nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2021‒08‒23
twelve papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Big pharma and monopoly capitalism: A long-term view By Giovanni Dosi; Luigi Marengo; Jacopo Staccioli; Maria Enrica Virgillito
  2. Knowledge for a warmer world: a patent analysis of climate change adaptation technologies By Kerstin H\"otte; Su Jung Jee; Sugandha Srivastav
  3. Does Offshoring Production Reduce Innovation: Firm-Level Evidence from Taiwan By Lee G. Branstetter; Jong-Rong Chen; Britta Glennon; Nikolas Zolas
  4. Exploration and Exploitation in US Technological Change By Carvalho, Vasco M.; Draca, Mirko; Kuhlen, Nikolas
  5. The contribution of business dynamics to productivity growth in the Netherlands By Daan Freeman; Leon Bettendorf; Harro van Heuvelen; Gerdien Meijerink
  6. Employment Protection, Workforce Mix and Firm Performance By Ardito, Chiara; Berton, Fabio; Pacelli, Lia; Passerini, Filippo
  7. Contract Labor and Firm Growth in India By Marianne Bertrand; Chang-Tai Hsieh; Nick Tsivanidis
  8. Propagation and Amplification of Local Productivity Spillovers By Xavier Giroud; Simone Lenzu; Quinn Maingi; Holger Mueller
  9. The Productivity Puzzle in Business Services By Alexander S. Kritikos; Alexander Schiersch; Caroline Stiel
  10. Public Sector Entrepreneurship, Politics, and Innovation By Link, Albert; Gicheva, Dora
  11. Does foreign investment hurt job creation at home? The geography of outward FDI and employment in the USA By Crescenzi, Riccardo; Ganau, Roberto; Storper, Michael
  12. Local Shocks and Internal Migration: The Disparate Effects of Robots and Chinese Imports in the US By Faber, Marius; Sarto, Andrés; Tabellini, Marco

  1. By: Giovanni Dosi; Luigi Marengo; Jacopo Staccioli; Maria Enrica Virgillito
    Abstract: Are IPRs institutions meant to foster innovative activities or conversely to secure appropriation and profitability? Taking stock of a long-term empirical evidence on the pharmaceutical sector in the US, we can hardly support IPRs intended as an innovation rewarding institution. According to our analysis, pharma patents have constituted legal barriers to protect intellectual monopolies rather than an incentive and a reward to innovative efforts. Patenting strategies appear to be quite aggressive in extending knowledge borders and enlarging the space protected from the possibility of infringements. This is also witnessed by the fact that patent applications are very skewed in the covered trade names and patent thickness expands over time. Conversely, the number of patents protecting new drugs approved by the FDA which draw upon government-sponsored research - as such a mark for quality - falls. Firm-level analysis on profitability confirms strong correlation, restricted to listed pharmaceutical firms, between patent portfolio and profit margins.
    Keywords: Intellectual property rights; patents; pharmaceutical industry.
    Date: 2021–08–11
  2. By: Kerstin H\"otte; Su Jung Jee; Sugandha Srivastav
    Abstract: Technologies help adapt to climate change but little systematic research about these technologies and their interaction with mitigation exists. We identify climate change adaptation technologies (CCATs) in US patent data to study the technological frontier in adaptation. We find that patenting in CCATs was roughly stagnant over the past decades. CCATs form two main clusters: (1) science-intensive CCATs related to agriculture, health and monitoring technologies; and (2) engineering-based for coastal, water and infrastructure adaptation. 25% of CCATs help in climate change mitigation, and we infer that synergies can be maximized through well designed policy. CCATs rely more on public R&D than other inventions, and CCAT patents are citing more science over time, indicating a growing relevance of research as a knowledge source for innovation. Policymakers can use these results to get greater clarity on where R&D support for CCATs can be directed.
    Date: 2021–08
  3. By: Lee G. Branstetter; Jong-Rong Chen; Britta Glennon; Nikolas Zolas
    Abstract: Does the offshoring of production degrade or enhance the innovative capabilities of manufacturing firms? We contribute to this debate by exploiting a policy shock that differentially affected the ability of Taiwanese firms to offshore some products to China. We find causal evidence that offshoring impacts both the level and nature of innovation. In the technologies directly related to product categories that could be offshored more easily after the policy shock, overall innovation levels decline and innovative effort shifts away from product innovation and towards process innovation. However, we also find evidence of a second-order positive effect of offshoring on the levels of innovation—particularly product innovation—in other parts of the firm’s portfolio. These results are consistent with the notion that offshoring production induces a complex reallocation of innovation effort within the firm, both across and within technology categories. Our paper examines this reallocation in the context of Taiwanese electronics firms, and introduces new methods that could be used to study post-offshoring reallocations of innovative effort in other contexts.
    JEL: F2 F6 O3 O4
    Date: 2021–08
  4. By: Carvalho, Vasco M. (University of Cambridge); Draca, Mirko (University of Warwick and CAGE Research Centre); Kuhlen, Nikolas (University of Cambridge and The Alan Turing Institute)
    Abstract: How do firms and inventors move through ‘knowledge space’ as they develop their innovations? We propose a method for tracking patterns of ‘exploration and exploitation’ in patenting behaviour in the US for the period since 1920. Our exploration measure is constructed from the text of patents find involves the use of ‘Bayesian Surprise’ to measure how different current patent-based innovations are from existing portfolios. Our results indicate that there are distinct ‘life-cycle’ patterns to firm and inventor exploration. Furthermore, exploration activity is more geographically concentrated than general patenting, but this concentration is centred outside the main hubs of patenting.
    Date: 2021
  5. By: Daan Freeman (CPB Netherlands Bureau for Economic Policy Analysis); Leon Bettendorf (CPB Netherlands Bureau for Economic Policy Analysis); Harro van Heuvelen (CPB Netherlands Bureau for Economic Policy Analysis); Gerdien Meijerink (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: This paper analyses the declining firm dynamism in the Netherlands, which may explain part of the slowdown in productivity growth. We use a rich microdata set including nearly all corporations in the Netherlands during 2006-2016, which enables us to evaluate the TFP growth contributions of exiting firms, start-ups and new firms resulting from mergers & acquisitions in different industries. We use a Melitz and Polanec (2015) decomposition to assess TFP growth contributions. We find that in service industries, start-ups, new firms created by M&As and exiting firms all contribute to overall TFP growth, in line with the creative destruction hypothesis. In manufacturing industries, TFP growth is driven mostly by incumbent firms. Here, entry and exit dynamics contribute relatively little or even negatively to TFP growth. In addition, young firms in the manufacturing industries tend to have higher TFP growth than older firms, while in service industries this is not the case. Finally, in general, relatively low productivity entrants are more likely to exit in the first five years after entry, which is in line with an `up-or-out' dynamic.
    JEL: F16 J31 R11
    Date: 2021–08
  6. By: Ardito, Chiara (University of Turin); Berton, Fabio (University of Turin); Pacelli, Lia (University of Turin); Passerini, Filippo (Catholic University Milan)
    Abstract: We measure the impact of employment protection reduction in an uncertain framework on firms' hires and performance, exploiting the Italian 2015 Jobs Act. Results indicate that firms (1) stabilize workforce mainly through contract transformations of low-tenure and low-human-capital incumbent workers performing high-physical and low-intellectual tasks; (2) apply a cost-saving strategy that increases profits and decreases value added per-head. Effects are stronger among non-exporting and non-innovative firms. Our evidence casts doubts on the effectiveness of employment protection reductions in enhancing productivity in the long run.
    Keywords: employment protection, human capital, productivity, tenure, tasks
    JEL: J08 J21 J24
    Date: 2021–07
  7. By: Marianne Bertrand; Chang-Tai Hsieh; Nick Tsivanidis
    Abstract: India's Industrial Disputes Act (IDA) of 1947 requires firm with more than 100 workers to pay large costs if they shrink their employment. Since the early 2000s, large Indian manufacturing firms have increasingly relied on contract workers who are not subject to the IDA. By 2015, contract workers accounted for 38% of total employment at firms with more than 100 workers compared to 20% in 2000. Over the same time period, the thickness of the right tail of the firm size distribution in formal Indian manufacturing plants increased, the average product of labor for large firms declined, the job creation rate for large firms increased, and the probability that large firms introduce new products rose. We provide evidence that these outcomes were caused by an increased reliance on contract labor among large establishments. A model of firm growth subject to firing costs suggests the rise of contract labor increased TFP in Indian manufacturing by 7.6%, occurring all through a one-time reduction in misallocation between large and small firms with negligible change in the long-run growth rate.
    JEL: J23 J4 J5 O0 O4
    Date: 2021–08
  8. By: Xavier Giroud; Simone Lenzu; Quinn Maingi; Holger Mueller
    Abstract: This paper shows that local productivity spillovers propagate throughout the economy through the plant-level networks of multi-region firms. Using confidential Census plant-level data, we show that large manufacturing plant openings not only raise the productivity of local plants but also of distant plants hundreds of miles away, which belong to multi-region firms that are exposed to the local productivity spillover through one of their plants. To quantify the significance of plant-level networks for the propagation and amplification of local productivity shocks, we develop and estimate a quantitative spatial model in which plants of multi-region firms are linked through shared knowledge. Our model features heterogeneous regions, which interact through goods trade and labor markets, as well as within-location, across-plant heterogeneity in productivity, wages, and employment. Counterfactual exercises show that while knowledge sharing through plant-level networks amplifies the aggregate effects of local productivity shocks, it widens economic disparities between individual workers and regions in the economy.
    JEL: C51 C68 E23 E24 L23 O4 R12 R13 R3
    Date: 2021–07
  9. By: Alexander S. Kritikos; Alexander Schiersch; Caroline Stiel
    Abstract: In Germany, the productivity of professional services, a sector dominated by micro and small firms, declined by 40 percent between 1995 and 2014. This productivity decline also holds true for professional services in other European countries. Using a German firm-level dataset of 700,000 observations between 2003 and 2017, we analyze this largely uncovered phenomenon among professional services, the 4th largest sector in the EU15 business economy, which provide important intermediate services for the rest of the economy. We show that changes in the value chain explain about half of the decline and the increase in part-time employment is a further minor part of the decline. In contrast to expectations, the entry of micro and small firms, despite their lower productivity levels, is not responsible for the decline. We also cannot confirm the conjecture that weakening competition allows unproductive firms to remain in the market.
    Keywords: business services, labor productivity, productivity slowdown
    JEL: L84 O47 D24 L11
    Date: 2021
  10. By: Link, Albert (University of North Carolina at Greensboro, Department of Economics); Gicheva, Dora (University of North Carolina at Greensboro, Department of Economics)
    Abstract: We suggest that a political leader or a political administration can be described in terms of a public sector entrepreneurship framework. To illustrate, we define the actions of U.S. President Donald Trump’s Administration to refocus the emphasis of the Environmental Protection Agency (EPA) as an innovative public policy initiative. And, we explore empirically the social consequences of those actions in terms of changes in the number of STEM employees at the EPA and the number of attendant innovative scientific publications.
    Keywords: Public sector entrepreneurship; Environmental Protection Agency; Trump Administration; STEM employees; Scientific publications;
    JEL: H11 O38 Q51
    Date: 2021–08–11
  11. By: Crescenzi, Riccardo; Ganau, Roberto; Storper, Michael
    Abstract: Rising political skepticism on the benefits of global economic integration has increased public scrutiny of the foreign activities of domestic firms in virtually all advanced economies. Decisions to invest in new activities abroad are seen by some commentators as potentially detrimental to domestic employment. We contribute to this debate by scrutinizing the relationship between outward ‘greenfield’ Foreign Direct Investments (FDI) and local employment levels. The analysis, at the scale of USA Economic Areas, finds a generally positive link between outward investment and local employment, but with an important range of differences across regions and sectors. Less developed regions benefit the most from the positive returns of outward FDI, and, particularly, from outward FDI if it is undertaken by firms in high-tech manufacturing and services industries. But there is a downside, in the form of increasing intra-regional inequalities between high-skilled and low-skilled workers in these areas.
    Keywords: internationalization; outward FDI; employment; economic areas; USA; The research leading to these results has received funding from the European Research Council under the European Union Horizon 2020 Programme H2020/2014-2020 (Grant Agreement n 639633-MASSIVE-ERC-2014-STG); OUP deal
    JEL: R14 J01
    Date: 2021–04–30
  12. By: Faber, Marius (University of Basel); Sarto, Andrés (NYU Stern); Tabellini, Marco (Harvard Business School)
    Abstract: Migration has long been considered one of the key mechanisms through which labor markets adjust to economic shocks. In this paper, we analyze the migration response of American workers to two of the most important shocks that hit US manufacturing since the late 1990s – Chinese import competition and the introduction of industrial robots. Exploiting plausibly exogenous variation in exposure across US local labor markets over time, we show that robots caused a sizable reduction in population size, while Chinese imports did not. We rationalize these results in two steps. First, we provide evidence that negative employment spillovers outside manufacturing, caused by robots but not by Chinese imports, are an important mechanism for the different migration responses triggered by the two shocks. Next, we present a model where workers are geographically mobile and compete with either machines or foreign labor in the completion of tasks. The model highlights that two key dimensions along which the shocks differ – the cost savings they provide and the degree of complementarity between directly and indirectly exposed industries – can explain their disparate employment effects outside manufacturing and, in turn, the differential migration response.
    Keywords: migration, employment, technology, trade
    JEL: J21 J23 J61
    Date: 2021–07

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