nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2020‒06‒29
fifteen papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Are ideas getting harder to find? By Bloom, Nicholas; Jones, Charles I; Van Reenen, John; Webb, Michael
  2. Competition Laws and Corporate Innovation By Ross Levine; Chen Lin; Lai Wei; Wensi Xie
  3. Product Innovation, Product Diversification, and Firm Growth: Evidence from Japan’s Early Industrialization By Serguey Braguinsky; Atsushi Ohyama; Tetsuji Okazaki; Chad Syverson
  4. Hipsters vs. Geeks? Creative workers, STEM and innovation in US cities By Lee, Neil; Rodríguez-Pose, Andrés
  5. Subsidizing Innovation Over the Business Cycle. By Jorge Andrés Vélez-Ospina; Isabel Busom Piquer
  6. Dynamic Mergers Effects on R&D Investments and Drug Development across Research Phases in the Pharmaceutical Industry By Ralph Siebert; Zhili Tian
  7. Rising markups, common ownership, and technological capacities By Gibbon, Alexandra J.; Schain, Jan Philip
  8. Concentration and Agglomeration of IT Innovation and Entrepreneurship: Evidence from Patenting By Chris Forman; Avi Goldfarb
  9. The Ties That Bind Us: Social Networks and Productivity in the Factory By Afridi, Farzana; Dhillon, Amrita; Sharma, Swati
  10. Innovating in Krugman’s Footsteps – Where and How Innovation Differs in Europe: Static Innovation Indicators for Identifying Regional Policy Leverages By Rhoden, Imke
  11. Does Emigration Drain Entrepreneurs? By Anelli, Massimo; Basso, Gaetano; Ippedico, Giuseppe; Peri, Giovanni
  12. Testing predictions on supplier governance from the global value chains literature By Schmitt, Alexander; Van Biesebroeck, Johannes
  13. Innovation, Growth and Structural Change in American Agriculture By Julian M. Alston; Philip G. Pardey
  14. At The Roots Of The Fourth Industrial Revolution: How ICT Investments Affect Industry 4.0 Adoption By Marco Bettiol; Mauro Capestro; Eleonora Di Maria; Stefano Micelli
  15. Robot Imports and Firm-Level Outcomes By Bonfiglioli, Alessandra; Crinò, Rosario; Fadinger, Harald; Gancia, Gino

  1. By: Bloom, Nicholas; Jones, Charles I; Van Reenen, John; Webb, Michael
    Abstract: Long-run growth in many models is the product of two terms: the effective number of researchers and their research productivity. We present evidence from various industries, products, and firms showing that research effort is rising substantially while research productivity is declining sharply. A good example is Moore's Law. The number of researchers required today to achieve the famous doubling of computer chip density is more than 18 times larger than the number required in the early 1970s. More generally, everywhere we look we find that ideas, and the exponential growth they imply, are getting harder to find.
    JEL: D24 E23 O31 O47
    Date: 2020–04–01
  2. By: Ross Levine; Chen Lin; Lai Wei; Wensi Xie
    Abstract: A central debate in economics concerns the relationship between competition and innovation, with some stressing that competition discourages innovation by reducing post-innovation rents and others emphasizing that more contestable markets spur currently dominant and other firms to invest more in innovation. We examine the impact of competition laws on innovation. We create a unique firm-level dataset on patenting activities that includes over 1.4 million firm-year observations, across 68 countries, from 1991 through 2015. Using a new, comprehensive dataset on competition laws, we find that more stringent competition laws are associated with increases in firms’ number of self-generated patents and the citation-impact and explorative nature of those patents. We also conduct the first examination of the relationship between competition laws and firms’ acquisition of patents from other firms. We find that competition increases patent acquisitions but lowers the ratio of acquired to self-generated patents. The results hold when using country-industry data on 186 countries over the 1888-2015 period.
    JEL: K21 L4 O3
    Date: 2020–05
  3. By: Serguey Braguinsky; Atsushi Ohyama; Tetsuji Okazaki; Chad Syverson
    Abstract: We explore how firms grow by adding products. In contrast to most earlier work on the topic, our conceptual and empirical framework allows for separate treatment of product innovation (vertical differentiation) and diversification (horizontal differentiation). The market context is Japan’s cotton spinning industry at the turn of the last century. We find that introducing innovative products outside of the previously feasible is a key to firm growth. It provides opportunities to capture high-end vertically differentiated product markets when successful while also facilitating the firm’s growth through horizontal expansion in product space. However, this process involves a high degree of uncertainty, so firms tend to introduce innovative products on experimental basis. In long-term outcomes, the right tail of the firm size distribution becomes dominated by firms that were able to expand in both directions: moving first into technologically challenging vertically differentiated products, and then later applying their newly acquired high-end technical competence to horizontal expansion of their product portfolios.
    Date: 2020–06
  4. By: Lee, Neil; Rodríguez-Pose, Andrés
    Abstract: Innovation in cities is increasingly regarded as an outcome of two potential inputs: scientific activity and creativity. Recent research using firm level data has suggested that actually it might be the combination of these two inputs, rather than the mere presence of workers representing each group, which matters. Yet there is little evidence on whether this relationship holds using city level data in the case of the United States (US). This paper investigates this gap in our knowledge by examining how the combination of STEM (geeks) and creative workers (hipsters) in a panel of 290 US Metropolitan Statistical Areas during the period between 2005 and 2015 relates to city level innovation. The results indicate that, although the presence of STEM workers is a more important driver of innovation than that of creative ones, the most innovative cities are characterised by a combination of the two. Hence, current policies which tend to focus mainly on either STEM or creativity may be better targeted at ensuring interactions between the two.
    Keywords: cities; Creative Class; Creativity; Innovation; STEM; United States
    JEL: O18 O32 O33 R12
    Date: 2020–04
  5. By: Jorge Andrés Vélez-Ospina (Departament d'Empresa, Universitat Autonoma de Barcelona); Isabel Busom Piquer (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: We investigate whether the impact of direct support for business investment in R&D and innovation varies over the business cycle. We address several questions: whether firms that obtain public support in a recession differ from firms that obtain it during expansions; whether the impact of support is smaller in recessions than in expansions, and whether effects vary with the treatment pattern. Using firm-level data from Spain during the period 2005 to 2014, we combine propensity score matching and difference-in-differences methods to estimate firms’ response to direct support in different phases of the cycle. Two findings stand out. First, while the impact of support on monetary investment in innovation is pro-cyclical, it is countercyclical in terms of the employee-time allocation to innovation activities. Second, the additionality of a one-year treatment is smaller than that of longer treatments, or repeate program participation. Firms receiving public support during the recession have assigned more employee time to innovation activities than a matched control group, preventing a decline of knowledge capital during the big recession.
    JEL: O25 O38 C14 C21 D22 L29 L53 H50
    Date: 2020–03
  6. By: Ralph Siebert; Zhili Tian
    Abstract: Pharmaceutical firms spend increasing amounts in mergers and acquisitions (M&As), which raises the question of whether sufficient investment is left after mergers to further develop firms’ internal drug development capability. We evaluate the effects of M&As on firms’ post-merger R&D investments and drug development capabilities across drug development phases. This study builds on a novel database that enables us to evaluate the post-merger effect at the research project level and across development phases. A further novel feature of the study is allowing measurement errors to enter firms’ R&D investments. Our study adopts a structural equation modeling approach, which is appropriate for evaluating a system of equations through which we examine the direct and indirect merger effects on R&D capabilities across development phases. We find that M&As have a strong effect on firms’ drug development at the late development phases through economies of scope. At the early development phases, M&As serve to replenish firms’ drug pipelines. The study shows that M&As have a direct and negative effect on firms’ R&D investments. However, the overall effect on R&D investments accounting for enhanced post-merger R&D capabilities and product approvals turns out to be positive. M&As can be an effective instrument for firms to acquire drug development knowledge and technology in late stages of the development process (Phases 3 clinical testing and regulatory filing). Our study provide empirical evidence that investments in M&As in late stage of drug development help firms’ growth and increase firms revenue.
    Keywords: drug development phases, dynamics, innovation management, merger and acquisition, pharmaceutical drug development, R&D capabilities
    JEL: L11 L13 L52 O31 O32 O38
    Date: 2020
  7. By: Gibbon, Alexandra J.; Schain, Jan Philip
    Abstract: This paper analyses the impact of common ownership on markups and innovation and adds to the discussion of the recently observed patterns of a long term rise in market power. We shed light on the inconclusiveness of results regarding the effects of common ownership on markups in the existing literature by exploiting industry technology classifications by the European Commission. Using a rich panel of European manufacturing firms from 2005 to 2016, we structurally infer markups and construct a measure of common ownership. Combining propensity score matching with a difference-in-differences estimator, we find an increase of firm markups by 3.1% after the first exposure tocommon ownership. While this effect is strongly pronounced in low-tech industries, we find no effect on markups in high-tech industries. In contrast, we measure a positive effect of common ownership on innovation activity in high-tech industries and no effectin low-tech industries. Both findings are consistent with recent theoretical findings in Lopéz and Vives (2019).
    Keywords: Competition,Common Ownership,Market Power,Industry Structure,Antitrust,Innovation
    JEL: L10 L41 L60 G23 G32 O34
    Date: 2020
  8. By: Chris Forman; Avi Goldfarb
    Abstract: Information technology (IT) matters to prosperity. The top patenters are increasingly IT companies. We use data on US patents to document four trends in IT patenting. First, firm-level concentration in IT patenting is increasing over time. Second, geographic concentration in IT patenting is increasing over time. Third, most technology classes experienced a decline in new patenters from 1980 to 2000. This was not true of new IT patents. Since 2000, the trend in new IT patenters looks like other classes and is declining over time. Fourth, there is increased geographic concentration of new IT patenters. We do not identify the reasons behind these trends nor whether they are related to overall changes in industry concentration, agglomeration, or prosperity.
    JEL: L22 L26 M13 M15 O31 O32 O33 O34 R12
    Date: 2020–06
  9. By: Afridi, Farzana; Dhillon, Amrita; Sharma, Swati
    Abstract: We use high frequency worker level productivity data from garment manufacturing units in India to study the effects of caste-based social networks on individual and group productivity when workers are complements in the production function but wages are paid at the individual level. Using exogenous variation in production line composition for almost 35,000 worker-days, we find that a 1 percentage point increase in the share of own caste workers in the line increases daily individual productivity by about 10 percentage points. The lowest performing worker increases her effort by more than 15 percentage points when the production line has a more homogeneous caste composition. Production externalities that impose financial costs due to worker's poor performance on co-workers within her social network can explain our findings. Our results suggest that even in the absence of explicit group-based financial incentives, social networks can be leveraged to improve both worker and group productivity.
    Keywords: assembly lines; caste; India; labor productivity; Social Networks
    JEL: J15 J24 Y40 Z13
    Date: 2020–04
  10. By: Rhoden, Imke
    Abstract: This paper introduces two indicators for innovation, showing the allocation of innovation and its inherent diversity. Both indicators can give insights for regional innovation policy conception. The first indicator measures the share of patents in research and development expenditure, proposing a locational innovation output indicator. It can show that innovation in Europe differs strongly among NUTS2-level regions, which points to regionally specific, place-based policies as a result of a strong dispersion in European innovation activity. The second measure, the innovation diversity indicator, shows the diversification of innovation in a region and is built upon Krugman’s locational Gini coefficients. Here, the share of patents belonging to a particular IPC class is related to the dispersion of all patents in a region. Possible implications for policy are the construction of place-based, technology-specific programs, on either national or subnational (NUTS2-) level, where each country or region has to be considered carefully. Analyses underline that innovation in Europe is a highly regionally and technically diversified concept.
    Keywords: Innovation Indicator,Innovation Gini,Regional Dispersion,Research and Development Allocation,Patent Data
    JEL: R12 O33 O38
    Date: 2020
  11. By: Anelli, Massimo (Bocconi University); Basso, Gaetano (University of California, Davis); Ippedico, Giuseppe (University of California, Davis); Peri, Giovanni (University of California, Davis)
    Abstract: Emigration of young, motivated individuals may deprive countries-of-origin of entrepreneurs. We isolate exogenous variation in a large emigration wave from Italy between 2008 and 2015 by interacting diaspora networks with economic pull factors in destination countries, and find that larger emigration rates reduced firm creation and innovative start-ups. We estimate that for every 100 emigrants, 26 fewer firms were created. An accounting exercise shows that 37 percent of the effect was due to the disproportionate loss of young people. The remaining effect was due to selection into emigration of highly entrepreneurial individuals, as well as negative spillovers on firm creation.
    Keywords: emigration, demography, brain drain, entrepreneurship, innovation, EU integration
    JEL: J61 H7 O3 M13
    Date: 2020–06
  12. By: Schmitt, Alexander; Van Biesebroeck, Johannes
    Abstract: A vast empirical literature analyzes the determinants of the make-or-buy decision, but firms also need to decide how to organize their supplier relationships when they choose to buy. The global value chains framework provides predictions on the nature of buyer-supplier collaboration. We use a unique transaction-level dataset of outsourced automotive components to study carmakers' choice between four distinct types of supplier governance: market, captive, relational, or modular. The theory formulates predictions based on three characteristics: the complexity or contractibility of a transaction, the capabilities of suppliers, and how objectively codifiable performance requirements are. The results illustrate that sourcing relationships differ systematically and that proxies for the three characteristics have effects in line with the theory.
    Keywords: GVC; Outsourcing; PRT; TCE; Theory of the firm
    JEL: L22 L23 M11
    Date: 2020–04
  13. By: Julian M. Alston; Philip G. Pardey
    Abstract: U.S. agriculture was transformed during the 20th century by waves of innovation with mechanical, biological, chemical, and information technologies. Compared with a few decades ago, today’s agriculture is much less labor intensive and farms are much larger and more specialized, supplying a much-evolved market for farm products. Over recent decades, the global landscape for agricultural R&D has shifted away from farms, away from the public sector toward the private sector, and away from the United States towards agriculturally important middle-income countries, especially China, India and Brazil. U.S. investments in agricultural R&D are stalling even though meta-evidence shows that past U.S. investments in agricultural R&D have yielded very favorable returns: median reported benefit-cost ratios in the range of 12:1. Sustained U.S. investment and innovation will be required to preserve past productivity gains in the face of climate change, coevolving pests and diseases, and changing technological regulations—let alone increase productivity. Great potential exists for innovation in crop and livestock genetics and digital farming technologies to generate new products and production processes, but innovators are facing increasingly strong headwinds from social and political forces that seek to dictate technology choices.
    JEL: O13 O3 O4 O51 Q16 Q28 Q52
    Date: 2020–05
  14. By: Marco Bettiol (DSEA - University of Padova); Mauro Capestro (DSEA - University of Padova); Eleonora Di Maria (DSEA - University of Padova); Stefano Micelli (Department of Management - Ca’ Foscari University)
    Abstract: The debate on the adoption of industry 4.0 technologies focuses on the transformation of organizations and business opportunities towards a new industrial revolution, driven by a recent emerging technological scenario. Despite this growing discussion, little has been said on the relationship with the previous waves of digital technologies and specifically how Information and Communication Technologies (ICT) are related with the adoption of industry 4.0 technologies. The paper explores the relationship between the antecedents driving industry 4.0 investments, examining how the firm’s ICT endowment relates to the industry 4.0 technologies adopted, in terms of intensity as well as of types of ICT associated with specific types of industry 4.0 technologies, and the role of strategic motivations on the investment 4.0. Based on unique data gathered in 2017 on a sample of 1,229 Italian firms, results on 165 adopters show the positive relation between the adoption of ICT and industry 4.0 technologies as well as between specific groups of ICT technologies – that we identify into three ones: web ICT, management ICT, and manufacturing ICT – and groups of industry 4.0 ones (data-driven tech 4.0, production tech 4.0, and customization tech 4.0). Results highlight the strong connection between firm experience with prior digital investments and the consequent Industry 4.0 adoption. Moreover, there is a relation between specific clusters of ICT technologies – Web ICT, Operation ICT, and Management ICT – and industry 4.0 technologies. Among the strategic motivations driving industry 4.0 the relevant one is product variety, consistently with the selective technologies chosen, taking into account the ICT path of adoption. On the contrary efficiency is negatively related to the adoption of industry 4.0 technologies, stressing the more important role of market-driven variables for technological investments. A second relevant result is related to the role of ICT-related competences firms have to internally develop in order to adopt industry 4.0 technologies, beyond size. For firms – also SMEs – it becomes more important in the context of “Industry 4.0†to rely on internal resources (know-how connected to the ICT domain) that can positively enact the selection and exploitation of industry 4.0 technologies. As a policy implication, pushing the adoption of industry 4.0 technologies in firms with limited ICT resources should be coupled with actions supporting the development of such know-how and broader ICT competences as the roots for industry 4.0.
    Keywords: digital technologies, ICT, strategy, industry 4.0, fourth industrial revolution
    Date: 2020–06
  15. By: Bonfiglioli, Alessandra; Crinò, Rosario; Fadinger, Harald; Gancia, Gino
    Abstract: We use French data over the period 1994-2013 to study how imports of industrial robots affect firm-level outcomes. Compared to other firms operating in the same 5-digit sector, robot importers are larger, more productive, and employ a higher share of managers and engineers. Over time, robot import occurs after periods of expansion in firm size, and is followed by improvements in efficiency and a fall in demand for labor. Guided by a simple model, we then develop various empirical strategies to identify the causal effects of robot adoption. Our results suggest that, while demand shocks generate a positive correlation between robot imports and employment, exogenous changes in automation lead to job losses. We also find that robot imports increase sales per worker and the employment share of high-skill professions, but have a weak effect on total sales. The latter result suggests that productivity gains from automation may not be entirely passed on to consumers in the form of lower prices.
    Keywords: automation; Displacement; firms; robots
    JEL: D22 J23 J24 O33
    Date: 2020–04

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