nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2023‒08‒21
fourteen papers chosen by
Fulvio Castellacci, Universitetet i Oslo

  1. Intended and unintended knowledge spillovers in innovation By Kraft, Kornelius; Rammer, Christian
  2. The employment impact of AI technologies among AI innovators By Giacomo Damioli; Vincent Van Roy; Daniel Vertesy; Marco Vivarelli
  3. Mega Firms and Recent Trends in the U.S. Innovation: Empirical Evidence from the U.S. Patent Data By Serguey Braguinsky; Joonkyu Choi; Yuheng Ding; Karam Jo; Seula Kim
  4. Regulating Transformative Technologies By Daron Acemoglu; Todd Lensman
  5. Serving the right menu of R&D policy instruments to firms: An analysis of policy mix sequencing By Lenihahn, Helena; Mulligan, Kevin; Perez-Alaniz, Mauricio; Rammer, Christian
  6. Smile without a reason why: functional specialisation and income distribution along global value chains By Federico Riccio; Giovanni Dosi; Maria Enrica Virgillito
  7. The geography of environmental innovation: a rural/urban comparison By Danielle Galliano; Simon Nadel; Pierre Triboulet
  8. The impact of ICT adoption on productivity: Evidence from Portuguese firm-level data By João Amador; Cátia Silva
  9. Pandemic effects: Do innovation activities of firms suffer from long-Covid? By Trunschke, Markus; Peters, Bettina; Czarnitzki, Dirk; Rammer, Christian
  10. Is acquisition-FDI during an economic crisis detrimental for domestic innovation? By García-Vega, María; Gupta, Apoorva; Kneller, Richard
  11. Moonshot: Public R&D and Growth By Shawn Kantor; Alexander T. Whalley
  12. Displacement Effects in Manufacturing and Structural Change By Ines Helm; Alice Kuegler; Uta Schoenberg
  13. Green Finance and Inequality By Ola Mahmoud; Tschan Lea
  14. Modern Manufacturing Capital, Labor Demand and Product Market Dynamics: Evidence from France By P. AGHION; C. ANTONIN; S. BUNEL; X. JARAVEL

  1. By: Kraft, Kornelius; Rammer, Christian
    Abstract: Firms can use different sources of external knowledge for developing and implementing innovations. Some knowledge is provided deliberately by the source and constitutes intended knowledge spillovers, e.g., knowledge disclosed in publications or patent files. Other sources represent unintended knowledge spillovers, such as reverse engineering of technologies or hiring workers from other firms. Based on data from the Community Innovation Survey, this paper analyses the role of different types of intended and unintended knowledge spillovers for innovation output at the firm level. Among intended knowledge spillovers, using knowledge from patents shows the strongest link to innovation output, particularly in case of product innovations with a high degree of novelty (world-first innovations). Knowledge from publications is not associated with a significantly higher innovation output. Among unintended spillovers, both reverse engineering and hiring of workers positively contribute to innovation output of firms, with stronger effects for reverse engineering. Interestingly, there is a strong link between reverse engineering and process innovation output (unit cost reduction), which reflects the fact that firms using this knowledge source operate in a market environment characterized by high price competition, which incentivizes an innovation strategy based on cost efficiency.
    Keywords: Knowledge sources, innovation output, intended knowledge spillovers, unintended knowledge spillovers, reverse engineering
    JEL: O31 O33 D83
    Date: 2023
  2. By: Giacomo Damioli; Vincent Van Roy; Daniel Vertesy; Marco Vivarelli
    Abstract: This study supports the labour-friendly nature of product innovation among developers of artificial intelligence (AI) technologies. GMM-SYS estimates on a worldwide longitudinal dataset covering 3, 500 companies that patented inventions related to AI technologies over the period 2000-2016 show a positive and significant impact of AI patent families on employment. The effect is small in magnitude and limited to service sectors and younger firms, which are front-runners of the AI revolution. We also detect some evidence of increasing returns suggesting that innovative companies more focused on AI technologies are those obtaining larger impacts in terms of job creation.
    Keywords: Innovation, technological change, artificial intelligence, patents, employment, job-creation
    Date: 2023–07–12
  3. By: Serguey Braguinsky; Joonkyu Choi; Yuheng Ding; Karam Jo; Seula Kim
    Abstract: We use the U.S. patent data merged with firm-level datasets to establish new facts about the role of mega firms in generating “novel patents”—innovations that introduce new combinations of technology components for the first time. While the importance of mega firms in novel patents had been declining until about 2000, it has strongly rebounded since then. The timing of this turnaround coincided with the ascendance of firms that newly became mega firms in the 2000s, and a shift in the technological contents, characterized by increasing integration of Information and Communication Technology (ICT) and non-ICT components. Mega firms also generate a disproportionately large number of “hits”—novel patents that lead to the largest numbers of follow-on patents (subsequent patents that use the same combinations of technology components as the first novel patent)—and their hits tend to generate more follow-on patents assigned to other firms when compared to hits generated by non-mega firms. Overall, our findings suggest that mega firms play an increasingly important role in generating new technological trajectories in recent years, especially in combining ICT with non-ICT components.
    JEL: L10 O30 O32 O33
    Date: 2023–07
  4. By: Daron Acemoglu; Todd Lensman
    Abstract: Transformative technologies like generative artificial intelligence promise to accelerate productivity growth across many sectors, but they also present new risks from potential misuse. We develop a multi-sector technology adoption model to study the optimal regulation of transformative technologies when society can learn about these risks over time. Socially optimal adoption is gradual and convex. If social damages are proportional to the productivity gains from the new technology, a higher growth rate leads to slower optimal adoption. Equilibrium adoption is inefficient when firms do not internalize all social damages, and sector-independent regulation is helpful but generally not sufficient to restore optimality.
    JEL: H21 O33 O41
    Date: 2023–07
  5. By: Lenihahn, Helena; Mulligan, Kevin; Perez-Alaniz, Mauricio; Rammer, Christian
    Abstract: The R&D policy instrument mix concept has become increasingly important for understanding how public R&D support drives firm-level R&D. To-date, empirical studies have conceptualised the instrument mix as a static unit, whereby firms receive multiple policy instruments at one point in time. However, firms can also receive multiple instruments in a sequence, over time. While sequencing is well rehearsed heoretically, this remains a major gap in the empirical literature. Our study evaluates, for the first time, how R&D policy instrument mix sequencing impacts firm-level R&D. We construct a unique dataset, containing almost 25, 000 firm-year observations over a 17-year period for Ireland. Our analysis focuses on R&D grants, R&D tax credits, and publicly-supported academic-industry collaborations, and develops two novel approaches to measure R&D policy instrument mix sequencing. Our results suggest that R&D policy instrument mix sequencing is highly effective at driving firm-level R&D, but that some sequences are more effective than others. These findings highlight opportunities to realise superior policy outcomes through targeted sequencing.
    Keywords: Policy mix, Policy instrument mix sequencing, Public R&D support, R&D grant, R&D tax credit, Academic-industry collaboration
    JEL: O25 O30 D04 O38 D22 O31
    Date: 2023
  6. By: Federico Riccio; Giovanni Dosi; Maria Enrica Virgillito
    Abstract: This paper addresses two questions namely, first, the extent to which the very participation in Global Value Chains (GVCs) has penalised labour as a globally insourced production input, and, second, what happened to between-occupation functional inequality. We combine input-output (I-O) tables and labour income along the production stages of global value chains. We focus on foreign labour requirements in manufacturing industries and distinguish across four production stages, namely fabrication, marketing, R&D and managerial functions to map the relative specialisation patterns of different production sub-systems. Our results show that GVCs are hierarchically structured, with advanced countries specialising in upstream functions along global production networks. Fabrication workers are the biggest losers in this process, accounting for most of the drop in labour share in developed and developing countries. Considering that production workers make up more than 50% of the workforce in both advanced and developing countries, the labour share loss of blue-collar workers is a major driver of the increasing global wage inequality.
    Keywords: Labour Share; Global Value Chains; Functional Specialisation; Comparative Advantages; Income Inequalities; International division of Labour.
    Date: 2023–08–05
  7. By: Danielle Galliano (AGIR - AGroécologie, Innovations, teRritoires - Toulouse INP - Institut National Polytechnique (Toulouse) - UT - Université de Toulouse - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Simon Nadel (CLERSÉ - Centre Lillois d’Études et de Recherches Sociologiques et Économiques - UMR 8019 - Université de Lille - CNRS - Centre National de la Recherche Scientifique); Pierre Triboulet (AGIR - AGroécologie, Innovations, teRritoires - Toulouse INP - Institut National Polytechnique (Toulouse) - UT - Université de Toulouse - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: This paper aims to contribute to enlarge a geography of eco-innovation. The objective is to study what kind of spatial externalities (specialization, related and unrelated variety) has the most positive impact on eco-innovation, according to firm's location (rural, peri-urban, urban). We empirically test this framework using a hurdle negative binomial model on firm-level data drawn from the French Community Innovation Survey (CIS). The results show that spatial externalities have different effects depending on the firm's engagement and breadth of eco-innovation as well as on its location. Marshallian specialization has a positive effect both on engagement and breadth of eco-innovations unlike unrelated variety, which negatively impacts breadth of eco-innovation. With regard to the firm's location, related variety is particularly correlated with the eco-innovation breadth of rural firms, whereas specialization is positively correlated with the breadth of eco-innovations of peri-urban firms. As for urban firms, spatial externalities seem to have less impact on their eco-innovation related behavior.
    Keywords: Eco-innovation, spatial externalities, related variety, rural, French industry
    Date: 2023
  8. By: João Amador; Cátia Silva
    Abstract: In this paper we study the impact of ICT adoption on the level of labour productivity and TFP of Portuguese firms in the period 2004-2018. For this purpose we combine firm-level annual survey data for different dimensions of ICT adoption and balance sheet variables that allow for the computation of productivity and control for several dimensions of heterogeneity. The paper uses a Bartik (1991) shift-share type instrumental variable and results state that there is a positive and sizeable impact from ICT adoption on TFP and labour productivity. One standard deviation increase in the first principal component that captures overall ICT adoption by the firm leads to an increase of 25 percent in TFP and an increase of 58 percent in labour productivity. When the analysis is made separately, online sales and the creation of a website stand out as the most relevant dimensions for productivity gains.
    JEL: J24 O3 O4
    Date: 2023
  9. By: Trunschke, Markus; Peters, Bettina; Czarnitzki, Dirk; Rammer, Christian
    Abstract: The COVID-19 pandemic has affected firms in many economies. Exploiting treatment heterogeneity, we use a difference-in-differences design to causally identify the short-run impact of COVID-19 on innovation spending in 2020 and expected innovation spending in subsequent years. Based on a representative sample of German firms, we find that negatively affected firms substantially reduced innovation expenditure not only in the first year of the pandemic (2020) but also in the two subsequent years, indicating 'Long-Covid' effects on innovation. In 2020, innovation expenditure fell by 4.7 % due to the pandemic. In 2022, innovation spending was even 5.4 % lower compared to the counterfactual scenario without the pandemic. Firms with higher pre-treatment digital capabilities show higher innovation resilience during the pandemic. Moreover, COVID-19 leads to a decrease in innovation spending not only in firms that were strongly negatively affected by the pandemic, but also in those firms that experienced a positive demand shock from the pandemic, presumably to increase production capacity.
    Keywords: COVID-19, innovation, difference-in-differences, economic crisis, resilience
    JEL: O31 O33
    Date: 2023
  10. By: García-Vega, María; Gupta, Apoorva; Kneller, Richard
    Abstract: We study how acquisition-FDI during economic crises affects R&D investments of target firms as compared to acquisitions made during periods of economic growth. Using a panel of Spanish firms, we find that foreign multinationals cherry-pick the best domestic firms, irrespective of timing of acquisition. Using matching and difference-in-difference regressions, we find that firms acquired during crises experience smaller declines in R&D than those acquired during periods of growth. Our results are consistent with the opportunity cost theory of R&D over the business cycle, as we also find that crisis-acquired firms prioritize new product creation over achieving economies of scale.
    Keywords: Foreign Acquisition, Recession, Innovation, Business cycle
    JEL: G34 O31 G01 D22
    Date: 2023
  11. By: Shawn Kantor; Alexander T. Whalley
    Abstract: We estimate the long-term effect of public R&D on growth in manufacturing by analyzing new data from the Cold War era Space Race. We develop a novel empirical strategy that leverages US-Soviet rivalry in space technology to isolate windfall R&D spending. Our results demonstrate that public R&D conducted by NASA contractors increased manufacturing value added, employment, and capital accumulation in space related sectors. While migration responses were important, they were not sufficient to generate a wedge between local and national effects. The iconic Moonshot R&D program had meaningful economic effects for both the local and national space related sectors. Yet the magnitudes of the estimated effects seem to align with those of other non-R&D types of government expenditures.
    JEL: H54 N12 N72 O32 R11
    Date: 2023–07
  12. By: Ines Helm (University of Munich); Alice Kuegler (Central European University); Uta Schoenberg (University College London)
    Abstract: We investigate the consequences of structural change for workers displaced from the manufacturing sector. Manufacturing establishments traditionally employed low- and high-wage workers in similar proportions and paid substantial wage premiums to both types of workers. Structural change has led to the disappearance of these jobs, particularly for low-wage workers. Decomposing displacement wage losses, we show that low-wage workers suffer considerable losses in establishment premiums following displacement, whereas high-wage workers tend to fall down the match quality ladder. With ongoing structural change, losses in wages and establishment premiums have increased over time, especially for low-wage workers, in part because they are increasingly forced to switch to low knowledge service jobs where establishment premiums are low. Our findings further highlight that structural change and layoffs in manufacturing have significantly contributed to job polarization and the rise in assortative matching of workers to firms.
    Keywords: : structural change, manufacturing decline, displaced workers, cost of job loss, human capital, firm rents
    JEL: J22 J24 J31 J63
    Date: 2023–07
  13. By: Ola Mahmoud (University of St. Gallen; University of California at Berkeley; Swiss Finance Institute); Tschan Lea (University of St. Gallen)
    Abstract: This paper provides empirical evidence for a significant positive association between green finance and top income inequality from a panel of 87 countries from 2004 to 2020. This relationship is strongest for countries with initially lower levels of income, low levels of financial development, and low levels of carbon emissions. We also find evidence that the effect on inequality persists for four years and thereafter abates. We argue that the association between green finance and inequality is at least partially driven by two mechanisms: technological change and investment emissions. Using a moderated mediation design, we show that technological change and investment emissions are partially mediating the relationship between green finance and top income inequality.
    Keywords: green finance, inequality, innovation
    JEL: D63 E44 O33 Q52 Q54 Q55
    Date: 2023–06
  14. By: P. AGHION (Insead, Collège de France et London School of Economics); C. ANTONIN (OFCE - Sciences Po); S. BUNEL (Banque de France et Paris School of Economics); X. JARAVEL (London School of Economics)
    Abstract: We use comprehensive micro data in the French manufacturing sector between 1995 and 2017 to document the effects of a fall in the cost of investments in modern manufacturing capital, including modern automation technologies, on employment, wages, sales, prices, and business stealing. Causal effects are estimated with event studies and a shift-share IV design leveraging pre-determined supply linkages and productivity shocks across foreign suppliers of manufacturing capital. At all levels of analysis — plant, firm, and industry — the estimated impact of capital investments on employment is positive, even for unskilled industrial workers. Furthermore, we find that capital investments lead to higher sales and exports, higher profits, and lower consumer prices, while wages and wage inequality remain unchanged. We estimate a positive industry-level employment response to manufacturing capital investments only in industries that are exposed to import competition, due to business-stealing across countries. Thus, typical investments in modern manufacturing capital lead to an increase in domestic labor demand and promote competitiveness in international markets.
    Keywords: Production, Automation, Machines, Labor
    JEL: D24 J23 J24 O32
    Date: 2023

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