nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2021‒01‒25
fourteen papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. The impact of regulation on innovation By Philippe Aghion; Antonin Bergeaud; John Van Reenen
  2. Eco-Innovation and Employment: A Task-Based Analysis By Elliott, Robert J. R.; Kuai, Wenjing; Maddison, David; Ozgen, Ceren
  3. Public R&D investment in economic crises By Pellens, Maikel; Peters, Bettina; Hud, Martin; Rammer, Christian; Licht, Georg
  4. Entrepreneurial Teams: Diversity of Skills and Early-Stage Growth By Francesco D’Acunto; Geoffrey Tate; Liu Yang
  5. Public Procurement and Innovation for Human-Centered Artificial Intelligence By Naudé, Wim; Dimitri, Nicola
  6. Immigration and Entrepreneurship in the United States By Pierre Azoulay; Benjamin F. Jones; J. Daniel Kim; Javier Miranda
  7. Structural Change and Regional Economic Growth in Indonesia By Andriansyah, Andriansyah; Nurwanda, Asep; Rifai, Bakhtiar
  8. Public subsidies and the sources of venture capital By Berger, Marius; Hottenrott, Hanna
  9. Governance structure, technical change and industry competition By Mattia Guerini; Philipp Harting; Mauro Napoletano
  10. Advanced Technologies Adoption and Use by U.S. Firms: Evidence from the Annual Business Survey By Nikolas Zolas; Zachary Kroff; Erik Brynjolfsson; Kristina McElheran; David Beede; Catherine Buffington; Nathan Goldschlag
  11. Are firms withdrawing from basic research? An analysis of firm-level publication behaviour in Germany By Krieger, Bastian; Pellens, Maikel; Blind, Knut; Schubert, Torben
  12. Learning and Upgrading in Global Value Chains: An Analysis of India's Manufacturing Sector By Sourish Dutta
  13. The age distribution of business firms By Flavio Calvino; Daniele Giachini; Mattia Guerini
  14. Technology, demand, and productivity: what an industry model tells us about business cycles By Molnarova, Zuzana; Reiter, Michael

  1. By: Philippe Aghion; Antonin Bergeaud; John Van Reenen
    Abstract: Does regulation affect the pace and nature of innovation and if so, by how much? We build a tractable and quantifiable endogenous growth model with size-contingent regulations. We apply this to population administrative firm panel data from France, where many labor regulations apply to firms with 50 or more employees. Nonparametrically, we find that there is a sharp fall in the fraction of innovating firms just to the left of the regulatory threshold. Further, a dynamic analysis shows a sharp reduction in the firm's innovation response to exogenous demand shocks for firms just below the regulatory threshold. We then quantitatively fit the parameters of the model to the data, finding that innovation at the macro level is about 5.4% lower due to the regulation, a 2.2% consumption equivalent welfare loss. Four-fifths of this loss is due to lower innovation intensity per firm rather than just a misallocation towards smaller firms and lower entry. We generalize the theory to allow for changes in the direction of R&D, and find that regulation's negative effects only matter for incremental innovation (as measured by citations and text-based measures of novelty). A more regulated economy may have less innovation, but when firms do innovate they tend to "swing for the fence" with more radical (and labor saving) breakthroughs.
    Keywords: innovation, regulation, patents, firm size
    JEL: O31 L11 L51 J8 L25 O31 L11 L51 J8 L25 O31 L11 L51 J8 L25
    Date: 2021–01
  2. By: Elliott, Robert J. R. (University of Birmingham); Kuai, Wenjing (University of Birmingham); Maddison, David (University of Birmingham); Ozgen, Ceren (University of Birmingham)
    Abstract: This paper provides some of the first evidence of the relationship between eco-innovation and employment. Adopting a O*NET based task approach, in a study of the Dutch firms, we show that eco-innovation has no impact on overall employment. However, compared to non- eco-innovators there is an 18.2% increase in the number of green jobs (equivalent to 12 new green workers for the average firm). This means an average increase in the share of green workers of around 3.3%. Broadly speaking, the increase in the share of green jobs was driven by a reduction in non-green workers and a smaller but still significant increase in the number of green workers. We further show that subsidy-driven policies, rather than regulation-driven policies positively correlate with the number of green workers.
    Keywords: eco-innovation, green jobs, subsidies
    JEL: Q52 Q55 J23
    Date: 2021–01
  3. By: Pellens, Maikel; Peters, Bettina; Hud, Martin; Rammer, Christian; Licht, Georg
    Abstract: We study the cyclicality of public R&D in 28 OECD countries (1995-2017). While procyclical on average, public R&D reacts asymmetrically over different phases of the business cycle and becomes acyclical during recessions. It is also heterogeneous across countries: Innovation leaders and followers behave countercyclically during recessions while moderate innovators behave procyclically. Furthermore, the share of public R&D allocated to the business sector is countercyclical, but the thematic composition remains stable. These results, not driven by countries' financial constraints, imply that countries behind the innovation frontier might strengthen their resilience to economic crises by adopting countercyclical R&D strategies.
    Keywords: R&D,Public Policy,Business Cycle
    JEL: O38 H50 H12 E32
    Date: 2020
  4. By: Francesco D’Acunto; Geoffrey Tate; Liu Yang
    Abstract: We use employer-employee linked data to track the employment histories of team members prior to startup formation for a full cohort of new firms in the U.S. Using pre-startup industry experience to measure skillsets, we find that startups that have founding teams with more diverse collective skillsets grow faster than peer firms in the same industries and local economies. A one standard deviation increase in teams’ skill diversity is associated with an increase in five-year employment (sales) growth of 16% (10%) from the mean. The effects are stronger among startups in innovative industries and among startups facing greater ex-ante uncertainty. Moreover, the results are robust to a variety of approaches to address the endogeneity of team composition. Overall, our results suggest that teams with more diverse collective skillsets adapt their strategies more successfully in the uncertain environments faced by (innovative) startup firms.
    Keywords: Economic Growth, Startups, Teams, Diversity, Innovation, Personnel Economics
    JEL: L25 L26 J24 M51
    Date: 2020–12
  5. By: Naudé, Wim (University College Cork); Dimitri, Nicola (University of Siena)
    Abstract: The possible negative consequences of Artificial Intelligence (AI) have given rise to calls for public policy to ensure that it is safe, and to prevent improper use and misuse. Human-centered AI (HCAI) draws on ethical principles and puts forth actionable guidelines in this regard. So far however, these have lacked strong incentives for adherence. In this paper we contribute to the debate on HCAI by arguing that public procurement and innovation (PPaI) can be used to incentivize HCAI. We dissect the literature on PPaI and HCAI and provide a simple theoretical model to show that procurement of innovative AI solutions underpinned by ethical considerations can provide the incentives that scholars have called for. Our argument in favor of PPaI for HCAI is also an argument for the more innovative use of public procurement, and is consistent with calls for mission-oriented and challenge-led innovation policies. Our paper also contributes to the emerging literature on public entrepreneurship, given that PPaI for HCAI can advance the transformation of society, but only under uncertaint.
    Keywords: artificial intelligence, data, innovation, public procurement, ethics
    JEL: H57 D02 O38 O32
    Date: 2021–01
  6. By: Pierre Azoulay; Benjamin F. Jones; J. Daniel Kim; Javier Miranda
    Abstract: Immigrants can expand labor supply and compete for jobs with native-born workers. But immigrants may also start new firms, expanding labor demand. This paper uses U.S. administrative data and other data sources to study the role of immigrants in entrepreneurship. We ask how often immigrants start companies, how many jobs these firms create, and how firms founded by native-born individuals compare. A simple model provides a measurement framework for addressing the dual roles of immigrants as founders and workers. The findings suggest that immigrants act more as “job creators” than “job takers” and play outsized roles in U.S. high-growth entrepreneurship.
    Date: 2020–12
  7. By: Andriansyah, Andriansyah; Nurwanda, Asep; Rifai, Bakhtiar
    Abstract: This paper investigates the relationship between structural change and regional economic growth in Indonesia. We utilize several measures of structural change, i.e. structural change index, norm absolute value index, shift-share method, and effective structural change index, for 30 provinces over the period 2005-2018. We show that the structural change has occurred across provinces, even though it is slowing, towards an agricultural-services transition. By employing dynamic panel data models, this study shows that structural change is a significant determinant of growth. However, structural change matters for growth only if there is an increase in productivity, not only a movement of labor across sectors. An improvement in productivity within sectors and a movement of labors to other sectors with better productivity lead to a better economic development.
    Keywords: Structural Change; Regional Growth; Indonesia; Productivity
    JEL: L16 O40 R11
    Date: 2020–08–07
  8. By: Berger, Marius; Hottenrott, Hanna
    Abstract: Research suggests that public subsidies for newly founded firms have a positive effect on follow-on financing, in particular, Venture Capital (VC). This study differentiates between Government VC, Independent VC, Corporate VC, and Business Angels and shows that public subsidies are not relevant for all of these sources. When accounting for firm characteristics that drive both selection into public subsidies as well as into VC financing through econometric matching techniques, we find that subsidies are only linked to Government VC and Business Angel financing.
    Keywords: Start-up Subsidies,Entrepreneurship Policy,Entrepreneurial Finance,Venture Capital,Business Angels
    JEL: G24 L26 O25 O31
    Date: 2020
  9. By: Mattia Guerini (COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019), GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur); Philipp Harting (Universität Bielefeld = Bielefeld University); Mauro Napoletano (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po, GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur)
    Abstract: We develop a model to study the impact of corporate governance on firm investment decisions and industry competition. In the model, governance structure affects the distribution of shares among short-and long-term oriented investors, the robustness of the management regarding possible stockholder interference, and the managerial remuneration scheme. A bargaining process between firm's stakeholders determines the optimal allocation of financial resources between real investments in R&D and financial investments in shares buybacks. We characterize the relation between corporate governance and firm's optimal investment strategy and we study how different governance structures shape technical progress and the degree of competition over the industrial life cycle. Numerical simulations of a calibrated setup of the model show that pooling together industries characterized by heterogeneous governance structures generate the well-documented inverted-U shaped relation between competition and innovation.
    Keywords: governance structure,industry dynamics,competition,technical change
    Date: 2020–12–04
  10. By: Nikolas Zolas; Zachary Kroff; Erik Brynjolfsson; Kristina McElheran; David Beede; Catherine Buffington; Nathan Goldschlag
    Abstract: We introduce a new survey module intended to complement and expand research on the causes and consequences of advanced technology adoption. The 2018 Annual Business Survey (ABS), conducted by the Census Bureau in partnership with the National Center for Science and Engineering Statistics (NCSES), provides comprehensive and timely information on the diffusion among U.S. firms of advanced technologies including artificial intelligence (AI), cloud computing, robotics, and the digitization of business information. The 2018 ABS is a large, nationally representative sample of over 850,000 firms covering all private, nonfarm sectors of the economy. We describe the motivation for and development of the technology module in the ABS, as well as provide a first look at technology adoption and use patterns across firms and sectors. We find that digitization is quite widespread, as is some use of cloud computing. In contrast, advanced technology adoption is rare and generally skewed towards larger and older firms. Adoption patterns are consistent with a hierarchy of increasing technological sophistication, in which most firms that adopt AI or other advanced business technologies also use the other, more widely diffused technologies. Finally, while few firms are at the technology frontier, they tend to be large so technology exposure of the average worker is significantly higher. This new data will be available to qualified researchers on approved projects in the Federal Statistical Research Data Center network.
    Date: 2020–12
  11. By: Krieger, Bastian; Pellens, Maikel; Blind, Knut; Schubert, Torben
    Abstract: Previous research has expressed concerns about firms engaging less in basic research. We contribute to this debate by studying trends in the scientific publishing activities of firms located in Germany. Our results do not confirm a declining trend in raw numbers with numbers indicating that firms' aggregate volume of scientific publications stayed constant between 2008 and 2016. However, the number of publishing firms declined, in particular in high-tech and knowledge-intensive industries. Beyond that, we observe positive trends in publishing in basic research journals compared to journals focused on applied research, and publishing in collaboration with academic partners compared to publishing alone. Thus, our results paint an ambiguous picture. While they do not confirm a decrease in firms' basic research engagement in the aggregate, the figures document a concentration of publishing activities on fewer firms. We argue that this concentration of basic research activities in firms may pose a threat to the longer term innovativeness of the German economy.
    Keywords: Corporate publishing,Basic research,R&D strategy
    JEL: O32 O33 O34 O36
    Date: 2020
  12. By: Sourish Dutta
    Abstract: The topic of my research is "Learning and Upgrading in Global Value Chains: An Analysis of India's Manufacturing Sector". To analyse India's learning and upgrading through position, functions, specialisation & value addition of manufacturing GVCs, it is required to quantify the extent, drivers, and impacts of India's Manufacturing links in GVCs. I have transformed this overall broad objective into three fundamental questions: (1) What is the extent of India's Manufacturing Links in GVCs? (2) What are the determinants of India's Manufacturing Links in GVCs? (3) What are the impacts of India's Manufacturing Links in GVCs? These three objectives represent my three chapters in my PhD thesis.
    Date: 2021–01
  13. By: Flavio Calvino (OCDE - Organisation de Coopération et de Développement Economiques); Daniele Giachini (Institute of Economics of Sant'Anna [Pisa] - SSSUP - Scuola Universitaria Superiore Sant'Anna [Pisa]); Mattia Guerini (COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019), GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur, Institute of Economics of Sant'Anna [Pisa] - SSSUP - Scuola Universitaria Superiore Sant'Anna [Pisa])
    Abstract: We investigate upon the shape and the determinants of the age distribution of business firms. By employing a novel dataset covering the population of French businesses, we highlight that a geometric law provides a reasonable approximation for the age distribution. However, relevant systematic deviations and sectoral heterogeneity appear. We develop a stochastic model of firm dynamics to explain the mechanisms behind this evidence and relate them to business dynamism. Results reveal a long-term decline in entry rates and lower survival probabilities of young firms. Our findings bear important implications for aggregate outcomes, notably employment growth.
    Keywords: Firm demographics,age distribution,business dynamism
    Date: 2020–12–04
  14. By: Molnarova, Zuzana (Institute for Advanced Studies, Vienna, Austria); Reiter, Michael (Institute for Advanced Studies, Vienna, Austria)
    Abstract: In this paper, we study the relative importance of demand and technology shocks in generating business cycle fluctuations, both at the aggregate level and at the level of individual industries. We construct a New Keynesian DSGE model that is highly disaggregated at the industry level with an input-output network structure. Measured productivity in the model fluctuates in response to both technology and demand shocks due to endogenous factor utilization. We estimate the model by the simulated method of moments using U.S. industry data from 1960 to 2005. We find that the aggregate technology shock has zero variance. Exogenous shocks to technology are necessary for our model to fit the data, but these shocks are exclusively industry-specific, uncorrelated across industries. The bulk of the aggregate fluctuations, including those in aggregate measured productivity, are explained through shocks to aggregate demand. This shock structure is supported by a host of information from the disaggregate data. Our second finding is that about half of the decrease in the cyclicality of measured productivity in the U.S. after the mid-1980s can be explained by the reduction in the size of demand shocks, in line with the narrative of the great moderation.
    Keywords: Business cycles, productivity, industries, factor utilization, input-output linkages, networks
    JEL: E32 E24 E37
    Date: 2021–01

This nep-tid issue is ©2021 by Fulvio Castellacci. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.