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on Technology and Industrial Dynamics |
| By: | Lucking, Brian; Bloom, Nicholas; Van Reenen, John |
| Abstract: | Slow growth over the last decade has prompted policy attention towards increasing R&D spending, often via the tax system. We examine the impact of R&D on firm performance, both by the firm's own investments and through positive (and negative) spillovers from other firms. We analyse panel data on US firms over the last three decades, and allow for time-varying spillovers in both technology space (knowledge spillover) and product market space (product market rivalry). We show that the magnitude of R&D spillovers remains as large in the second decade of the 21st century as it was in the mid 1980s. Since the ratio of the social return to the private return to R&D is about four to one, this implies that there remains a strong case for public support of R&D. Positive spillovers appeared to temporarily increase in the 1995–2004 digital technology boom. We also show how these micro estimates relate to estimates from the endogenous growth literature and give some suggestions for future work. |
| Keywords: | innovation; patents; productivity; R&D; spillovers |
| JEL: | O31 O32 O33 F23 |
| Date: | 2019–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:104054&r=all |
| By: | James Driver; Adam Kolasinski; Jared Stanfield |
| Abstract: | We analyze a unique dataset that separately reports research and development expenditures for a large panel of public and private firms. Definitions of “research” and “development” in this dataset, respectively, correspond to definitions of knowledge “exploration” and “exploitation” in the innovation theory literature. We can thus test theories of how equity ownership status relates to innovation strategy. We find that public firms have greater research intensity than private firms, inconsistent with theories asserting private ownership is more conducive to exploration. We also find public firms invest more intensely in innovation of all sorts. These results suggest relaxed financing constraints enjoyed by public firms, as well as their diversified shareholder bases, make them more conducive to investing in all types of innovation. Reconciling several seemingly conflicting results in prior research, we find private-equity-owned firms, though not less innovative overall than other private firms, skew their innovation strategies toward development and away from research. |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:20-14&r=all |
| By: | David Argente; Salomé Baslandze; Douglas Hanley; Sara Moreira |
| Abstract: | We study the relationship between patents and actual product innovation in the market, and how this relationship varies with firms’ market share. We use textual analysis to create a new data set that links patents to products of firms in the consumer goods sector. We find that patent filings are positively associated with subsequent product innovation by firms, but at least half of product innovation and growth comes from firms that never patent. We also find that market leaders use patents differently from followers. Market leaders have lower product innovation rates, though they rely on patents more. Patents of market leaders relate to higher future sales above and beyond their effect on product innovation, and these patents are associated with declining product introduction on the part of competitors, which is consistent with the notion that market leaders use their patents to limit competition. We then use a model to analyze the firms' patenting and product innovation decisions. We show that the private value of a patent is particularly high for large firms as patents protect large market shares of existing products. |
| Keywords: | patent value; productivity; creative destruction; patents; product innovation; growth |
| JEL: | O3 O4 |
| Date: | 2020–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:87832&r=all |
| By: | Sen, Ali |
| Abstract: | I analyze structural change within the services sector and its implications for Baumol's cost disease and cross-country productivity differences. My results show that Baumol's cost disease becomes less relevant over development: It generates minor declines on aggregate productivity growth rate and accounts for a small share of the productivity growth slow- down. I argue that the existence of services sub-sectors with high-productivity growth rates, progressive services, and their substitutability with other sectors in the economy rationalize these facts. A model consistent with these stylized facts predict that Baumol's cost disease would depress aggregate productivity growth rate less in the future for developed countries. I later analyze cross-country productivity differences. The results in Duarte and Restuccia (2010) hide discrepancies between different services sub-sectors: Although developed countries have caught-up the US in the low-productivity growth services sub-sectors, stagnant services, the opposite conclusions emerge for the progressive/business services. I conclude that the substitutability between progressive/business and stagnant services sectors contribute to increasing aggregate productivity differences between the US and other developed countries. To put differently, structural change facts that limit Baumol's cost disease also advance cross-country productivity differences. |
| Keywords: | structural change, services, Baumol's cost disease, aggregate productivity. |
| JEL: | E01 O41 O47 O57 |
| Date: | 2020–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99614&r=all |
| By: | Ufuk Akcigit; Salomé Baslandze; Francesca Lotti |
| Abstract: | How do political connections affect firm dynamics, innovation, and creative destruction? To answer this question, we build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model generates a number of theoretical testable predictions and highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity. We test the predictions of our model using a brand-new dataset on Italian firms and their workers. Our dataset spans the period from 1993 to 2014, where we merge: (i) firm-level balance sheet data, (ii) social security data on the universe of workers, (iii) patent data from the European Patent Office, (iv) the national registry of local politicians, and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that industries with a larger share of politically connected firms feature worse firm dynamics. We identify a leadership paradox: when compared to their competitors, market leaders are much more likely to be politically connected but much less likely to innovate. In addition, political connections relate to a higher rate of survival, as well as growth in employment and revenue, but not in productivity—a result that we also confirm using a regression discontinuity design. |
| Keywords: | political connections; productivity; innovation; firm dynamics; creative destruction |
| JEL: | O30 O43 |
| Date: | 2020–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:87833&r=all |
| By: | Pierre-Alexandre Balland; Ron Boschma |
| Abstract: | Regional capabilities are regarded a pillar of Smart Specialization Strategy (S3). There is yet little focus in S3 policy on the role of inter-regional linkages. Our study on 292 NUTS2 regions in Europe finds that inter-regional linkages have a positive effect on the probability of regions to diversify, especially in peripheral regions. What matters is not being connected to other regions per se but being connected to regions that provide complementary capabilities. Finally, we propose a new indicator that enables regions to identify other regions as strategic partners in their S3 policy, depending on the presence of complementary capabilities in other regions. |
| Keywords: | Smart Specialization, relatedness, inter-regional linkages, regional diversification, complementary capabilities |
| JEL: | O25 O38 R11 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:2023&r=all |
| By: | Giebel, Marek; Kraft, Kornelius |
| Abstract: | This paper tests for the sensitivity of R&D to financing constraints conditional on restrictions in external financing. Financing constraints of firms are identified by an exogenously calculated rating index. Restrictions in external financing are determined by (i) the specific time period (crisis vs. non-crisis) and (ii) the balance sheet strength of the firm's main bank in terms of bank capital. Results of difference-in-differences estimations utilizing three time periods: 2002-2006 (pre-crisis) 2007-2009 (crisis) and 2010-2012 (post-crisis) support the theoretical prediction that financing constraints affect R&D. Moreover, we find that the effect of firm financing constraints is more intense (i) in times of stress on financial markets and (ii) when the firm faces restrictions in external financing. Additionally, our results indicate that on average the effect does not persist over time. |
| Keywords: | R&D investment,financing constraints,credit rating,financial crisis,bank capital,external financing of innovation |
| JEL: | G01 G21 G24 G30 O16 O30 O31 O32 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:20018&r=all |
| By: | Danilo Cascaldi-Garcia; Marija Vukotić |
| Abstract: | We exploit firm-level data on patent grants and subsequent reactions of stocks to identify technological news shocks. Changes in stock market valuations due to announcements of individual patent grants represent expected future increases in the technology level, which we refer to as patent-based news shocks. Our patentbased news shocks resemble diffusion news, in that they do not affect total factor productivity in the short run but induce a strong permanent effect after five years. These shocks produce positive comovement between consumption, output, investment, and hours. Unlike the existing empirical evidence, patent-based news shocks generate a positive response in inflation and the federal funds rate, in line with a standard New Keynesian model. Patenting activity in electronic and electrical equipment industries, within the manufacturing sector, and computer programming and data processing services, within the services sector, play crucial roles in driving our results. |
| Keywords: | News Shocks; Patents; Patent-based news shocks |
| JEL: | E30 E32 L60 |
| Date: | 2020–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1277&r=all |
| By: | Rene Belderbos; Christoph Grimpe |
| Abstract: | We suggest that the benefits of learning in international value chains for firms’ innovation performance are heterogeneous and depend on the specific source of learning (customers, suppliers, or competitors), whether these sources are based in countries that are technologically advanced or less advanced (learning opportunities), on technology leadership (learning capabilities) on the part of the focal firm, and on the simultaneous learning that occurs from domestic firms. Using direct survey evidence on learning and innovation by German firms, we confirm that technology leaders benefit from advanced foreign customer and supplier learning, that technology laggards benefit from less advanced foreign customer learning and advanced foreign competitor learning, and that both leaders and laggards benefit from domestic customer learning. The findings suggest a tradeoff between the opportunities to learn from foreign or domestic customers. |
| Keywords: | learning from internationalization, innovation, technology leadership |
| Date: | 2020–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:ete:msiper:653332&r=all |
| By: | Ulrich Schetter (Center for International Development at Harvard University) |
| Abstract: | We introduce quality differentiation into a Ricardian model of international trade. We show that (1) quality differentiation allows industrialized countries to be active across the full board of products, complex and simple ones, while developing countries systematically specialize in simple products, in line with novel stylized facts. (2) Quality differentiation may thus help to explain why richer countries tend to be more diversified and why, increasingly over time, rich and poor countries tend to export the same products. (3) Quality differentiation implies that the gains from inter-product trade mostly accrue to developing countries. (4) Guided by our theory, we use a censored regression model to estimate the link between a country’s GDP per capita and its export quality. We find a much stronger relationship than when using OLS, in line with our theory. |
| Keywords: | Comparative Advantage, Export Diversification, Nestedness, Product Complexity, Quality Differentiation |
| JEL: | F10 F11 F14 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:cid:wpfacu:126a&r=all |
| By: | Arieli, Itai; Babichenko, Yakov; Peretz, Ron; Young, H. Peyton |
| Abstract: | New ways of doing things often get started through the actions of a few innovators, then diffuse rapidly as more and more people come into contact with prior adopters in their social network. Much of the literature focuses on the speed of diffusion as a function of the network topology. In practice, the topology may not be known with any precision, and it is constantly in flux as links are formed and severed. Here, we establish an upper bound on the expected waiting time until a given proportion of the population has adopted that holds independently of the network structure. Kreindler and Young (2014) demonstrated such a bound for regular networks when agents choose between two options: the innovation and the status quo. Our bound holds for directed and undirected networks of arbitrary size and degree distribution, and for multiple competing innovations with different payoffs. |
| Keywords: | Innovation diffusion; social networks; speed of equilibrium convergence |
| JEL: | J1 |
| Date: | 2020–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:102538&r=all |