nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2023‒07‒31
eleven papers chosen by
Fulvio Castellacci
Universitetet i Oslo

  1. Employment versus Efficiency: Which Firms Should R&D Tax Credits Target? By Anna Bernard; Rahim Lila; Joana Silva
  2. Beyond Trading: Knowledge Spillovers and learning-by-exporting in Global Value Chains By Holger Graf; Hoda Mohamed
  3. Science and productivity in European Firms: How do regional innovation modes matter? By Natália Barbosa; Ana Paula Faria
  4. R&D tax credits and the acquisition of startups By McShane, William; Sevilir, Merih
  5. Innovation convergence By Bryan Hardy; Can Sever
  6. Global value chains, functional diversification and within-country inequality: an empirical assessment By Andrea Coveri; Elena Paglialunga; Antonello Zanfei
  7. COVID-19 and productivity-enhancing digitalisation: Firm-level evidence from Slovenia By Martin Borowiecki; Federico Giovannelli; Jens Høj
  8. R&D subsidies and Portuguese firms’ performance: A longitudinal firm-level study By Inês Teixeira; Aurora Teixeira; Luís Santos
  9. The evolution of labor share in Poland. New evidence from firm-level data By Hubert Drazkowski; Sebastian Zalas
  10. Does scientific research output matter for Portugal’s economic growth? By Tânia Pinto; Aurora Teixeira
  11. Medical innovation, life expectancy, and economic growth By Michael Kuhn; Antonio Minniti; Klaus Prettner; Francesco Venturini

  1. By: Anna Bernard; Rahim Lila; Joana Silva (Católica School of Business and Economics, Universidade Católica Portuguesa; Charles Rivers Associate; Católica School of Business and Economics, Universidade Católica Portuguesa)
    Abstract: R&D tax credits, by stimulating private sector innovation, can play a key role in promoting employment and firm performance. This paper examines the program impact on the trajectory of firms in terms of technology adoption, firm performance and workforce composition, and the extent to which it depends on the size of the targeted firms. It uses rich longitudinal micro-data on innovation, firms and their workers. Combining matching with a staggered adoption differences-in-differences, we show that tax credits increase investment in R&D-related activities while funds are being received, but not thereafter. Productivity and efficiency (but not employment) increase in large firms. These effects are driven by structural changes, both in terms of the increased share of skilled individuals within the firm (keeping the overall employment level constant) and enhanced technological adoption. In contrast, small firms mostly respond by increasing employment and production scale. Our results suggest that an important trade-off: R&D tax credit programs that target large firms are likely to lead to efficiency and productivity gains, but limited effects on employment of supported firms. In contrast, R&D tax credit programs that mostly benefit small firms may lead to employment gains in supported firms, but limited effects on structural changes in productivity and efficiency.
    Keywords: R&D tax credits, Innovation, SIFIDE, Matching, Differences-in-Differences
    JEL: O31 O38 H25
    Date: 2023–07
  2. By: Holger Graf (Friedrich Schiller University Jena, Economics Department); Hoda Mohamed (Friedrich Schiller University Jena, Economics Department)
    Abstract: Does exporting intermediate goods induce learning from importers? In this paper, we examine to what extent learning from German industries can be explained by knowledge spillovers, channeled through the export of intermediate goods. Our study is based on a sample of 27 German trade partners in 14 manufacturing industries for the period 2004 to 2016. Using data on patent citations and trading in intermediate goods, we find support for the widely known “learning-by-exporting†hypothesis. Our analyses reveal that citations to German patents are positively related to exported intermediate goods weighted by German R&D expenditure. The relationship between these spillovers and learning seems to be particularly strong in certain industries. We also show that the level of absorptive capacity of the exporting trade partner, as measured by the number of researchers involved in R&D activities, plays a role in mediating these spillovers.
    Keywords: GVC, trade, intermediate goods, learning-by-exporting, knowledge spillovers
    JEL: F14 O14 O32 O33
    Date: 2023–07–07
  3. By: Natália Barbosa; Ana Paula Faria (Department of Economics and NIPE, University of Minho; Department of Economics and NIPE, University of Minho,)
    Abstract: Productivity disparities in the European regions tend to persist. In order to understand the underlying sources of this phenomenon we assess the importance of science and regional innovation modes on firms’ productivity growth on a sample of 150, 712 firms across 161 NUTSII European regions, over the period 2012-2017. We find that science is a major source of firms’ productivity growth, and it has been particularly important to firms located in Southern Europe and, to less extent, in Eastern EU regions, indicating that a science-push convergence process is at work in the EU peripheral regions. Our findings also show that the fast-growing productivity firms are those who benefit more from external knowledge and innovation. Growth by imitation seems to be a viable strategy restricted to the slow-growing productivity firms. These results help to conciliate contentious evidence regarding firms’ benefits from spillovers, namely from scientific knowledge.
    Keywords: Territorial innovation patterns, Firm productivity, Europe, Quantile regression
    JEL: O33 O38 L25 R11
    Date: 2023–07
  4. By: McShane, William; Sevilir, Merih
    Abstract: We propose a novel mechanism through which established firms contribute to the startup ecosystem: the allocation of R&D tax credits to startups via the M&A channel. We show that when established firms become eligible for R&D tax credits, they increase their R&D and M&A activity. In particular, they acquire more venture capital (VC)-backed startups, but not non-VC-backed firms. Moreover, the impact of R&D tax credits on firms' R&D is increasing with their acquisition of VC-backed startups. The results suggest that established firms respond to R&D tax credits by acquiring startups rather than solely focusing on increasing their R&D intensity in-house. We also highlight evidence that startups do not appear to benefit from R&D tax credits directly, perhaps because they typically lack the taxable income necessary to directly benefit from the tax credits. In this context, established firms can play an intermediary role by acquiring startups and reallocating R&D tax credits, effectively relaxing the financial constraints faced by startups.
    Keywords: indirect effects, innovation, mergers and acquisitions (M&A), research and development (R&D), startups, tax credits
    JEL: G00 G34 H24 M13 O31
    Date: 2023
  5. By: Bryan Hardy; Can Sever
    Abstract: This paper sheds light on convergence of innovation (patenting) using data from two-digit manufacturing industries in 32 countries over the period of 1976-2006. It shows that patenting rates tend to converge over time (patenting growth is faster when initial patents are lower), including within countries (across industries) and within industries (across countries). Notably, the quality (citations and citations per patent) and efficiency (patents per worker) of innovation also exhibit convergence. Convergence is widespread across all countries and industries in our sample, and in all time periods. Country-level data confirms patent convergence continues through 2020. Patent convergence is stronger where financial development, international financial integration, and institutional quality are higher, and under the presence of financial policies supportive of financial liberalization. These factors contribute to both within country (across industries) and within industry (across countries) convergence. The results highlight the importance of financial and institutional environment for the growth of patenting, and ultimately for economic growth and productivity.
    Keywords: innovation, patents, citations, convergence, financial development, financial openness, institutional quality
    JEL: O4 O3 E2 E44 F3
    Date: 2023–07
  6. By: Andrea Coveri (Department of Economics, Society & Politics, Università di Urbino Carlo Bo); Elena Paglialunga (Department of Economics, Society & Politics, Università di Urbino Carlo Bo); Antonello Zanfei (Department of Economics, Society & Politics, Università di Urbino Carlo Bo)
    Abstract: A growing literature has stressed that the geographical dispersion of production and the subsequent rise of global value chains (GVCs) are associated with important social and economic disparities across countries. However, systemic empirical evidence on the distributional consequences of GVCs within countries has so far been rather limited. In this work, we take a step forward in the direction of filling this gap by providing a comprehensive empirical assessment of the GVC-inequality nexus on a sample including more than 100 countries over the period 2003-2015. Our results show that (i) the association between trade in GVC and income inequality is conditioned by the GVC positioning of countries; (ii) greater shares of FDIs in the upstream (i.e., knowledgeintensive activities such as R&D, design and training) and downstream (i.e., logistics, marketing and post-sales services) segments of the value chain are associated with lower income inequality; (iii) greater functional diversification in FDI is associated with lower levels of income disparities within countries, consistent with the hypothesis that a larger mix of value-adding activities an economy carries out expands learning opportunities and occupational choices for its workers and is conducive to a more inclusive development.
    Keywords: Global value chains; inequality; international trade, FDI; value chain functions;functional diversification
    Date: 2023
  7. By: Martin Borowiecki; Federico Giovannelli; Jens Høj
    Abstract: This paper provides evidence on the impact of digitalisation on productivity in Slovenia during the COVID-19 crisis. The pandemic affected overall labour productivity negatively. Nonetheless, results show that firms that were more ICT-intensive before the pandemic experienced a smaller decline in their labour productivity growth compared to their less ICT-intensive peers in the same 2-digit level sector. This resilience effect was strongest for firms that are integrated in global value chains. A second finding is that COVID-19 resulted in productivity-enhancing reallocation of labour to ICT-intensive firms, reflecting that these firms registered higher employment growth relative to their less ICT-intensive peers during the pandemic. A third finding is that high levels of state ownership in a sector was associated with less productivity-enhancing reallocation. This suggests that state-owned enterprises retained workers that could be redirected to more productive firms. Together, these findings highlight the potential of digitalisation to support resilience and stronger productivity growth, although labour market rigidities and state ownership hamper the positive impact of digitalisation.
    Keywords: digitalisation, labour reallocation, productivity
    JEL: D24 E22 E24 O33
    Date: 2023–07–10
  8. By: Inês Teixeira; Aurora Teixeira; Luís Santos (Faculdade de Economia, Universidade do Porto & KU Leuven; CEF.UP, Faculdade de Economia, Universidade do Porto & INESC TEC; Faculdade de Economia, Universidade do Porto)
    Abstract: The present study analyses the impact of subsidies to Research and Development (R&D), more specifically, the impact of QREN (Quadro de Referência Estratégico Nacional)’s Sistema de Incentivos à Investigação e Desenvolvimento Tecnológico nas Empresa (SI I&DT QREN), on the performance of firms. A relatively wide range of studies explores the relationship between subsidies to R&D and firms’ performance. Nevertheless, no consensus has been reached. Furthermore, the literature that analyses the impact of R&D subsidies in non-market-centred and moderate innovative economies like Portugal is quite scarce and limited. The information used in this empirical study concerns the period between 2008-2017, and it was collected from the Operational Competitiveness Programme (COMPETE) included in QREN and complemented with economic and financial data gathered from the Annual System of Iberian Balances (SABI) database. We compared the performance of firms that in 2014 succeeded in obtaining subsidies to R&D with similar firms that did not receive subsidies. Resorting to information on a set of relevant variables in the period before obtaining the subsidy (2008-2013), we established a trustable comparison group using the Propensity Score Matching (PSM). Then, based on the Average Treatment Effect on the Treated (ATT), we compared firms that received subsidies with those that did not use outcome variables of 2017 (three years after the subsidy), most notably employment, labour productivity, operational results, and exports. Results show that firms that received a public subsidy to R&D three years after receiving the subsidy have higher employment levels and export propensity than those that did not. Notwithstanding, no statistically significant differences were encountered in terms of labour productivity or overall financial performance.
    Keywords: R&D subsidies; firms’ performance; propensity score matching; Portugal
    JEL: C31 L25 O32
    Date: 2023–07
  9. By: Hubert Drazkowski (Group for Research in Applied Economics (GRAPE)); Sebastian Zalas (Group for Research in Applied Economics (GRAPE))
    Abstract: We evaluate the usefulness of non-representative registry data such as Orbis in drawing inferences about economic phenomena in Poland. While firm-level studies of economic phenomena are of key policy relevance, census data and representative samples are scarcely available across countries. We obtain estimates of labor share for the period 1995-2019. For the overlapping period and samples, we compare our estimates to Growiec (2009), who drew on a census of Polish firms employing 50+ employees. We also refer to OECD STAN data. We demonstrate that time patterns are common across data sources. Additionally, we study the potential for various imputation methods to enrich inference.
    Keywords: labor share, firm-level data, missing data
    JEL: C81 E25 D33
    Date: 2023
  10. By: Tânia Pinto; Aurora Teixeira (CEF.UP, Faculty of Economics, University of Porto, Porto, Portugal; CEF.UP, Faculty of Economics, University of Porto; INESC Tec)
    Abstract: The literature on the impact of research output on economic growth has been rapidly expanding. However, the single growth processes of technological laggard countries and the mediating roles of human capital and structural change have been overlooked. Resorting to cointegration analyses and Granger causality tests for Portugal over the last 40 years (1980-2019) four main results are worth highlighting: (1) in the long-run, global and hard sciences (life sciences, physical sciences, engineering and technology, social sciences) research outputs are positively and significantly associated to economic growth; (2) in the short-run, global, hard sciences and soft sciences (base clinical, pre-clinical and health, arts and humanities) foster economic growth; (3) important (long and short-run) mismatches between human capital and scientific production emerged, with the years of schooling mitigating the positive impact of research output on economic growth; (4) structural change processes favouring industry amplify the positive (long-run) association and (short-run) impact of research output on economic growth. Such results robustly suggest that even in technological laggard contexts, scientific production is critical for economic growth, especially when aligned with changes in sectoral production composition favouring industry.
    Keywords: Research output; human capital; structural change; economic growth; cointegration analysis; Portugal
    JEL: O30 O38 O47
    Date: 2023–07
  11. By: Michael Kuhn (International Institute for Applied Systems Analysis (IIASA)); Antonio Minniti (Department of Economics, University of Bologna); Klaus Prettner (Department of Economics, Vienna University of Economics and Business); Francesco Venturini (Department of Economics, University of Perugia)
    Abstract: Despite an increasing recognition of the importance of health for economic growth, there is still a lack of understanding of the role of medical innovation in this process. Specifically, what are the causal effects of medical innovation on economic growth and which non-linearities matter in this context? To answer these questions, we propose an R\&D-based economic growth model with overlapping generations in which life expectancy depends on health care utilization per capita and on medical innovation and test the model's implications empirically. We show that a causal pathway from medical innovation to economic growth prevails with life expectancy being an important transmission mechanism. Non-linearities matter in the following way: in early stages of development, medical innovation does not have a positive effect on economic growth, whereas in intermediate stages, a positive and significant effect emerges. In late stages of development, when life expectancy is already very high, the effect becomes weaker and potentially negative because health improvements are increasingly difficult to achieve and become ever more resource intensive.
    Keywords: Medical innovation, industrial innovation, life expectancy, health, economic growth
    JEL: I15 J11 O41 O47
    Date: 2023–07

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