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on Technology and Industrial Dynamics |
| By: | Peter J. Klenow; Huiyu Li |
| Abstract: | Recent work highlights a falling entry rate of new firms and a rising market share of large firms in the United States. To understand how these changing firm demographics have affected growth, we decompose productivity growth into the firms doing the innovating. We trace how much each firm innovates by the rate at which it opens and closes plants, the market share of those plants, and how fast its surviving plants grow. Using data on all nonfarm businesses from 1982-2013, we find that new and young firms (ages Oto 5 years) account for almost one-half of growth- three times their share of employment. Large established firms contribute only one-tenth of growth despite representing one-fourth of employment. Older firms do explain most of the speedup and slowdown during the middle of our sample. Finally, most growth takes the form of incumbents improving their own products, as opposed to creative destruction or new varieties. |
| Keywords: | firm demographics; productivity growth; innovation |
| Date: | 2020–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:87890&r=all |
| By: | David Dranove; Craig Garthwaite; Manuel I. Hermosilla |
| Abstract: | Innovation policy involves trading off monopoly output and pricing in the short run in exchange for incentives for firms to develop new products in the future. While existing research demonstrates that expected profits fuel R&D investments, little is known about the novelty of the projects funded by these investments. Relying on data that describe the scientific approaches used by a large sample of experimental drug projects, we expand on this literature by examining the scientific novelty of pharmaceutical R&D investments following the creation of the Medicare Part D program. We find little evidence that the positive demand shock implied by this program prompted firms to undertake scientifically novel R&D activity, as measured by whether the specific scientific approach had been used before. However, we find some evidence that firms invested in products involving novel combinations of scientific approaches. These estimates can inform economists and policymakers assessing the tradeoffs associated with marginal changes in commercial returns from newly developed pharmaceutical products. |
| JEL: | I1 O3 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27093&r=all |
| By: | Maurizio Iacopetta (Sciences Po-OFCE and SKEMA Business School); Raoul Minetti (Michigan State University); Pierluigi Murro (LUISS University) |
| Abstract: | New firms are often based on ideas that the founders developed while working for incumbent firms. We study the macroeconomic effects of spinoffs through a growth model of product variety expansion, driven by firm entry, and product innovation. Spinoffs stem from conflicts of interest between incumbent firms' shareholders and employees. The analysis suggests that incumbents invest more in product innovation when knowledge protection is stronger. An inverted-U shape relationship emerges, however, between the intensity of spinoff activities and the strength of the rule of law. A calibration experiment indicates that, with a good rule of law, loosening knowledge protection by 53 reduces product innovation by one fifth in the short run and one seventh in the long run, but boosts the spinoff rate by one tenth and one sixth in the short and long run, respectively. Nevertheless, per capita income growth drops and welfare deteriorates. The trade-offs are broadly consistent with evidence from Italian firms. |
| Keywords: | Corporate Governance, Endogenous Growth, Spinoffs. |
| JEL: | E44 O40 G30 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:2013&r=all |
| By: | Hirofumi Uchida (Graduate School of Business Administration Kobe University); Kazuo Yamada (Faculty of Economics and Graduate School of Economics Nagasaki University); Alberto Zazzaro (Universita' degli Studi di Napoli Federico II) |
| Abstract: | In this paper, we examine whether family firms are more or less likely to foster management innovation, expanded incumbent business activities, or make advance to new business fields after CEO succession than non-family firms. Using data of 1,149 SMEs (small- and medium-sized enterprises) obtained from a corporate survey in Japan, we find that the new CEOs of family firms are not systematically less or more innovative than their counterparts in non-family firms. However, we also find that this zero effect of family ownership on innovation likelihood is the result of a negative impact of professional successors and a positive impact of heir successors. Finally, we show that access to intangible family assets increases the innovativeness of heir successors and decreases that of professional successors. |
| Keywords: | Innovation, Family Firm, Family Ownership, Succession |
| JEL: | L21 J12 Z13 G32 G21 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wmofir:161&r=all |
| By: | Antoine Berthou; John Jong-Hyun Chung; Kalina Manova; Charlotte Sandoz-Dit-Bragard |
| Abstract: | We examine the gains from globalization in the presence of firm heterogeneity and potential resource misallocation. We show theoretically that without distortions, bilateral and export liberalizations increase aggregate welfare and productivity, while import liberalization has ambiguous effects. Resource misallocation can either amplify, dampen or reverse the gains from trade. Using model-consistent measures and unique new data on 14 European countries and 20 industries in 1998-2011, we empirically establish that exogenous shocks to export demand and import competition both generate large aggregate productivity gains. Guided by theory, we provide evidence consistent with these effects operating through reallocations across firms in the presence of distortions. (i) Both export and import expansion increase average firm productivity, but the former also shifts activity towards more productive firms, while the latter acts in reverse. (ii) Both export and import exposure raise the productivity threshold for survival, but this cut-off is not a sufficient statistic for aggregate productivity. (iii) Efficient institutions, factor and product markets amplify the gains from import competition but dampen those from export access. |
| Keywords: | : International Trade, Productivity, Allocative Efficiency. |
| JEL: | F10 F14 F43 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:749&r=all |
| By: | Fourberg, Niklas; Korff, Alex |
| Abstract: | The upgrade of legacy infrastructure is a challenging undertaking in general. The underlying issues are especially prominent for telecommunications networks outside of urban areas. Using German micro-level data, we identify the structural determinants for fiber optics deployment and its extent. We also measure the role of technology competition from the existing infrastructures, VDSL-Vectoring and TV-Cable. In this setting and exploiting a natural experiment, a technologically restrictive policy as proposed by the European Commission is found to be ineffective in promoting fiber deployment. Policy interventions in the form of subsidies targeted at specific local infrastructure projects, however, raise the likelihood of fiber deployment by a substantial margin. A targeted, proactive policy approach is therefore needed to overcome structural and geographical disadvantages. |
| Keywords: | Fiber expansion,Technology competition,Technology regulation,Subsidies,Regional Infrastructure |
| JEL: | D22 L52 L86 L96 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:334&r=all |
| By: | Nurmi, Satu; Vanhala, Juuso; Virén, Matti |
| Abstract: | We analyze the demographics of zombie firms and durations of zombie spells as well as their determinants, including an application on public subsidies using firm level population panel data from Finland. Firm-level analysis of firm demographics reveals that zombie-firms, as commonly defined in the literature, are often not truly distressed firms but rather companies with temporarily low revenues relative to interest payments. More importantly, we find that roughly a third of these firms are in fact growing companies and two thirds recover from the zombie status to become healthy firms. We also show that the increase of zombie firms over the past 15 years has mainly been driven by cyclical factors, as opposed to a secular trend. In our policy application on government subsidies to firms, estimation results strongly suggest that subsidy-receiving firms are less likely to die, regardless of the type of subsidy. However, with regard to recovery there is heterogeneity in the effects depending on the type of firm and the type of subsidy received. Thus, we do not find a robust positive association of subsidies with zombie recovery. |
| JEL: | D22 D24 G33 H25 L16 L25 O25 |
| Date: | 2020–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofrdp:2020_008&r=all |
| By: | Konrad B. Burchardi; Thomas Chaney; Tarek Alexander Hassan; Lisa Tarquinio; Stephen J. Terry |
| Abstract: | We show a causal impact of immigration on innovation and dynamism in US counties. To identify the causal impact of immigration, we use 130 years of detailed data on migrations from foreign countries to US counties to isolate quasi-random variation in the ancestry composition of US counties that results purely from the interaction of two historical forces: (i) changes over time in the relative attractiveness of different destinations within the US to the average migrant arriving at the time and (ii) the staggered timing of the arrival of migrants from different origin countries. We then use this plausibly exogenous variation in ancestry composition to predict the total number of migrants flowing into each US county in recent decades. We show four main results. First, immigration has a positive impact on innovation, measured by the patenting of local firms. Second, immigration has a positive impact on measures of local economic dynamism. Third, the positive impact of immigration on innovation percolates over space, but spatial spillovers quickly die out with distance. Fourth, the impact of immigration on innovation is stronger for more educated migrants. |
| JEL: | J61 O31 O40 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27075&r=all |
| By: | Zhangkai Huang; Gordon M. Phillips; Jialun Yang; Yi Zhang |
| Abstract: | The Cultural Revolution deprived Chinese students of the opportunity to receive higher education for 10 years when colleges and universities were closed from 1966-1976. We examine the human capital cost of this loss of education on subsequent innovation by firms, and ask if it impacted firms more than 30 years later. We examine the innovation of firms with CEOs who turned 18 during the Cultural Revolution, which sharply reduced their chances of attending college. Using multiple approaches to control for selection and endogeneity, including an instrument based on whether the CEO turned 18 during the Cultural Revolution and a regression discontinuity approach, we show that Chinese firms led by CEOs without a college degree spend less on R&D, generate fewer patents, and receive fewer citations to these patents. |
| JEL: | G3 I23 J24 O31 O32 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27107&r=all |
| By: | Crafts, Nicholas (University of Warwick & University of Sussex) |
| Abstract: | I examine the implications of technological change for productivity, real wages and factor shares during the industrial revolution using recently available data. This shows that real GDP per worker grew faster than real consumption earnings but labour’s share of national income changed little as real product wages grew at a similar rate to labour productivity in the medium term. The period saw modest TFP growth which limited the growth both of real wages and of labour productivity. Economists looking for an historical example of rapid labour-saving technological progress having a seriously adverse impact on labour’s share must look elsewhere. |
| Keywords: | Engels’ pause ; factor shares ; industrial revolution ; labour productivity ; real wages JEL codes: N13 ; O33 ; O47 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1268&r=all |
| By: | Feng, Andy; Valero, Anna |
| Abstract: | This paper investigates the link between management practices and workforce skills in manufacturing firms, exploiting geographical variation in the supply of human capital. Skills measures are constructed using newly compiled data on universities and regional labour markets across 19 countries. Consistent with management practices being complementary with skills, we show that firms further away from universities employ fewer skilled workers and are worse managed, even after controlling for a rich set of observables and fixed effects. Analysis using regional skill premia suggests that variation in the price of skill drives these relationships. |
| Keywords: | management practices; human capital; universities; complementaries; ES/M010341/1 |
| JEL: | I23 J24 L20 L60 M20 |
| Date: | 2020–01–24 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:103094&r=all |
| By: | Nick Jacob; Giordano Mion |
| Abstract: | Ever since Marshall (1890) agglomeration externalities have been viewed as the key factor explaining the existence of cities and their size. However, while the various micro foundations of agglomeration externalities stress the importance of Total Factor Productivity (TFP), the empirical evidence on agglomeration externalities rests on measures obtained using firm revenue or value-added as a measure of firm output: revenue-based TFP (TFP-R). This paper uses data on French manufacturing firms’ revenue, quantity and prices to estimate TFP and TFP-R and decompose the latter into various elements. Our analysis suggests that the revenue productivity advantage of denser areas is mainly driven by higher prices charged rather than differences in TFP. At the same time, firms in denser areas are able to sell higher quantities, and generate higher revenues, despite higher prices. These and other results we document suggest that firms in denser areas are able to charge higher prices because they sell higher demand/quality products. Finally, while the correlation between firm revenue TFP and firm size is positive in each location, it is also systematically related to density: firms with higher (lower) TFP-R account for a larger (smaller) share of total revenue in denser areas. These patterns thus amplify in aggregate regional-level figures any firm-level differences in productivity across space. |
| Keywords: | total factor productivity (TFP), density, agglomeration externalities, revenue-based TFP, prices, demand, quality |
| JEL: | R12 R15 D24 L11 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8261&r=all |
| By: | Fagiolo, Giorgio; Silva, Olmo; Strange, William C. |
| Abstract: | This paper considers the heterogeneous microfoundations of agglomeration economies. It studies the co-location of industries to look for evidence of labor pooling, input sharing, and knowledge spillovers. The novel contribution of the paper is that it estimates single-industry models using a common empirical framework that exploits the cross-sectional variation in how one industry co-locates with the other industries in the economy. This unified approach yields evidence on the relative importance of the Marshallian microfoundations at the single-industry level, allowing for like-for-like cross-industry comparisons on the determinants of agglomeration. Using UK data, we estimate such microfoundations models for 97 manufacturing sectors, including the classic agglomeration cases of automobiles, computers, cutlery, and textiles. These four cases – as with all of the individual industry models we estimate – clearly show the importance of the Marshallian forces. However, they also highlight how the importance of these forces varies across industries – implying that extrapolation from cases should be viewed with caution. The paper concludes with an investigation of the pattern of heterogeneity. The degree of an industry’s clustering (localization), entrepreneurship, incumbent firm size, and worker education are shown to contribute to the pattern of heterogeneous microfoundations. |
| Keywords: | agglomeration; microfoundations; heterogeneity; industrial clusters; ES/G005966/1; ES/J021342/1 |
| JEL: | R14 J01 N0 |
| Date: | 2020–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:103571&r=all |