nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2022‒10‒24
twelve papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Varieties of Regional Innovation Systems around the World and Catch-up by Latecomers By Jinhee Kim; Keun Lee; ;
  2. Profit Taxation, R&D Spending, and Innovation By Andreas Lichter; Max Löffler; Ingo E. Isphording; Thu-Van Nguyen; Felix Poege; Sebastian Siegloch
  3. Dynamics of First-Time Patenting Firms By Øivind Anti Nilsen; Arvid Raknerud
  4. Hiring Entrepreneurs for Innovation By Louise Lindbjerg; Theodor Vladasel
  5. Bouncing back, forward, and beyond: Towards regenerative regional development in responsible value chains By Grillitsch, Markus; Asheim, Bjørn
  6. Let's Switch to the Cloud: Cloud Adoption and Its Effect on IT Investment and Productivity By Tomaso Duso; Alexander Schiersch
  7. Joining and exiting the value chain of Multinationals and the performance of suppliers: evidence from inter-firm transaction data By Jaan Masso; Priit Vahter
  8. Rising Markups or Changing Technology? By Lucia S. Foster; John C. Haltiwanger; Cody Tuttle
  9. Environmental Efficiency of European Industries across Sectors and Countries By Stergiou, Eirini
  10. Market Size and Number of Firms with New Technology By Sugata Marjit; Krishnendu Ghosh Dastidar; Gouranga Gopal Das
  11. The work-from-home revolution and the performance of cities By Steven Bond-Smith; Philip McCann
  12. The Empirics of Economic Growth Over Time and Across Nations: A Unified Growth Perspective By Cervellati, Matteo; Meyerheim, Gerrit; Sunde, Uwe

  1. By: Jinhee Kim; Keun Lee; ;
    Abstract: This study identifies the characteristics and types of the regional innovation systems (RIS) of regions and cities in emerging economies in comparison to those in advanced economies. It uses the citation data of the US patents filed by 30 regions. Some RIS variables are newly developed, and they include intra-regional, inter-regional, and inter-national sourcing of knowledge and local ownership of innovation. The cluster analysis of these variables enables us to identify four major types of RIS around the world and link them to regional economic performance. The four types are, in the descending order of their per capita income levels, as follows: large, mature RIS characterized by a combination of long cycle technology specialization and high local ownership (Group 1), mixed RIS characterized by a long cycle and low local ownership (Group 2), “strong catch-up†characterized by short cycle and high local ownership (Group 3), and “weak catch-up†characterized by short cycle and low local ownership (Group 4). Groups 3 and 4 include only the regions in emerging world. They similarly specialize in the same short cycle time of technologies (CTT)-based sectors but show different records of economic performance. The key differentiating variable is the degree of local ownership of knowledge, which can be a basis for increasing domestic sourcing of knowledge and sustained catching up. Another important variable is decentralization, of which the level is lower in the strong catch-up group than in the weak catch-up group. In this Group 3, catching up is led by big businesses. Several cities experiencing upgrading, like Moscow, Beijing, and Shanghai, also show an increasing trend of local ownership and centralization.
    Keywords: regional innovation systems, innovation, patents, economic growth, economic catch-up
    JEL: C23 O31 O32 O33 O50 R11 R58
    Date: 2022–10
  2. By: Andreas Lichter (DICE and HHU Düsseldorf); Max Löffler (Maastricht University); Ingo E. Isphording (IZA – Institute for Labor Economics); Thu-Van Nguyen (Stifterverband Essen); Felix Poege (Technology & Policy Research Initiative, Boston University and Max Planck Institute for Innovation and Competition); Sebastian Siegloch (University of Cologne)
    Abstract: We study how business taxes affect establishments’ R&D activities. Relying on geocoded panel data targeting the universe of R&D-active establishments in Germany, we exploit around 7,300 changes in the local business tax rate over the period 1987 2013 for identification. Using event study techniques, we find a sizable negative and statistically significant effect of an increase in the local business tax on establishments’ total R&D spending and patents filed. Zooming into the process of innovation production, we uncover substantial heterogeneity in the impact of business taxation for various R&D inputs, among establishment characteristics, and for different types of research projects.
    Keywords: corporate taxation, firms, R&D, innovation, patents
    JEL: H25 H32 O31 O32
    Date: 2022–09
  3. By: Øivind Anti Nilsen; Arvid Raknerud
    Abstract: This paper investigates firm dynamics in the period before, during, and after an event consisting of a first published patent application. The analysis is based on patent data from the Norwegian Industrial Property Office merged with data from several business registers covering a period of almost 20 years. We apply an event study design and use matching to control for confounding factors. The first patent application by a young firm is associated with significant growth in employment, output, assets and public research funding. Moreover, our results indicate that economic activity starts to increase at least three years ahead of the first patent application. However, we find no evidence of additional firm growth after patent approval for successful applicants. Our findings indicate that the existence of a properly functioning patenting system supports innovation activities, especially early in the life cycle of firms.
    Keywords: patenting, firm performance, panel data, event study design
    JEL: C33 D22 O34
    Date: 2022
  4. By: Louise Lindbjerg; Theodor Vladasel
    Abstract: Technical human capital improves firms’ invention outcomes, but generating innovation revenue may require distinct skills in bringing new ideas to market. We argue that former founders are endowed with execution skills, a generalist ability to create and exploit market gaps by acquiring and mobilizing resources, so entrepreneurial human capital enhances innovation in established organizations. Combining register and Community Innovation Survey data from Denmark, we show that entrepreneur hires are associated with higher sales from new products and services. This result is driven by founder hires in middle management, a hierarchical position where broader decision rights and resource access increase execution skills’ effectiveness. Founder hires are more tightly linked to innovation new to the firm or market, rather than world, consistent with our prediction that execution skills help bring incremental improvements to market, but do not necessarily generate radical innovation. Together, our findings suggest that entrepreneurial human capital may help firms appropriate a larger share of the value their knowledge generates.
    Keywords: innovation, learning by hiring, entrepreneurship, execution skills, human capital, middle management
    JEL: J24 L23 M12 M21 M51
    Date: 2021–12
  5. By: Grillitsch, Markus (CIRCLE, Lund University); Asheim, Bjørn (CIRCLE, Lund University)
    Abstract: Understanding, explaining, and affecting regional economic resilience and transformation has become more important in recent years than a narrow economic growth perspective. The paper investigates why, how and to what consequences local actors engage in regional development during and after crisis times to understand the role of human agency for regional resilience. We identify the differences in the underlying processes that lead to adaptation – bouncing back to economic activities existing before the crisis, adaptability – bouncing forward or diversification into new economic activities, or transformation – bouncing beyond the current organization of the economy towards a more green and inclusive future. In our empirical study of the maritime industry in Sunnmøre/Norway, we found two starkly contrasting development rationales: a traditional, neoliberal economic rationale of globalization, and a progressive rationale combining regenerative regional development with responsible value chains. We trace the origin of these rationales and show how they differ in agentic orientation and time perspective. Subsequently, we engage in a theoretical discussion about the downsides of global value chains embedded in a neoliberal ideology, and how it would be possible to combine regenerative regional development with responsible value chains; including important elements of policy interventions to facilitate the shift.
    Keywords: Regional resilience; sustainability transformation; human agency; global value chains; automation and industry 4.0; innovation; industrial and innovation policy
    JEL: O30 R10 R11 R50 R58
    Date: 2022–10–11
  6. By: Tomaso Duso; Alexander Schiersch
    Abstract: The advent of cloud computing promises to improve the way firms utilize IT solutions. Firms are expected to replace large and inflexible fixed-cost investments in IT with more targeted variable spending in cloud solutions. In addition, cloud usage is expected to increase the productivity of firms, as it allows them to quickly customize the IT they require to their specific needs. We assess these assertions using data on a representative sample of firms provided by the German statistical offices for the years 2014 and 2016, which allows to observe who are the cloud users. Our analysis explicitly accounts for the self-selection into cloud adoption within an endogenous treatment regression framework. Broadband availability at the municipality level is used as an exogenous shifter for cloud usage. We show that, while cloud adoption does not impact IT investment in any sectors, it does significantly improve labor productivity for firms in manufacturing and in information and communication services.
    Keywords: cloud computing, investment, productivity, IT, substitution, firm performance
    JEL: D24 D25 L60 L80 O14 O33
    Date: 2022
  7. By: Jaan Masso (Tartu University); Priit Vahter (Tartu University)
    Abstract: This paper investigates the productivity effects for domestic suppliers from joining and exiting the value chains of multinational enterprises (MNEs). The vast majority of prior literature has relied on sector-level input-output tables in estimating the effects of vertical linkages of FDI. Instead, our econometric analysis of the creation and destruction of backward linkages of MNEs is based on information on firm-to-firm transactions recorded in the valued added tax declarations data. Treatment analysis based on propensity score matching and panel data from Estonia suggests that starting to supply multinationals initially boosts the value added per employee of domestic firms, including effects on the scale of production and the capitallabour ratio. These first linkages to MNEs do not affect the total factor productivity (TFP) of domestic firms, suggesting that TFP effects take time to materialise. We further find that there are limits to the wider diffusion of the effects of linkages to MNEs. We find no significant positive effects on the second-tier suppliers: the positive effects are limited to the first-tier suppliers with direct links to MNEs. One novel result is the evidence that the productivity of suppliers does not fall, on average, after decreasing or ending supplier relationships with MNE customers
    Keywords: FDI, supplier upgrading, global value chains, vertical spillovers, backward linkages
    JEL: F14 F23 F61
    Date: 2022–03
  8. By: Lucia S. Foster; John C. Haltiwanger; Cody Tuttle
    Abstract: Recent evidence suggests the U.S. business environment is changing, with rising market concentration and markups. The most prominent and extensive evidence backs out firm-level markups from the first-order conditions for variable factors. The markup is identified as the ratio of the variable factor’s output elasticity to its cost share of revenue. Our analysis starts from this indirect approach, but we exploit a long panel of manufacturing establishments to permit output elasticities to vary to a much greater extent - relative to the existing literature - across establishments within the same industry over time. With our more detailed estimates of output elasticities, the measured increase in markups is substantially dampened, if not eliminated, for U.S. manufacturing. As supporting evidence, we relate differences in the markups’ patterns to observable changes in technology (e.g., computer investment per worker, capital intensity, diversification to non-manufacturing), and we find patterns in support of changing technology as the driver of those differences.
    JEL: L11 O14
    Date: 2022–09
  9. By: Stergiou, Eirini
    Abstract: Green growth is recognized as the fundamental development strategy in Europe due to the immense pressure of environmental pollution, economic growth and energy usage. In this study, a non-radial directional distance function is used to measure environmental efficiency (ENE) of 54 industries from 28 European countries across the three sectors of an economy over the 2000-2014 period. The complexity of heterogeneity is examined by incorporating the metafrontier approach under distinct group frontiers. The results reveal that industries present higher levels of environmental efficiency within their sectors while manufacturing industries achieved the lowest progress in environmental efficiency. Thus, it is critical to introduce and implement sector-oriented policies rather than common guidelines for all European countries.
    Keywords: Environmental efficiency, Directional distance function, Metafrontier, Heterogeneity, European industries
    JEL: C44 D29 L23 Q01 Q53 Q56 Q57
    Date: 2022–09–20
  10. By: Sugata Marjit; Krishnendu Ghosh Dastidar; Gouranga Gopal Das
    Abstract: In this paper, unlike the conventional wisdom, we demonstrate that the relationship between the size of the market and number of firms would be non-monotonic. While moderate rise in the size would force the local firms to exit and only the foreign firm rules, substantial rise in the size would accommodate all firms. Also, the possibility of survival increases if the local firms could differentiate their product more and then we drift towards the conventional result.
    Keywords: product differentiation, free entry, Cournot, output, market size, technology, FDI
    JEL: L13 D40 F10
    Date: 2022
  11. By: Steven Bond-Smith (UHERO, University of Hawai'i at Manoa); Philip McCann (University of Manchester, Alliance Manchester Business School; The Productivity Institute, Manchester, United Kingdom)
    Abstract: In this paper we set out the relationships between the behavioural, technological and spatial changes in systems that allow for heterogeneous responses to workingfrom- home by different types of actors, and also identifies the channels via which such changes take place. Unlike all other papers on the subject, the analytical framework we propose centers explicitly on the role of frequency of commuting. In particular, we find that the optimal frequency of commuting is positively related to the opportunity costs of less-than-continuous face-to-face interaction and inversely related to the travel plus travel-time costs. The results also support recent empirical findings of a “donut effect†with greater growth in the suburbs and hinterlands around large cities, but also capture inter-city effects for the first time. Counterintuitively, the reduction in the frequency of commuting makes larger cities and their hinterlands more desirable places, in spite of longer commuting distances. Taken together, our results imply enhanced productivity of larger cities over smaller cities.
    Keywords: Working-from-home, agglomeration economies
    JEL: R1
    Date: 2022–09
  12. By: Cervellati, Matteo (University of Bologna); Meyerheim, Gerrit (LMU Munich); Sunde, Uwe (LMU Munich)
    Abstract: This research develops an expanded unified growth theory that incorporates the endogenous accumulation of physical capital, population, human capital, and technology. The model incorporates a complementarity between physical capital and human capital and can be extended to a multi-country setting with international technology diffusion. The analytical characterization of the mechanisms behind the observed patterns of long-run growth and comparative development delivers a consistent explanation for a large set of seemingly unrelated empirical facts. A quantitative multi-country version of the model matches various empirical regularities of long-run growth dynamics and comparative development patterns that have previously been studied in isolation. The findings also shed new light on the role of the demographic transition for convergence patterns, the specification of cross-country growth regressions, technology spillovers, and the secular stagnation debate.
    Keywords: unified growth; long-run development; demographic transition; secular stagnation;
    JEL: O47 O11 O15 E24
    Date: 2022–09–29

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