nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2022‒07‒25
eight papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. The trickle down from environmental innovation to productive complexity By Francesco de Cunzo; Alberto Petri; Andrea Zaccaria; Angelica Sbardella
  2. Structural Change Within Versus Across Firms: Evidence from the United States By Xiang Ding; Teresa C. Fort; Stephen J. Redding; Peter K. Schott
  3. The Role of Venture Capital in an Endogenously Growing Economy By Peichang Zhang
  4. Great expectations: the promises and limits of innovation policy in addressing societal challenges By Laatsit, Mart; Grillitsch, Markus; Fünfschilling, Lea
  5. Regional perspectives on socio-technical transitions: Combining research insights from geography of innovation and transition studies By Hansmeier, Hendrik; Koschatzky, Knut; Zenker, Andrea; Stahlecker, Thomas
  6. Inefficient Automation By Martin Beraja; Nathan Zorzi
  7. Business creation during Covid-19 By Bahaj, Saleem; Piton, Sophie; Savagar, Anthony
  8. Religiosity and Innovation Attitudes: An Instrumental Variables Analysis By Duygu Buyukyazici; Francesco Serti

  1. By: Francesco de Cunzo; Alberto Petri; Andrea Zaccaria; Angelica Sbardella
    Abstract: We study the empirical relationship between green technologies and industrial production at very fine-grained levels by employing Economic Complexity techniques. Firstly, we use patent data on green technology domains as a proxy for competitive green innovation and data on exported products as a proxy for competitive industrial production. Secondly, with the aim of observing how green technological development trickles down into industrial production, we build a bipartite directed network linking single green technologies at time $t_1$ to single products at time $t_2 \ge t_1$ on the basis of their time-lagged co-occurrences in the technological and industrial specialization profiles of countries. Thirdly we filter the links in the network by employing a maximum entropy null-model. In particular, we find that the industrial sectors most connected to green technologies are related to the processing of raw materials, which we know to be crucial for the development of clean energy innovations. Furthermore, by looking at the evolution of the network over time, we observe that more complex green technological know-how requires more time to be transmitted to industrial production, and is also linked to more complex products.
    Date: 2022–06
  2. By: Xiang Ding (Georgetown University); Teresa C. Fort (Dartmouth College); Stephen J. Redding (Princeton University); Peter K. Schott (Yale University)
    Abstract: We document the role of intangible capital in manufacturing firms' substantial contribution to non-manufacturing employment growth from 1977-2019. Exploiting data on firms' "auxiliary" establishments, we develop a novel measure of proprietary in-house knowledge and show that it is associated with increased growth and industry switching. We rationalize this reallocation in a model where firms combine physical and knowledge inputs as complements, and where producing the latter in-house confers a sector-neutral productivity advantage facilitating within-firm structural transformation. Consistent with the model, manufacturing firms with auxiliary employment pivot towards services in response to a plausibly exogenous decline in their physical input prices.
    Keywords: Intangible capital, Manufacturing, Employment Growth, Non-manufacturing employment, Firms
    JEL: D24 F14 L16 O47
    Date: 2022–06
  3. By: Peichang Zhang
    Abstract: This paper presents an endogenous growth model in which R&D improves product quality and venture capital supports these qualityenhancing activities both financially and nonfinancially. In the model, the venture capitalists' skill in evaluating entrepreneurs' innovative abilities plays a key role in achieving innovation and economic growth. When their skill is suciently low, neither innovation nor economic growth occurs even if entrepreneurs are abundant in the economy. Moreover, insucient market size discourages entrepreneurs from engaging in R&D activities. Therefore, competent venture capitalists and a suciently large market are indispensable to the economy's long-run growth.
    Date: 2022–04
  4. By: Laatsit, Mart (CIRCLE, Lund University); Grillitsch, Markus (CIRCLE, Lund University); Fünfschilling, Lea (CIRCLE, Lund University)
    Abstract: In the policy discourse on societal challenges it has become common to think of innovation policy as the universal tool for addressing societal challenges. However, we argue that innovation policy has limits to what it can do, and for it to remain a useful tool for tackling societal challenges, it is necessary to re-assess its role. Thus, this paper addresses the following research questions: What are the theoretical implications of the augmented expectations of innovation policy to deliver system change, what role can innovation policy play in contributing to system change, and what conditions this role. Linking to the literature on wicked problems and radical innovations, we differentiate between disruptive and progressive system change, and show that the potential role of innovation policy differs between these two types of change. Acknowledging both the potential and limitations of innovation policy, we make a proposition for how an ambitious innovation policy contributing to system change may be conceived.
    Keywords: Innovation policy; System change; Societal challenges
    JEL: O38
    Date: 2022–07–04
  5. By: Hansmeier, Hendrik; Koschatzky, Knut; Zenker, Andrea; Stahlecker, Thomas
    Abstract: While societal challenges are global in nature, solving and addressing them usually tends to take place at smaller spatial scales. As place-specific technological, institutional and actor settings have a decisive influence on the direction, scope and speed of transformative dynamics, regions vary greatly in the generation and application of innovations required for socio-technical transitions. With a broader understanding of regional innovation systems (RIS), on the one hand, and spatial considerations in transition studies, on the other, geographic research has recently contributed to a better understanding of innovation-based structural and systemic change. At the same time, the research findings are still insufficiently linked with one another. We argue that recent theorizing on expanded regional innovation systems provides additional explanatory power in the context of sys-temic transitions by considering similar aspects, e.g. the role of experimentation and different modes of innovation, yet incorporating a more spatial perspective. Against this background, we show that innovation policies at the regional level seem to be particularly effective when they sup-port innovation dynamics aimed at sustainability through the inclusion of various actor groups and the attention to both the production and application side. Given the increasing spatial disparities in innovation dynamics, however, further research is needed on the opportunities and barriers of different regional settings for sustainability transitions.
    Date: 2022
  6. By: Martin Beraja; Nathan Zorzi
    Abstract: How should the government respond to automation? We study this question in a heterogeneous agent model that takes worker displacement seriously. We recognize that displaced workers face two frictions in practice: reallocation is slow and borrowing is limited. We first show that these frictions result in inefficient automation. Firms fail to internalize that displaced workers have a limited ability to smooth consumption while they reallocate. We then analyze a second best problem where the government can tax automation but lacks redistributive tools to fully overcome borrowing frictions. The equilibrium is (constrained) inefficient. The government finds it optimal to slow down automation on efficiency grounds, even when it has no preference for redistribution. Using a quantitative version of our model, we find that the optimal speed of automation is considerably lower than at the laissez-faire. The optimal policy improves aggregate efficiency and achieves welfare gains of 4%. Slowing down automation achieves important gains even when the government implements generous social insurance policies.
    JEL: E2 H21 J08 J23 O33 O38
    Date: 2022–06
  7. By: Bahaj, Saleem (Bank of England); Piton, Sophie (Bank of England); Savagar, Anthony (University of Kent and Centre for Macroeconomics)
    Abstract: We use data on business registrations in the UK to study the response of firm entry to the Covid-19 pandemic. We find that firm entry increased during the pandemic, unlike typical recessions where firm entry declines. The rise in firm creation is driven by individual entrepreneurs creating companies for the first time, and particularly creating companies in online retail. We link the rise in firm creation to declines in brick-and-mortar retail footfall via Google mobility data, and show that it takes 10 weeks for a firm to be registered after a shock to footfall. To study the impacts of the newly created firms, we merge entry data with online job postings from Indeed and show that the rise in firm creation drives increased vacancy postings. However, we also show there is a higher probability of pandemic startups dissolving relative to pre-pandemic cohorts. Therefore, we conclude that booming firm creation aided the rapid recovery of the UK economy in the short run, but the long-run implications are more uncertain.
    Keywords: Firm dynamics; Covid-19; business dynamism; firm entry.
    JEL: E32 L25 L26
    Date: 2022–05–20
  8. By: Duygu Buyukyazici; Francesco Serti
    Abstract: Estimating the influence of religion on innovation is challenging because of both complexness and endogeneity. In order to untangle these issues, we use several measures of religiosity, adopt an individual-level approach to innovation and employ the instrumental variables method. We analyse the effect of religiosity on individual attitudes that are either favourable or unfavourable to innovation, presenting an individual's propensity to innovate. We instrument one's religiosity with the average religiosity of people of the same sex, age range, and religious affiliation who live in countries with the same dominant religious denomination. The results strongly suggest that each measure of religiosity has a somewhat negative effect on innovation attitudes. The diagnostic test results and sensitivity analyses support the main findings. We propose three causality channels from religion to innovation: time allocation, the fear of uncertainty, and conventional roles reinforced by religion.
    Date: 2022–06

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