nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2022‒05‒23
twelve papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Innovation catalysts: how multinationals reshape the global geography of innovation By Crescenzi, Riccardo; Dyevre, Arnaud; Neffke, Frank
  2. Industries, Mega Firms, and Increasing Inequality By John C. Haltiwanger; Henry R. Hyatt; James Spletzer
  3. Labor Scarcity, Technology Adoption and Innovation: Evidence from the Cholera Pandemics in 19th Century France By Raphaël Franck
  4. The North-South divide: sources of divergence, policies for convergence By Lucrezia Fanti; Marcelo C. Pereira; Maria Enrica Virgillito
  5. Migration and invention in the Age of Mass Migration By DIodato, Dario; Morrison, Andrea; Petralia, Sergio
  6. Are industrial policy instruments effective?: A review of the evidence in OECD countries By Chiara Criscuolo; Nicolas Gonne; Kohei Kitazawa; Guy Lalanne
  7. Can the Government Be an Effective Venture Capital Investor? By Martina Fraschini; Andrea Maino; Luciano Somoza
  8. AI, Ageing and Brain-Work Productivity: Technological Change in Professional Japanese Chess By Eiji Yamamura; Ryohei Hayashi
  9. Green start-ups and the role of founder personality By Chapman, Gary; Hottenrott, Hanna
  10. Measuring Firm Activity from Outer Space By Katarzyna A. Bilicka; André Seidel
  11. Entry, exit and market structure in a changing climate By Cascarano, Michele; Natoli, Filippo; Petrella, Andrea
  12. Global socio-economic and climate change mitigation scenarios through the lens of structural change By Julien Lefevre; Thomas Le Gallic; Panagiotis Fragkos; Jean-François Mercure; Yeliz Simsek; Leonidas Paroussos

  1. By: Crescenzi, Riccardo; Dyevre, Arnaud; Neffke, Frank
    Abstract: We study whether and when Research and Development (R&D) activities by foreign multinationals facilitate the formation and growth of new innovation clusters. Combining information on nearly four decades’ worth of patents with socio‐economic data for regions that cover virtually the entire globe, we use matched difference‐in‐differences estimation to show that R&D activities by foreign multinationals have a positive causal effect on local innovation rates. This effect is sizeable: over a five‐year period, foreign research activities help a region climb 14 centiles in the global innovation ranks. This effect materializes through a combination of knowledge spillovers to domestic firms and the attraction of new foreign firms to the region. However, not all multinationals generate equal benefits. In spite of their advanced technological capabilities, technology leaders generate fewer spillovers than technologically less advanced multinationals. A closer inspection reveals that technology leaders also engage in fewer technological alliances and exchange fewer workers with local firms abroad than less advanced firms. Moreover, technology leaders tend to set up their foreign R&D activities in regions with lower levels of economic development than less advanced firms, yet with comparable public sector research capacity. These findings suggest that multinationals with high levels of technological sophistication face comparatively unfavorable tradeoffs between the costs and benefits of local spillovers, underscoring the importance of understanding corporate strategy when analyzing innovation clusters.
    Keywords: innovation; regions; foreign direct investment; patenting; cluster emergence; European Union Horizon 2020 Program H2020/2014‐2020) (Grant Agreement n 639633‐MASSIVE‐ERC‐ 2014‐STG; T&F deal
    JEL: O32 O33 R11 R12
    Date: 2022–04–21
  2. By: John C. Haltiwanger; Henry R. Hyatt; James Spletzer
    Abstract: Most of the rise in overall earnings inequality is accounted for by rising between-industry dispersion from about ten percent of 4-digit NAICS industries. These thirty industries are in the tails of the earnings distribution, and are clustered especially in high-paying high-tech and low-paying retail sectors. The remaining ninety percent of industries contribute little to between-industry earnings inequality. The rise of employment in mega firms is concentrated in the thirty industries that dominate rising earnings inequality. Among these industries, earnings differentials for the mega firms relative to small firms decline in the low-paying industries but increase in the high-paying industries. We also find that increased sorting and segregation of workers across firms mainly occurs between industries rather than within industries.
    JEL: J21 J31
    Date: 2022–04
  3. By: Raphaël Franck
    Abstract: To analyze the impact of labor scarcity on technology adoption and innovation, this study uses the differential spread of cholera across France in 1832, 1849 and 1854, before the transmission mode of this disease was understood. The results suggest that a larger share of cholera deaths in the population, which can be causally linked to summer temperature levels, had a positive and significant shortrun effect on technology adoption and innovation in agriculture but a negative and significant short-run impact on technology adoption in industry. These results, which are not driven by migration, urbanization, religiosity or local financial intermediation, can be explained by the positive impact of labor scarcity on human capital formation.
    Keywords: epidemics, labor scarcity, technology adoption
    JEL: I15 N13 O33
    Date: 2022
  4. By: Lucrezia Fanti; Marcelo C. Pereira; Maria Enrica Virgillito
    Abstract: Building upon the labour-augmented K+S modelling framework (Dosi et al., 2010, 2017, 2020), we address the analysis of the North-South divide by means of an agent-based model (ABM) endogenously reproducing divergence between two artificial macro-regions characterized by identical initial conditions in terms of productive and innovation structures, but different labour market organizations. Given the ex-ante initial conditions, we identify the role played by different functioning of the labour markets on the possible divergence across the two regions. We do find that divergences in labour market reverberate into asymmetric productive performance due to negative reinforcing feedback loop dynamics. We then confront alternative policy schemes by showing that investment policies directed at increasing machine renewal and higher substitutionary investment are the most effective in fostering the convergence process.
    Keywords: Agent-Based Models; Technology Gap; Labour Market.
    Date: 2022–05–17
  5. By: DIodato, Dario; Morrison, Andrea; Petralia, Sergio
    Abstract: More than 30 million people migrated to the USA between late-ninetieth and early-twentieth century, and thousands became inventors. Drawing on a novel dataset of immigrant inventors in the USA, we assess the city-level impact of immigrants' patenting and their contribution to the technological specialization of the receiving US regions between 1870 and 1940. Our results show that native inventors benefited from the inventive activity of immigrants. In addition, we show that the knowledge transferred by immigrants gave rise to new and previously not exiting technological fields in the US regions where immigrants moved to.
    Keywords: Age of Mass Migration; immigration; innovation; knowledge spill-over; patent; USA
    JEL: F22 O31 R30 J61
    Date: 2022–03–16
  6. By: Chiara Criscuolo (OECD); Nicolas Gonne (OECD); Kohei Kitazawa (OECD); Guy Lalanne (OECD)
    Abstract: While the case for industrial policy is gaining traction across OECD countries, little consensus exists on the effectiveness of such interventions. Building on a new analytical framework for industrial policy developed in a companion paper, this paper reviews the empirical literature on the effectiveness of industrial policy instruments, laying out the knowns and unknowns. Overall, it strongly supports the premise that well-designed economic incentives for firms and good framework conditions shaping the business environment are effective. At the same time, it emphasises the limited and inconclusive nature of the evidence regarding the increasingly frequent targeted and demand-side instruments. Finally, it underlines the complementarities between economic incentives and other interventions such as skill policies or framework conditions, notably competition and trade policies. Framework conditions are indeed key in enabling the most productive firms to grow and an important channel for structural change.
    Keywords: industrial policy, public guarantees, public loans, public venture capital, subsidies, tax expenditures
    JEL: L52 L53 O25 O38 Q58
    Date: 2022–05–03
  7. By: Martina Fraschini (University of Lausanne, HEC; Swiss Finance Institute); Andrea Maino (University of Geneva); Luciano Somoza (University of Lausanne, HEC; Swiss Finance Institute)
    Abstract: In recent years, governments have allocated increasing capital to direct startup funding through Government-sponsored Venture Capital funds (GVC). In this paper, we study the role of GVCs in the venture capital market and their relationship with Private Venture Capitalists (PVC). Using European data, we find that GVCs invest consistently with their policy mandates, favoring specific industries, geographical areas, and firms with high innovation potential, but have lower average performances. These findings indicate that GVCs can identify innovative companies and prioritize positive externalities over profit maximization. We build an asset pricing model with heterogeneous preferences to study the role of GVCs in catalyzing PVC investments. We find that PVCs invest less in startups previously funded by GVCs, in line with empirical evidence. At aggregate level, GVC investments can crowd-in private ones if they focus on startups in VC hubs.
    Keywords: venture capital, public investments, crowd-in, subsidy, industrial policy, patent data, innovation.
    JEL: G24 G11 G18 H54 O30
    Date: 2022–04
  8. By: Eiji Yamamura; Ryohei Hayashi
    Abstract: Using Japanese professional chess (Shogi) players records in the novel setting, this paper examines how and the extent to which the emergence of technological changes influences the ageing and innate ability of players winning probability. We gathered games of professional Shogi players from 1968 to 2019. The major findings are: (1) diffusion of artificial intelligence (AI) reduces innate ability, which reduces the performance gap among same-age players; (2) players winning rates declined consistently from 20 years and as they get older; (3) AI accelerated the ageing declination of the probability of winning, which increased the performance gap among different aged players; (4) the effects of AI on the ageing declination and the probability of winning are observed for high innate skill players but not for low innate skill ones. This implies that the diffusion of AI hastens players retirement from active play, especially for those with high innate abilities. Thus, AI is a substitute for innate ability in brain-work productivity.
    Date: 2022–04
  9. By: Chapman, Gary; Hottenrott, Hanna
    Abstract: Green start-ups play a vital role in the needed transition towards more environmentally sustainable economies. Yet our understanding of why some founders start green ventures and others do not remains incomplete. We build on the cognitive and decision-making perspectives on start-ups proenvironmental engagement to shed light on the role of founders' personality traits - focusing on the 'Big 5' and risk tolerance - in explaining whether founders' start new ventures with environmentally friendly products. Our analysis of a large, representative, manufacturing and service sector sample of German start-ups illustrates the important role of founder personality traits. Specifically, openness and extraversion promote environmentally friendly products while neuroticism inhibits it. We discuss the implications of these insights.
    Keywords: emission reduction,environmentally friendly products,green innovation,Big Fivepersonality traits,sustainability
    JEL: G24 L26 O25 O31
    Date: 2022
  10. By: Katarzyna A. Bilicka; André Seidel
    Abstract: To understand how global firm networks operate, we need consistent information on their activities, unbiased by their reporting choices. In this paper, we collect a novel dataset on the light that factories emit at night for a large sample of car manufacturing plants. We show that nightlight data can measure activity at such a granular level, using annual firm financial data and high-frequency data related to Covid-19 pandemic production shocks. We use this data to quantify the extent of misreported global operations of these car manufacturing firms and examine differences between sources of nightlight.
    JEL: F23 H26 H32
    Date: 2022–04
  11. By: Cascarano, Michele; Natoli, Filippo; Petrella, Andrea
    Abstract: Climate change has long run effects on the size and composition of a country's corporate sector. Using administrative data on the universe of Italian firms, we find that an increase in the incidence of very hot days over a multiyear period persistently reduces the growth rate of active firms in the market. This is due to a drop in firm entry and an increase in firm exit, with relocation playing a minor role. A firm-level investigation reveals a dichotomy between smaller firms, which suffer from high temperatures, and larger firms that successfully adapt, increasing production and net revenues. According to an average climatic scenario, the projected evolution of local temperatures will impact corporate demography further, also exacerbating the divergent effects across warmer and colder areas over the current decade.
    Keywords: climate change; temperatures; firm dynamics
    JEL: D22 Q54 R12
    Date: 2022–04–26
  12. By: Julien Lefevre (AgroParisTech, CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique); Thomas Le Gallic (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique); Panagiotis Fragkos; Jean-François Mercure (University of Exeter, CAM - University of Cambridge [UK]); Yeliz Simsek (University of Exeter); Leonidas Paroussos
    Abstract: This paper analyses structural change in the economy as a key but largely unexplored aspect of global socioeconomic and climate change mitigation scenarios. Structural change can actually drive energy and land use as much as economic growth and influence mitigation opportunities and barriers. Conversely, stringent climate policy is bound to induce specific structural and socioeconomic transformations that are still insufficiently understood. We introduce Multi-Sectoral Integrated Assessment Models as main tools to capture the key drivers of structural change and we conduct a multi-model study to assess main structural effectschanges of the sectoral composition and intensity of trade of global and regional economiesin a baseline and 2°C policy scenario by 2050. First, the range of baseline projections across models, for which we identify the main drivers, illustrates the uncertainty on future economic pathways-in emerging economies especially-and inform on plausible alternative futures with implications for energy use and emissions. Second, in all models, climate policy in the 2°C scenario imposes only a second-order impact on the economic structure at the macrosectoral level-agriculture, manufacturing and services-compared to changes modelled in the baseline. However, this hides more radical changes for individual industries-within the energy sector especially. The study, which adopts a top-down framing of global structural change, represents a starting point to kick-start a conversation and propose a new research agenda seeking to improve understanding of the structural change effects in socioeconomic and mitigation scenarios, and better inform policy assessments.
    Keywords: Energy sector,Multi-sectoral macroeconomic modelling,Climate policy,Socio-economic pathways,Structural change
    Date: 2022

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