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on Technology and Industrial Dynamics |
| By: | Johannes Hirvonen (Northwestern University); Aapo Stenhammar (University of Bonn); Joonas Tuhkuri (Stockholm University) |
| Abstract: | Industrial policies are widespread, but evidence on their workforce effects remains limited. We present novel evidence on the impact of EU technology subsidies on employment and skill demand in Finnish SMEs, 1994–2018. The subsidies fund new machinery, including robots and CNC machines. Comparing closely matched grant winners and losers, we find that receiving a grant increased employment without changing skill composition. Leveraging application text data and machine learning, we match firms, analyze their plans, and show that subsidies primarily supported expansion, such as launching new products, rather than automating work. In contrast, analysis of a broader sample of manufacturing firms outside the program reveals that IT investments are more strongly associated with skill upgrading than machinery investments, suggesting that different technologies may impact jobs differently. Our findings indicate that machinery grants can create opportunities for non-college-educated workers. |
| Keywords: | Industrial Policy, Subsidies, Technological Change, Labor Demand, Skills |
| JEL: | J23 J24 O33 O25 H25 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2504 |
| By: | Anna Gumpert; Kalina Manova; Cristina Rujan; Monika Schnitzer; Kalina B. Manova |
| Abstract: | This paper provides an integrated analysis of multinational companies’ global production and innovation. We establish novel stylized facts using rich data on the network of production affiliates and patent activity of German multinationals. We rationalize these facts with a heterogeneous-firm model, in which companies jointly determine the location and scale of production, basic innovation and applied innovation, under asymmetric complementarities across these three activities. Empirical evidence consistent with the model indicates that bigger MNCs innovate more intensively in terms of patent frequency and quality, and offshore innovation to more countries, including both countries with and without production affiliates. Moreover, MNCs’ innovation portfolio follows countries’ comparative advantage across technology classes, with applied innovation more likely to be co-located with production than basic innovation. |
| Keywords: | multinational firms, FDI, offshoring, innovation, patents |
| JEL: | F20 F23 F63 L23 L24 O31 O32 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11713 |
| By: | Tan , Yeng-May (Xiamen University Malaysia); Amorós , José Ernesto (EGADE Business School, Tecnológico de Monterrey); Autio , Erkko (Imperial College London); Fu , Kun (Loughborough University); Park, Donghyun (Asian Development Bank) |
| Abstract: | This study explores the relationship between digitalization and entrepreneurial innovation across developing economies. We assess whether higher levels of digital technology development within a country enhance the innovation potential of its entrepreneurial ventures and how this impact varies between Asia and other regions. Using data from the Global Entrepreneurship Monitor (2013–2022) and the Global Innovation Index along with its subindexes, we examine 11 developing economies in Asia and 57 developing economies in other regions. We find that digital technology development generally boosts entrepreneurial innovation. However, our results reveal a significant regional variation. The impact on product innovation is significantly stronger in developing economies outside Asia. This suggests that while digitalization supports innovation generally, its effects may be more transformative in regions outside Asia. These findings offer valuable insights for policymakers seeking to leverage digitalization to drive innovation and economic growth. |
| Keywords: | digitalization; digital technologies; entrepreneurial innovation; ICT development; developing Asia; developing economies |
| JEL: | L26 O31 O33 O57 |
| Date: | 2025–04–28 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:0776 |
| By: | Czarnitzki Dirk; Confraria Hugo (European Commission - JRC) |
| Abstract: | It has been a long-standing debate whether Europe suffers from an innovation gap. Recent studies indicate a global decline in research and development (R&D) productivity across various sectors, raising concerns about the efficiency of innovation investments. New panel data from the EU Industrial R&D Investment Scoreboard allow examining long-term relationships between firm productivity and R&D. The results show that EU top R&D investors struggle more than their global counterparts to convert their R&D into new ideas and marketable products. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc141091 |
| By: | Tani, Massimiliano (University of New South Wales); Vivarelli, Marco (Università Cattolica del Sacro Cuore); Piva, Mariacristina (Università Cattolica del Sacro Cuore) |
| Abstract: | Labor mobility is considered a powerful channel to acquire external knowledge and trigger complementarities in the innovation and R&D investment strategies; however, the extant literature has focused on either scientists’ mobility or migration of high-skilled workers, while virtually no attention has been devoted to the possible role of short-term business visits. Using a unique and novel database originating a country/sector unbalanced panel over the period 1998-2019 (for a total of 8, 316 longitudinal observations), this paper aims to fill this gap by testing the impact of BVs on R&D investment. Results from GMM-SYS estimates show that short-term mobility positively and significantly affects R&D investments; moreover, our findings indicate - as expected - that the beneficial impact of BVs is particularly significant in less innovative countries and in less innovative industries. These outcomes justify some form of support for BVs within the portfolio of the effective innovation policies, both at the national and local level. |
| Keywords: | knowledge transfer, labor mobility, business visits, R&D investments |
| JEL: | O3 O40 J60 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17806 |
| By: | Ohki, Kazuyoshi |
| Abstract: | In this paper, we construct a tractable endogenous growth model that incorporates both incremental innovation by heterogeneous incumbents and innovation by entrants. Our model features two endogenous sources of growth: quality improvement (vertical growth) and expansion in the variety of goods (horizontal growth). We then examine the policy effects of a subsidy for incremental innovation by incumbents and a subsidy for innovation by entrants on the overall economic growth rate, as well as on the relationship between the two sources of growth. Our model confirms that incumbents with higher profit flows tend to engage in incremental innovation for a longer duration and incur greater innovation costs, which is consistent with both Schumpeter's hypothesis and the findings of Christensen (1997) Additionally, the model generates counterintuitive results that are not commonly found in the conventional literature. First, a subsidy for incremental innovation by incumbents may reduce the entry of new firms. Second, a subsidy for innovation by entrants may have a negative effect on the overall economic growth rate. |
| Keywords: | Economic Growth, \&D, In-house model, Firm-Heterogeneity, Innovation by Incumbents, IPR policy, Incremental Innovation, Sustaining Innovation |
| JEL: | O31 O32 O33 O34 O41 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124304 |
| By: | Christian Keuschnigg; Giedrius Kazimieras Stalenis |
| Abstract: | We study a small open economy that must implement an emissions reduction plan and eventually phase out fossil fuel. R&D leads to the design of energy saving new machines. Endogenous scrapping eliminates old inefficient machines. We identify two distortions that delay the adoption and diffusion of energy saving technology: scrapping of old equipment and investment in new machines are both too low. The optimal policy to manage the energy transition thus combines a carbon tax with a profit tax to speed up exit, and an investment subsidy to speed up investment in new equipment. The optimal policy increases capital turnover, the diffusion of energy saving technology, and thereby mitigates the costs of the energy transition. Compared to a policy that exclusively relies on carbon taxes, the optimal policy could reduce the GDP loss of moving to net zero from 7.8 to 6.1% of GDP. |
| Keywords: | energy saving innovation, vintage capital, emissions reduction |
| JEL: | D21 D62 H23 O33 Q41 Q43 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11722 |
| By: | Yanqing Yang; Nan Zhang; Jinfeng Ge; Yan Xu |
| Abstract: | This paper identifies the impact of China-U.S. science and technology (S&T) friction on knowledge flows in different fields, using data on invention patent applications from China, the U.S., Europe, and the World Patent Office (WPO) along with machine-learning-based econometric methods. The empirical results find that the negative impacts of China-U.S. S&T frictions on cross-border knowledge flows are confined to a limited number of technology areas during the period of our observation. This paper further explores the characteristics of the negatively impacted technology areas, and the empirical results show that technology areas that rely more on basic scientific research, where the distribution of U.S. scientific and technological strength is more concentrated, and where the gap between U.S. and Chinese science and technology is narrower, are more likely to be the victims of the Sino-U.S. S&T friction. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2503.21822 |
| By: | Florian Misch; Ben Park; Carlo Pizzinelli; Galen Sher |
| Abstract: | The discussion on Artificial Intelligence (AI) often centers around its impact on productivity, but macroeconomic evidence for Europe remains scarce. Using the Acemoglu (2024) approach we simulate the medium-term impact of AI adoption on total factor productivity for 31 European countries. We compile many scenarios by pooling evidence on which tasks will be automatable in the near term, using reduced-form regressions to predict AI adoption across Europe, and considering relevant regulation that restricts AI use heterogeneously across tasks, occupations and sectors. We find that the medium-term productivity gains for Europe as a whole are likely to be modest, at around 1 percent cumulatively over five years. While economcially still moderate, these gains are still larger than estimates by Acemoglu (2024) for the US. They vary widely across scenarios and countries and are sustantially larger in countries with higher incomes. Furthermore, we show that national and EU regulations around occupation-level requirements, AI safety, and data privacy combined could reduce Europe’s productivity gains by over 30 percent if AI exposure were 50 percent lower in tasks, occupations and sectors affected by regulation. |
| Keywords: | Artificial Intelligence; Productivity; Technology; Regulation |
| Date: | 2025–04–04 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/067 |
| By: | Falk Bartscherer (Technical University of Munich, TUM School of Management); Felix Kurz (Technical University of Munich, TUM School of Social Sciences and Technology); Stefan Wurster (Technical University of Munich, TUM School of Social Sciences and Technology); Hanna Hottenrott (TUM School of Management, Technical University Munich & ZEW Leibniz Centre for European Economic Research, Mannheim) |
| Abstract: | Countries worldwide implement mission-oriented innovation policies to address contemporary challenges. However, how the understanding of ‘missions’ differs across countries remains unclear. We distinguish between traditional, narrowly focused missions, and newer, wider, and multiple stakeholder-based missions. Mapping MOIPs in 39 countries reveals a growing popularity of wider missions, though narrow missions persist. We identify distinct mission profiles for different countries with varying foci and understandings of MOIPs. In-depth analyses of selected countries suggest linkages between national innovation systems and mission designs. |
| Keywords: | Mission orientation, mission innovation, innovation policy, grand challenges, policy instruments, Organisation for Economic Co-operation and Development (OECD) |
| JEL: | O14 O30 O38 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:aiw:wpaper:40 |
| By: | Fusillo Fabrizio; Manera Maria; Orsatti Gianluca; Quatraro Francesco; Rentocchini Francesco (European Commission - JRC) |
| Abstract: | Reducing uncertainty around critical raw materials (CRM) supply is a policy priority for the EU in view of their role for advanced carbon neutral and digital technologies. A new, AI based indicator is introduced to measure the exposure of inventive activities to critical raw materials, outperforming existing approaches by identifying CRM relevance even when not immediately evident. High exposure sectors, such as aerospace & defence and ICT services, intensify inventive efforts in response to CRM supply risk, indicating strategic shifts towards substitution and diversification. European regions differ significantly in CRM exposure: some areas (e.g. parts of France, Germany, Italy, and Scandinavia) show con-siderable hidden CRM based inventive activity. Firms in CRM exposed sectors adapt by both increasing their inventive efforts and seeking alternative inventive routes, suggesting that innovation can mitigate supply risk vulnerabilities. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc141261 |
| By: | Farmer, J. Doyne; Barbrook-Johnson, Peter; Tankwa, Brendon; Vazquez Bassat, Lucas (University of Oxford Department of Economics) |
| Abstract: | Understanding national-level technology adoption is critical for addressing economic, societal, and environmental challenges. This study analyzes 27 technology datasets with good temporal and regional coverage to understand national-level technology diffusion, and identifies the logistic S-curve as a robust, parsimonious model for capturing adoption patterns. We show that technology adoption speeds have increased over time, especially in Information and Communication Technologies (ICT). While early-adopting countries (leaders) often have slower diffusion, later adopters (followers) benefit from imitation and de-risking, supporting a national-level "fast-follower" hypothesis. Structural factors also shape these outcomes: adoption speed grows with GDP growth but falls with population size; technology leadership is influenced by GDP per capita, government effectiveness, distance to a technology's inventor, and population size. Our findings reinforce established theories while providing new insights into cross-country variation, shifting adoption sequences, and increasingly rigid country rankings, particularly in ICT. This evidence helps policymakers and researchers better understand technology diffusion and can inform strategies that guide technological progress. |
| Keywords: | S-curves, National-level data, Technological progress, Technology leadership, Drivers of technology |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:amz:wpaper:2025-01 |
| By: | Amir Mirzadeh Phirouzabadi |
| Abstract: | This research unravels the stationary or transitionary dilemma of hybrid technologies in transitions processes. A system dynamics technology interaction framework is built and simulated based on Technological Innovation System and Lotka-Volterra to investigate the inter-technology relationship impacts and modes that hybrid technologies establish with incumbent and emerging technologies. This is conducted for the case of conventional, hybrid and battery electric vehicles under various scenarios . Results reveal that, by acting as an exploration-hybrid solution, hybrid technologies maintain a transitionary role by supporting mainly the technological development side of emerging technology. On the contrary, by acting as an exploitation-hybrid solution, they hardly (or never) sustain an inhibitive role against both the technological and market development sides of incumbent technology. While hybrid technologies may play a stationary role on the market development side in transitions processes, simulation results show that maintaining all inter-technology relationship modes as business-as-usual (i.e., baseline scenario) but instead simultaneously strengthening the various socio-technical dimensions of emerging technology and destabilising the various socio-technical dimensions of incumbent technology (i.e., sociotechnical scenario) is a more promising pathway in both short term (e.g., an accelerated uptake of emerging technology and decline of incumbent technology) and long term (e.g., highest emission reduction). Findings, additionally, reinforce the existence of both spillover and try-harder versions of 'sailing-ship effect', which are either seriously doubted in the literature or partially validated using raw bibliometric and patents data. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2504.06018 |