU KLEMS data. Our main findings are as follows: i) Spain has lower productivity levels vis-à-vis other EU countries in most sectors, with only 4 out of 23 sectors exhibiting higher productivity in Spain: accommodation and food services, agriculture, electricity and gas supply, and information and communication services; moreover, the allocation of employment towards low-productivity sectors accounts for half of the aggregate Spain-EU productivity gap in levels; ii) turning to the changes in the 2000-2016 period, the overall lack of convergence is driven by a divergence in productivity relative to EU countries, especially within services sectors; iii) while both ICT (Information and Communication Technology) and non-ICT capital in Spain converged towards European levels, Total Factor Productivity (TFP) divergence in most sectors explains the lack of convergence in labour productivity. Finally, we explore one potential explanation for this pattern: the TFP divergence and ICT capital convergence can be rationalised in the presence of complementarities between ICT-capital and labour force skills. Indeed, our industry-country regression analysis suggests that the dismal performance of Spanish TFP might be related to the significant deficit in the population’s skills as proxied by PIAAC-OECD scores.
    Keywords: labour productivity, Total Factor Productivity, productivity gap, labour force skills.
    JEL: D24 C23
    Date: 2020–03
  11. By: Mathew, Nanditha (UNU-MERIT); Paily, George (Centre for Development Studies, Trivandrum)
    Abstract: This paper examines the effect of dfferent innovation strategies followed by small and large firms on their overall performance in the capital goods industry. Following the wider literature on national innovation systems, we categorise the innovation modes as formal Science, Technology and Innovation (STI) and informal learning by Doing, Using and Interacting (DUI) mode. We observe that, in the case of small firms the informal learning and experience based innovation mode is related to improved performance, while the formal STI mode does not have any effect. On the other hand, for large firms, both STI and DUI innovation modes are positively related to its sales growth. Our results indicate that building certain DUI capabilities may act as a pre-condition to enhance the strength of science and technology based innovation strategies.
    Keywords: STI, DUI, Modes of innovation, Capabilities accumulation, Corporate performance, capital goods industry, India
    JEL: O32 O33 L20
    Date: 2020–02–11
  12. By: Matthias Kehrig; Nicolas Vincent
    Abstract: The labor share in U.S. manufacturing declined from 62 percentage points (ppts) in 1967 to 41 ppts in 2012. The labor share of the typical U.S. manufacturing establishment, in contrast, rose by over 3 ppts during the same period. Using micro-level data, we document five salient facts: (1) since the 1980s, there has been a dramatic reallocation of value added toward the lower end of the labor share distribution; (2) this aggregate reallocation is not due to entry/exit, to “superstars" growing faster or to large establishments lowering their labor shares, but is instead due to units whose labor share fell as they grew in size; (3) low labor share (LL) establishments benefit from high revenue labor productivity, not low wages; (4) they also enjoy a product price premium relative to their peers, pointing to a significant role for demand-side forces; and (5) they have only temporarily lower labor shares that rebound after five to eight years. This transient pattern has become more pronounced over time, and the dynamics of value added and employment are increasingly disconnected.
    Keywords: Labor Share, Productivity, Firm Size Distribution, Relative Prices
    JEL: E2 L1 L2 L6 O4
    Date: 2020–03
  13. By: Fernandes,Ana Margarida; Kee,Hiau Looi; Winkler,Deborah Elisabeth
    Abstract: The past decades witnessed big changes in international trade with the rise of global value chains. Some countries, such as China, Poland, and Vietnam, rode the tide, while other countries, many in the Africa region, faltered. This paper studies the determinants of participation in global value chains, based on empirical evidence from a panel data set covering more than 100 countries over the past three decades. The evidence shows that factor endowments, geography, political stability, liberal trade policies, foreign direct investment inflows, and domestic industrial capacity are very important in determining participation in global value chains. These factors affect participation in global value chains more than traditional exports.
    Date: 2020–03–26
  14. By: Christopher Hooton
    Abstract: The usage of cloud computing technology in business and daily life has grown rapidly in recent years. However, measurement and research on the impacts of that usage remain relatively scarce and new. The current paper examines the economic contributions of cloud technology by estimating the size of the 'cloud economy' in the United States. The author uses input from cloud industry experts and product line receipt details to identify specific commercial receipts related to the cloud industry. The author then uses an adapted input-output methodology previously employed by other groups examining the size of the technology sector to estimate the economic size of the cloud in terms of Output, Earnings, Employment, Value-Added, Direct-Effect Earnings, and Direct-Effect Employment. The estimates are simply a starting point for measuring the economic size of the cloud, but they compare favorably with other estimates from industry groups and private parties. The key advantage of the current paper is the detailing of a replicable approach to use in future research including a discussion of the identification criteria used by the consulting experts.
    Keywords: Cloud computing, digital economy, national accounts, economic estimates
    JEL: L86 E01 O30
    Date: 2020–02

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