nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2023‒08‒28
nine papers chosen by
Fulvio Castellacci, Universitetet i Oslo

  1. Innovation and the Enforceability of Noncompete Agreements By Matthew S. Johnson; Michael Lipsitz; Alison Pei
  2. Research and/or Development? Financial Frictions and Innovation Investment By Filippo Mezzanotti; Timothy Simcoe
  3. Displacement Effects in Manufacturing and Structural Change By Helm, Ines; Kügler, Alice; Schönberg, Uta
  4. Innovation in the creative industries: Linking the founder's creative and business orientation to innovation outcomes By Koch, Florian; Hoellen, Max; Konrad, Elmar D.; Kock, Alexander
  5. A Non-Parametric Estimation of Productivity with Idiosyncratic and Aggregate Shocks: The Role of Research and Development (R&D) and Corporate Tax By Bournakis, Ioannis; Tsionas, Mike G.
  6. Long Tails, Automation and Labor By B. N. Kausik
  7. One Size Does Not Fit All: Developing Robot User Types for Office Robots By Stock-Homburg, Ruth; Heitlinger, Lea
  8. Air Pollution and Green Innovation By Guo, Liwen; Cheng, Zhiming; Tani, Massimiliano; Cook, Sarah
  9. Spatial wage inequality in North America and Western Europe: Changes between and within local labour markets 1975-2019 By Bauluz, Luis; Bukowski, P.; Fransham, M.; Lee, A.; López Forero, M.; Novokmet, Filip; Breau, S.; Lee, Neil; Malgouyres, Clément; Schularick, Moritz; Verdugo, Gregory

  1. By: Matthew S. Johnson; Michael Lipsitz; Alison Pei
    Abstract: Worker mobility across firms can enhance innovation by spreading knowledge, but such mobility may also hinder innovation by making firms reluctant to invest in R&D. A common way that firms limit workers' mobility is with noncompete agreements (NCAs). We examine how the legal enforceability of NCAs affects innovation, as measured by patenting, using data on every state-level NCA enforceability change between 1991–2014. We find that making NCAs easier to enforce (“stricter” enforceability) substantially reduces the rate of patenting: an average-sized increase in NCA enforceability leads a state to have 16-19% fewer citation-weighted patents over the following 10 years. This effect reflects a true loss in innovation rather than a reduction in useless or strategic patents. We then reconcile these findings with contrasting theoretical predictions. Stricter NCA enforceability reduces job mobility and new business formation in innovative industries, suggesting slower knowledge spread. Within publicly-traded firms, stricter NCA enforceability increases investment, but still leads to less innovation, suggesting that any gains from enhanced incentives to invest are more than offset by other ways that NCAs slow down innovation. Finally, using variation in technology classes’ exposure to NCA enforceability changes, we show that the economy-wide losses to innovation from strict enforceability are even larger than what our state-level estimates imply.
    JEL: J38 O31 O38
    Date: 2023–07
  2. By: Filippo Mezzanotti; Timothy Simcoe
    Abstract: U.S. firms have reduced their investment in scientific research (“R”) compared to product development (“D”), raising questions about the returns to each type of investment, and about the reasons for this shift. We use Census data that disaggregates “R” from “D” to study how US firms adjust their innovation investments in response to an external increase in funding cost. Companies with greater demand for refinancing during the 2008 financial crisis, made larger cuts to R&D investment. This reduction in R&D is achieved almost entirely by reducing investment in research. Development remains essentially unchanged. If other firms patenting similar technologies must refinance, however, then Development investment declines. We interpret the latter result as evidence of technological competition: firms are reluctant to cut Development expenditures when that could place them at a disadvantage compared to potential rivals.
    Keywords: Research and Development, Financial Crisis, Technology Competition.
    JEL: O32 O31 G30 L20
    Date: 2023–08
  3. By: Helm, Ines (Ludwig-Maximilians-Universität München); Kügler, Alice (CEU); Schönberg, Uta (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
  4. By: Koch, Florian; Hoellen, Max; Konrad, Elmar D.; Kock, Alexander
    Abstract: Creative industries contain paradoxes because conflicting tensions arise between the market and the arts. Entrepreneurs need to find and maintain a balance between those two sides to create innovation. This study tests the interaction between business and creative orientations of a founder in their influence on innovation in the context of creative entrepreneurial firms and provides recommendations for how creative agents can leverage and manage their innovations based on their creative visions. Determinants on the individual level, such as the founder's creative or business orientations, have a lasting impact on the practices and process of their venture. To trace the imprinting influence of the founder's orientation on innovation, the empirical setting is a time‐lagged study of German firm owners in the cultural and creative industries surveyed 5 years apart. The results show a significant relationship between creative orientation and innovation, whereas business orientation does not significantly relate to innovation. However, creative and business orientations reveal a negative interaction effect. This study contributes empirical evidence to the paradox theory and the interaction between the opposite poles. Our findings provide valuable insights about the relevance of creative orientation and its visionary impact on the firms' innovation process. Furthermore, the results shed new light on the tension between art and the market, as different compositions of the two orientation poles seem to have a varying impact on the degree of innovation. Thus, the study reveals the complexity of creative entrepreneurship and provides managerial guidance for other knowledge‐based industries.
    Date: 2023
  5. By: Bournakis, Ioannis; Tsionas, Mike G.
    Abstract: We developed a non-parametric technique to measure Total Factor Productivity (TFP). Our paper has two major novelties in estimating the production function. First, we propose a productivity modelling with both idiosyncratic firm factors and aggregate shocks within the same framework. Second, we apply Bayesian Markov Chain Monte Carlo (MCMC) estimation techniques to overcome restrictions associated with monotonicity between productivity and variable inputs and moment conditions in identifying input parameters. We implemented our methodology in a group of 4286 manufacturing firms from France, Germany, Italy, and the United Kingdom (2001-2014). The results show that: (i) aggregate shocks matter for firm TFP evolution. The global financial crisis of 2008 caused severe adverse effects on TFP albeit short in duration; (ii) there is substantial heterogeneity across countries in the way firms react to changes in R&D and taxation. German and U.K. firms are more sensitive to fiscal changes than R\&D, while Italian firms are the opposite. R\&D and taxation effects are symmetrical for French firms; (iii) the U.K. productivity handicap continued for years after the financial crisis; (iv) industrial clusters promote knowledge diffusion among German and Italian firms.
    Keywords: Total Factor Productivity (TFP), Control Function, Non-parametric Bayesian Estimation, Markov Chain Monte Carlo(MCMC), Research and Development (R\&D), Taxation, European firms
    JEL: C11 D24 H21 H25 Q55
    Date: 2023–07–21
  6. By: B. N. Kausik
    Abstract: A central question in economics is whether automation will displace human labor and diminish standards of living. Whilst prior works typically frame this question as a competition between human labor and machines, we frame it as a competition between human consumers and human suppliers. Specifically, we observe that human needs favor long tail distributions, i.e., a long list of niche items that are substantial in aggregate demand. In turn, the long tails are reflected in the goods and services that fulfill those needs. With this background, we propose a theoretical model of economic activity on a long tail distribution, where innovation in demand for new niche outputs competes with innovation in supply automation for mature outputs. Our model yields analytic expressions and asymptotes for the shares of automation and labor in terms of just four parameters: the rates of innovation in supply and demand, the exponent of the long tail distribution and an initial value. We validate the model via non-linear stochastic regression on historical US economic data with surprising accuracy.
    Date: 2023–07
  7. By: Stock-Homburg, Ruth; Heitlinger, Lea
    Abstract: Office robots can be a solution to the shortage of skilled workers in certain areas. They perform tasks automatically and work around the clock. Examples of tasks performed by these robots include data processing, clerical work, and administrative tasks. We propose five types of robot users based on interviews after real-life use cases of an office robot. We investigate these types in an online study that shows relevant patterns associated with each type and first indications of type distribution. By using these individual robot user types, organizations can tailor robot implementation to their workforce and create ideal human-robot interactions in the workplace.
    Date: 2023–07–28
  8. By: Guo, Liwen (University of New South Wales); Cheng, Zhiming (University of New South Wales); Tani, Massimiliano (University of New South Wales); Cook, Sarah (University of Nottingham)
    Abstract: With air pollution remaining a significant problem in many regions globally, an increasing number of environmentally conscious entrepreneurs have been taking initiatives to combat this issue, accompanied by a growing environmental awareness among the general public. To test the strength of this relationship, we use individual-level information from an enterprise survey in China in 2018 and conducted instrumental variable analyses to study the impact of air pollution on the green innovation behaviours of non-agricultural entrepreneurs. The results indicate that, on average, a one standard deviation increase in PM2.5 concentration is associated with a 4.3 percentage points increase in green innovation (or a 11.9 percentage points increase in green innovation intensity). Entrepreneurs' gambling preferences could potentially mediate the relationship between air pollution and green innovation, while expected firm income and actual firm income may act as suppressors. Specifically, entrepreneurs who launch their businesses following the implementation of environmental policies are more likely to adopt green innovation practices. This study provides insight into why there is a growing trend of environmentally-conscious entrepreneurs in regions with high levels of air pollution.
    Keywords: green innovation, air pollution, China
    JEL: J01 Q53 Q55
    Date: 2023–07
  9. By: Bauluz, Luis; Bukowski, P.; Fransham, M.; Lee, A.; López Forero, M.; Novokmet, Filip; Breau, S.; Lee, Neil; Malgouyres, Clément; Schularick, Moritz; Verdugo, Gregory
    Abstract: The rise of economic inequalities in advanced economies has been often linked with the growth of spatial inequalities within countries, yet there is limited comparative research that studies the relationship between national and subnational economic inequality. This paper presents the first systematic attempt to create internationally comparable evidence showing how different countries perform in terms of geographic wage inequalities. We create cross-country comparable measures of spatial wage disparities between and within similarly-defined local labour market areas (LLMAs) for Canada, France, (West) Germany, the UK and the US since the 1970s, and assess their contribution to national inequality. By the end of the 2010s, spatial inequalities in LLMA mean wages are similar in Canada, France, Germany and the UK; the US exhibits the highest degree of spatial inequality. Over the study period, spatial inequalities have nearly doubled in all countries, except for France where spatial inequalities have fallen back to 1970s levels. Due to a concomitant increase in within-place inequality, the contribution of places in explaining national wage inequality has remained fairly constant over the 40-year study period, except in the UK where we document a significant increase. Whilst common global social, economic and technological shocks are important drivers of spatial inequality, this variation in levels and trends of spatial inequality opens the way to comparative research exploring the role of national institutions in mediating how global shocks translate into economic disparities between places.
    Keywords: regional inequality, wage inequality, local labour markets
    JEL: J3 R1 R23
    Date: 2023

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