nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2023‒02‒20
twelve papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. The rise of China's technological power: the perspective from frontier technologies By Bergeaud, Antonin; Verluise, Cyril
  2. Promoting Innovation: The Differential Impact of R&D Subsidies By Fuad Hasanov; Reda Cherif; Christoph Grimpe; Wolfgang Sofka
  3. Patents with simultaneous innovations: The non-obviousness requirement and the direction of innovation By Fabio M. Manenti; Luca Sandrini
  4. Do Technology Standards Induce Innovation in Environmental Technologies When Coordination is Important? By Myriam Gregoire-Zawilski; David Popp
  5. Tools to Promote Productivity in Finland By Koski, Heli; Maliranta, Mika
  6. The future geography of industries and occupations By Milene Tessarin; Deyu Li; Sergio Petralia; Ron Boschma
  7. Risk, Precaution, and Regulation in Chemical Search and Innovation: The Case of the EU REACH Legislation By Gianluca Biggi
  8. Global Innovation Contests By Dinopoulos, Elias; Syropoulos, Constantinos; Tsoulouhas, Theofanis
  9. Measuring Corporate Digital Divide with web scraping: Evidence from Italy By Mazzoni Leonardo; Pinelli Fabio; Riccaboni Massimo
  10. Structural change, global R* and the missing-investment puzzle By Bailey, Andrew; Cesa-Bianchi, Ambrogio; Garofalo, Marco; Harrison, Richard; McLaren, Nick; Sajedi, Rana; Piton, Sophie
  11. Digitalization and Resilience By Davide Furceri; Alexander Copestake; Julia Estefania-Flores
  12. Automation when skills are bundled By Hernnäs, Sofia

  1. By: Bergeaud, Antonin; Verluise, Cyril
    Abstract: We use patent data to study the contribution of the US, Europe, China and Japan to frontier technology using automated patent landscaping. We find that China's contribution to frontier technology has become quantitatively similar to the US in the late 2010s while overcoming the European and Japanese contributions respectively. Although China still exhibits the stigmas of a catching up economy, these stigmas are on the downside. The quality of frontier technology patents published at the Chinese Patent Office has leveled up to the quality of patents published at the European and Japanese patent offices. At the same time, frontier technology patenting at the Chinese Patent Office seems to have been increasingly supported by domestic patentees, suggesting the build up of domestic capabilities.
    Keywords: frontier technologies; China; patent landscaping; machine learning; patents
    JEL: O30 O31 O32
    Date: 2022–10–14
  2. By: Fuad Hasanov; Reda Cherif; Christoph Grimpe; Wolfgang Sofka
    Abstract: We investigate the effect of R&D subsidies on firms’ innovation by ownership, industry, and firm size using German firm-level data. The impact of R&D subsidies is heterogeneous across industries for multinational corporations (MNCs) and domestic firms while it does not differ substantially by firm size. Domestic firms have a larger response in R&D spending in low-tech manufacturing, knowledge-intensive services, and technological services while the response of domestic and foreign MNCs is broadly similar and is greater in medium-tech and high-tech manufacturing. Foreign MNC subsidiaries’ response in terms of patents is greater than that of domestic MNCs in most industries.
    Keywords: Innovation; patents; research and development; R&D; subsidies; multinationals; investment; technology policy; R&D subsidy; high-tech manufacturing; subsidiaries' response; low-tech manufacturing; R&D spending; Transnational corporations; Manufacturing; Services sector; Government subsidies; Investment policy; Global
    Date: 2022–09–23
  3. By: Fabio M. Manenti (Department of Economics and Management M. Fanno, University of Padova); Luca Sandrini (Research Centre of Quantitative Social and Management Sciences, Budapest University of Technology and Economics)
    Abstract: We model a three-stage duopolistic game where firms first simultaneously choose the technological direction of their innovation, then invest in the chosen direction, and finally, compete. Investments can be in competing or non-competing innovations and their outcome is uncertain. If successful, a firm can be imitated by the rival. Patent protection prevents imitation and is granted to non-obvious innovations. We show that compared to a regime where negligible innovations are patentable, strengthening the non-obviousness requirement for patentability can increase market efficiency. Importantly, we also show that the level of the requirement may affect the direction of firms' R&D trajectories. While in a mild patent regime firms tend to invest in competing technologies, a stricter non-obviousness requirement may induce firms to operate in different technological areas, and this increases social welfare and consumer surplus. We illustrate our general theory through a stylised model of Cournot competition with process innovations.
    Keywords: patents, R&D, non-obviousness, direction of innovation
    JEL: L13 O31 O34
    Date: 2023–02
  4. By: Myriam Gregoire-Zawilski; David Popp
    Abstract: If further decarbonization of electricity systems is to continue, a next generation of innovation in transformative grid modernization and renewables integration technologies will be needed. Few studies have investigated the policy determinants of innovation in this sector to glean insights on how government may support the development and deployment of these technologies. We argue that policies that were successful at supporting the first wave of renewables innovation may not be sufficient to produce similar results in the next wave of green innovation since those face higher coordination bottlenecks. We investigate the effects of interoperability standards - an instrument that may facilitate coordination - on patenting using smart grid as an example of a technology that has high interoperability requirements. We find that standards decrease patenting at the extensive and intensive margins, but these results vary across types of firms. We find that this negative effect is driven by large firms, whereas standards increase entry by firms without prior smart grid innovation experience. We interpret this result as an information effect: standards provide useful information to new entrants and may help diversify the range of players innovating in this space.
    JEL: O31 Q40 Q55
    Date: 2023–01
  5. By: Koski, Heli; Maliranta, Mika
    Abstract: Abstract We present an overview of the recent productivity development in Finland. In particular, we focus on what distinguishes companies at the frontier of productivity from other companies. The measures needed to support the development of Finnish companies into high-productivity companies are assessed. Innovation policy measures that promote the creation of innovations that benefit society at large and the dissemination of knowledge in the economy have an exceptionally high national economic productivity growth potential. Such actions include: 1. Allocation of public R&D subsidies i) to companies that have the highest capabilities to produce radical innovation that benefit society more broadly and ii) to projects that require cooperation between companies and universities. 2. Allocation of public funding to the R&D projects taking place in the centers of expertise. 3. Strengthening funding aimed at quantitative and qualitative improvements of basic research and teaching in higher education institutions. 4. Promotion of work-based immigration (accelerating permit processes, financial incentives for skilled immigrants). 5. Ensuring that the product and labor markets are well-functioning and provide an operating environment that encourages companies to make R&D investments and other intangible investments.
    Keywords: Productivity, Economic growth, R&D, Innovation policy
    JEL: L16 O3 O4
    Date: 2023–02–08
  6. By: Milene Tessarin; Deyu Li; Sergio Petralia; Ron Boschma
    Abstract: In this report we evaluate the opportunities for regional diversification in Europe over the last decade. We use microdata from the European Labour Force Survey to empirically test the entry and exit of occupational specializations at the regional level. Our results show that NUTS 2 regions are more likely to diversify into new occupations that are related to their existing local labour markets. So, the new opportunities for diversification are path-dependent, that is, they depend on the previous (occupational) production structure of the regions. Relatedness is especially important for diversifying toward complex occupations, thus increasing the potential economic benefits of the regions. However, there are significant regional heterogeneities in this related diversification process. Relatedness is positively associated with occupational specialization, but it loses strength as GDP per capita increases among European regions. Finally, we point out some policy orientations that can guide the paths of occupational diversification for European regions.
    Date: 2023–01
  7. By: Gianluca Biggi
    Abstract: This study investigates the impact of the introduction of the European chemical regulation (the EU REACH legislation) on chemical search and innovation by focusing on the knowledge recombination processes leading to the generation of inventions. Using a novel dataset of patents and chemical structures contained therein over the period 1978-2016, this study readapts established patent indicators to capture the complexity, novelty, and novelty in recombination of the inventive activities as a result of the chemical regulation. The separate effect of the chemical regulation reflected in +39.8% of compounds per patent, +23% of new compounds per patent, and +2% of newer recombinations of compounds per patent is supported by the Propensity Score Matching estimations. The positive and significant effect of chemical regulation on compound patenting supports prior scholarly work on the idea that regulations by altering the search space, influence the rate and intensity of technological search and innovation.
    Keywords: Chemical inventions; Patent data; Regulation; Knowledge recombination.
    Date: 2023–01–25
  8. By: Dinopoulos, Elias (Department of Economics University of Florida); Syropoulos, Constantinos (School of Economics Drexel University); Tsoulouhas, Theofanis (Department of Economics and Business Management University of California, Merced)
    Abstract: This paper develops a two-country, dynamic, general-equilibrium model with innovation contests to study the impact of globalization on the skill premium and fully endogenous growth. Higher quality products are endogenously discovered through stochastic and sequential global innovation contests in which challengers devote resources to R&D to discover new products while technology leaders undertake rent-protection activities (RPAs) to prolong the expected duration of their temporary monopoly power by hindering the R&D effort of challengers. The model generates intra-sectoral trade, multinationals, and international outsourcing of investment services. Globalization, captured by a move from autarky to the integrated-world equilibrium, leads to convergence of wages and growth rates. Globalization and long-run growth are either substitutes or complements depending on a country’s relative skill abundance and the ranking of skill intensities between RPAs and R&D services. Trade openness between two countries that possess identical relative skill endowments but differ in size does not affect either country’s long-run growth.
    Keywords: Innovation contests; economic growth; scale effects; R&D; rent-protection activities; barriers to innovation; wage premium
    JEL: F10 F30 F40
    Date: 2023–01–12
  9. By: Mazzoni Leonardo; Pinelli Fabio; Riccaboni Massimo
    Abstract: With the increasing pervasiveness of ICTs in the fabric of economic activities, the corporate digital divide has emerged as a new crucial topic to evaluate the IT competencies and the digital gap between firms and territories. Given the scarcity of available granular data to measure the phenomenon, most studies have used survey data. To bridge the empirical gap, we scrape the website homepage of 182 705 Italian firms, extracting ten features related to their digital footprint characteristics to develop a new corporate digital assessment index. Our results highlight a significant digital divide across dimensions, sectors and geographical locations of Italian firms, opening up new perspectives on monitoring and near-real-time data-driven analysis.
    Date: 2023–01
  10. By: Bailey, Andrew (Bank of England); Cesa-Bianchi, Ambrogio (Bank of England); Garofalo, Marco (Bank of England); Harrison, Richard (Bank of England); McLaren, Nick (Bank of England); Sajedi, Rana (Bank of England); Piton, Sophie (Bank of England)
    Abstract: The world has undergone substantial structural change over recent decades, with profound implications for the long-run policy landscape. We focus on two key trends. First, the secular decline in risk-free interest rates, suggesting a fall in the long-run global equilibrium interest rate, Global R*. Using a structural model, we find that declining productivity growth and increasing longevity played the largest roles in explaining this fall. The second trend is the recorded weakness in investment, despite an increasing wedge between the return on capital and the risk-free rate. We use industry-level data for the United Kingdom to investigate the potential structural factors behind this ‘missing-investment puzzle’, and find a strong role for intangible capital.
    Keywords: Structural change; equilibrium interest rates; investment
    JEL: E22 E43 J11
    Date: 2023–01–23
  11. By: Davide Furceri; Alexander Copestake; Julia Estefania-Flores
    Abstract: This paper investigates the role of digitialization in improving economic resilience. Using balance sheet data from 24, 000 firms in 75 countries, and a difference-in-differences approach, we find that firms in industries that are more digitalized experience lower revenue losses following recessions. Early data since the outbreak of the COVID-19 pandemic suggest an even larger effect during the resulting recessions. These results are robust across a wide range of digitalization measures—such as ICT input and employment shares, robot usage, online sales, intangible assets and digital skills listed on online profiles—and several alternative specifications.
    Keywords: Resilience; Digitalization; Recessions; Firms; Local Projection; digitalization measure; macroeconomic data; balance sheet data; outbreak of the COVID-19 pandemic; revenue loss; employment share; Economic recession; COVID-19; Global
    Date: 2022–10–28
  12. By: Hernnäs, Sofia (Institutet för bostadsforskning vid Uppsala universitet.)
    Abstract: Automation affects workers because it affects the return to their skills when performing different tasks. I propose a general equilibrium model of occupational choice and technological change which takes two important labor market features into account: (i) automation happens to tasks and (ii) workers have bundled skills. Equilibrium skill returns vary across tasks, and the impact of automation on skill returns is task-specific. I find that, to a first-order approximation, skill returns depend only on the relative skill allocation in each task. In equilibrium, automation reduces employment in the task subjected to automation so long as tasks are gross complements. This reduction in employment increases both tasks’ intensity in the skill used intensively in the automated task. This increased intensity is coupled with a universal decline in the return to the skill used intensively in the automated task. Conversely, the return to the other skill increases in both tasks.
    Keywords: automation; bundled skills;
    JEL: J20
    Date: 2023–01–24

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