nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2022‒04‒18
nine papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Fdi spillover effects on innovation activities of knowledge using and knowledge creating firms: evidence from an emerging economy By Vujanovic, Nina; Radosevic, Slavo; Stojcic, Nebojsa; Hisarciklilar, Mehtap; Hashi, Iraj
  2. Artificial intelligence and firm-level productivity By Czarnitzki, Dirk; Fernández, Gastón P.; Rammer, Christian
  3. Measuring process innovation output: Results from firm-level panel data By Rammer, Christian
  4. R&D grant and tax credit support for foreign-owned subsidiaries: Does it pay off? By Lenihan, Helena; Mulligan, Kevin; Doran, Justin; Rammer, Christian; Ipinnaiye, Olubunmi
  5. "A Technology-Gap Model of Premature Deindustrialization" By Ippei Fujiwara; Kiminori Matsuyama
  6. Political and Socioeconomic Factors That Determine the Financial Outcome of Successful Green Innovation By Riehl, Kevin; Kiesel, Florian; Schiereck, Dirk
  7. Renewal Through Industry Switching and Its Impacts on Productivity By Kuosmanen, Natalia; Kuosmanen, Timo; Ali-Yrkkö, Jyrki; Pajarinen, Mika
  8. Impacts of Firm GVC Participation on Productivity: A Case of Japanese Firms By URATA Shujiro; Youngmin BAEK
  9. Sectoral decomposition of convergence in labor productivity : A re-examination from a new dataset By Dieppe, Alistair; Matsuoka, Hideaki

  1. By: Vujanovic, Nina; Radosevic, Slavo; Stojcic, Nebojsa; Hisarciklilar, Mehtap; Hashi, Iraj
    Abstract: The beneficial effects of innovation for firm performance and competitiveness are well established but it has been suggested in recent years that innovation regimes differ between advanced and emerging economies. While advanced economies rely on knowledge generation, their emerging counterparts follow mainly knowledge use regime through the application of existing knowledge and technology. Climbing up the technological ladder can be helped through spillovers from foreign investors to local firms. We investigate whether FDI spillovers influence different phases of innovation process (from decision to innovate to productivity) among knowledge using and knowledge creating firms in an emerging European economy. The results show that innovation process in emerging economies is closer to imitation than creation of novel products. Local firms benefit from foreign counterparts in the early phase of innovation process. Stronger FDI effects are found on firms that undertake innovation through knowledge use than through knowledge generation.
    Keywords: knowledge use; knowledge generation; FDI; innovation; emerging economy
    JEL: O31
    Date: 2022–01
  2. By: Czarnitzki, Dirk; Fernández, Gastón P.; Rammer, Christian
    Abstract: Artificial Intelligence (AI) is often regarded as the next general-purpose technology with a rapid, penetrating, and far-reaching use over a broad number of industrial sectors. A main feature of new general-purpose technology is to enable new ways of production that may increase productivity. So far, however, only very few studies investigated likely productivity effects of AI at the firm-level; presumably because of lacking data. We exploit unique survey data on firms' adoption of AI technology and estimate its productivity effects with a sample of German firms. We employ both a cross-sectional dataset and a panel database. To address the potential endogeneity of AI adoption, we also implement an IV approach. We find positive and significant effects of the use of AI on firm productivity. This finding holds for different measures of AI usage, i.e., an indicator variable of AI adoption, and the intensity with which firms use AI methods in their business processes.
    Keywords: Artificial Intelligence,Productivity,CIS data
    JEL: O14 O31 O33 L25 M15
    Date: 2022
  3. By: Rammer, Christian
    Abstract: Process innovation is an important part of firms' innovation activities and supposed to significantly contribute to positive returns from innovation. Measuring process innovation output at the firm level is still in its infancy, however. This paper reports empirical evidence on measures of process innovation output that have been collected in the German part of the Community Innovation Survey (CIS) over the past 25 years. Distinguishing between cost reduction and quality improvement, the paper finds low item non-response for the qualitative (yes/no) part of both indicators. Item non-response is much higher for quantitative information and does not decrease with questionnaire experience of firms. For both cost reduction and quality improvement, response to quantitative indicators is categorical in nature, and firms tend to report the same set of values when participating frequently in the survey. The determinants of realising the two types of process innovation output are very similar. The observed variance in the quantitative part is difficult to explain for both measures. The impact of process innovation output on firm performance is limited. While cost reduction seems to spur the export share, sales increase due to quality improvement is associated with higher profitability.
    Keywords: Process innovation,innovation output,panel data,Community Innovation Survey
    JEL: O31 O32 O33
    Date: 2022
  4. By: Lenihan, Helena; Mulligan, Kevin; Doran, Justin; Rammer, Christian; Ipinnaiye, Olubunmi
    Abstract: Foreign-owned subsidiaries make significant contributions to national Research and Development (R&D) in many host countries. Policymakers often support subsidiaries through R&D grants and R&D tax credits. A key objective of this funding is to leverage R&D-driven firm performance benefits for the host economy. However, the subsidiary's parent firm may decide not to exploit the results from publicly-funded R&D projects in the host country. Therefore, supporting subsidiaries' R&D presents a risk that significant amounts of public funding may translate into little, or no payoffs for the host economy. Our study provides the first evaluation of 1) whether public R&D funding stimulates additional R&D investment in subsidiaries, 2) whether policy-induced R&D drives subsidiary performance, and 3) the differential effects of R&D grants and R&D tax credits. Drawing on a unique panel dataset for Ireland (2007-2016), we find that both R&D supports drive subsidiary R&D, resulting in substantial host country firm performance benefits.
    Keywords: Public funding for R&D,Firm performance,Firm ownership,Foreign-owned subsidiaries,Multinational enterprise,R&D tax credit,R&D grant,Policy evaluation
    JEL: D22 O25 F23 F21 O38 D04 H25 O31
    Date: 2022
  5. By: Ippei Fujiwara (Faculty of Economics, Keio University); Kiminori Matsuyama (Department of Economics, Northwestern University and Faculty of Economics, The University of Tokyo)
    Abstract: This paper presents a parsimonious mechanism for generating what Rodrik (2016) called premature deindustrialization (PD); the tendency that, compared to early industrializers, late industrializers reach their peaks of industrialization later in time, but earlier in per capita income, with lower peak manufacturing shares. In the baseline model, the hump-shaped path of the manufacturing sector is solely driven by the Baumol (1967) effect with the productivity growth rates of the frontier technology being the highest in agriculture and the lowest in services. The countries are heterogeneous only in the “technology gap,†their capacity to adopt the frontier technology, which might affect adoption lags across sectors differently. In this setup, we show that PD occurs when the following three conditions are met; i) the impact of the technology gap on the adoption lag is larger in services than in agriculture, ii) in spite of its relatively shorter adoption lag, the productivity growth rate is sufficiently higher in agriculture than in services that the cross-country productivity dispersion is larger in agriculture than in services; and iii) the impact of the technology gap on the adoption lag is not too large in manufacturing. It turns out that these conditions for PD jointly imply that the cross-country productivity dispersion is the largest in agriculture. In the first of the two extensions, we add the Engel effect on top of the Baumol effect so that the hump-shaped path of manufacturing is also shaped by nonhomothetic demand with the income elasticities being the largest in services and the smallest in agriculture. Even though adding the Engel effect to the Baumol effect changes the shape of the path, it does not change the main implications on how the technology gap generates PD. We also show that, if we had relied solely on the Engel effect, PD would occur only under the conditions that would imply that the cross-country productivity dispersion is the largest in services. In the second extension, we allow late industrializers to catch up by narrowing the technology gaps over time and show that the main results carry over, unless the catching-up speed is too high.
    Date: 2022–03
  6. By: Riehl, Kevin; Kiesel, Florian; Schiereck, Dirk
    Abstract: Green innovation and technology diffusion must be financially and commercially attractive to convince corporate decision makers. This paper focuses on the factors that determine the financial outcome of successful green innovation activities conducted by large, listed companies. We employ a cross-industry dataset including more than 97,954 reports on corporate environmentalism from 286 international listed companies. Our results indicate that economic, political, cultural, firm-specific, investor-related, and governance factors significantly determine the financial performance of green innovation, measured by abnormal returns. Moreover, we can show that factors that reduce the competition in green innovation markets benefit the financial success of firms operating via them. Finally, we find an opposing influence for several factors that benefit earlier stages of innovation (e.g., research output) while harming the later stages (e.g., market introduction and financial performance). These findings imply that a spatial separation strategy for different stages of innovation supports corporate environmentalism activities. Moreover, physical property rights, the governments’ willingness to support green technologies, and economic framework conditions such as oil price, GDP, or public R&D budget need to be balanced by policymakers to address and stimulate green innovation.
    Date: 2022
  7. By: Kuosmanen, Natalia; Kuosmanen, Timo; Ali-Yrkkö, Jyrki; Pajarinen, Mika
    Abstract: Abstract Productivity growth in Finland has slowed down due to structural change. Firms are in a continuous process of renewal in a dynamic economy. In addition to firms’ entry and exit, the structure of business sector also renews internally. Some firms renew their product and service offerings to such an extent that they change industry. We find that industry switching by firms are surprisingly common in Finnish business sector. As many as a quarter of companies in the early 2000s that continue to operate in 2018 have switched industries. Similar to entry and exit, the renewal of products and service offerings is a part of structural change that can impact productivity growth of industries. Industry switching has both positive and negative contributions to aggregate productivity in different industries and periods. Gradual industry switching mainly has negative impact on productivity growth suggesting that the change of industry is a survival strategy. On the other hand, more radical industry changes generally have positive impacts on productivity. This result is particularly relevant to the Finnish innovation policy that aims to provide incentives for continuous renewal of companies. Much research has been done on barriers to startup establishment. However, industry switching is also a form of entry, and the barriers of product switching and how those could be lowered should be further explored.
    Keywords: Industry, Industry switching, Productivity, Renewal, Structural change
    JEL: D4 O47 D23
    Date: 2022–03–28
  8. By: URATA Shujiro; Youngmin BAEK
    Abstract: This article examined the effect of participation in global value chains (GVCs) on productivity for Japanese manufacturing firms by using firm-level data obtained from the Basic Survey of Japanese Business Structure and Activities [Kigyo Katsudo Kihon Chosa], Ministry of Economy, Trade and Industry. We define a firm that is engaged in both importing and exporting as a GVC firm. Our analysis is conducted for the period 1994-2018, and it covers approximately 10,000 firms for each year with some variation during the period. We combine the Propensity Score Matching (PSM) and Difference in Differences (DID) estimation methods in order to examine the impact of a shift from being a non-GVC firm to a GVC firm, or participation in GVCs by a non-GVC firm, on its productivity. To test the importance of experience in GVC participation on productivity (learning effect), we estimated the impact not only for the first year of GVC participation but also for subsequent five years. Our analysis showed the impact of GVC participation on productivity is positive for our 110 estimations with few exceptions, and the estimated coefficients are statistically significant for approximately 35 percent of the cases. These findings indicate that the impact of GVC participation on productivity for Japanese manufacturing firms is generally positive, but the impact is not very strong. We also found that the magnitude of the positive coefficient increased over time, indicating that it takes GVC participating firms time and the accumulation of experience to assimilate new technology and management know-how they acquired through GVC participation.
    Date: 2022–03
  9. By: Dieppe, Alistair; Matsuoka, Hideaki
    Abstract: This paper investigates how the sector-specific source or the changing sectoral composition of labor productivity has contributed to β-convergence, using a newly constructed eight-sector database. The main findings are twofold. First, both within and sectoral reallocation have become important drivers of β-convergence in labor productivity. Second, agricultural productivity growth has been a significant contributor to β-convergence, whereas catch-up in other sectors has only contributed a small amount to convergence. The strong growth of the agriculture sector has been the most important driver of aggregate productivity convergence even though agricultural productivity itself in low-income countries is not converging to that in advanced economies.
    JEL: O1 O11 O4
    Date: 2022–04–08

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