What are good R&D investment strategies for leaders and followers?

Research and development (R&D) investment affects the growth of firms in the same industry differently according to their technological positions. This study empirically investigates differences in how R&D investment influences firm growth between technological leaders and followers. Additionally, this study investigates the moderating effects of complementary assets and market competition on the relationship between R&D investment and firm growth. Using a sample of 2322 observations from 492 firms in the U.S. chemical and allied products industry for the period 2000–2009, we show that an increase in R&D investment leads to greater firm growth for technological followers than for technological leaders. We also find that the moderating effects of complementary assets and market competition vary depending on whether a firm is a technological leader or follower.     

Technology Sourcing and Strategic Foreign Direct Investment

Empirical evidence suggests that technological spillovers are limited by distance. The present paper investigates the implications of this observation for the investment decisions of a technologically leading and lagging firm, located in different countries. Technological spillovers may induce “technology sourcing” foreign direct investment by the less advanced firm, as it seeks to upgrade its technology. Our main result, however, is that there may be strong incentives for the leading firm to undertake strategic investment abroad in order to prevent technology sourcing by the lagging firm. We analyze how trade costs, the technology gap between firms, technological spillovers, and the ability of a firm to transfer technology between plants affect the two firms’ entry decisions.     

Investment and technological choice in a right-to-manage model

We analyze the interactions between investment and local wage bargaining in a putty-clay model where the investment decision commits the firm to a particular capital intensity. This technological precommitment is used strategically in order to manipulate the bargaining outcome. We show that this strategic behavior induces a nonmonotonic relationship between the capital and labor demands of the firm and most of its environmental parameters (e.g., the bargaining power of the union, its minimum wage requirement, the capital cost). The results we obtain in our putty-clay framework thus contradict several conclusions of the standard literature on wage bargaining and investment.     

Uncertainty over future environmental taxes

Besides static efficiency properties, environmental policies should be evaluated in terms of their longer-run impacts on investment and technological change to reduce pollution and degradation of natural resources. Using a stochastic dynamic programming approach, this paper analyzes how uncertainty about a future environmental tax on a polluting input alters investment in resource conservation and how such investment affects future demand for the polluting input. The impact on investment depends crucially on price elasticities of demand and on the manner in which investment shifts and rotates the demand schedule for the polluting input in the future. The expectation of a higher tax does not necessarily create stronger incentives for investment in resource conservation. More uncertainty about future policies does encourage investment if it makes a firm more responsive to future price changes and discourages investment if it makes a firm less responsive to price changes.     

Are Public Firms Always Less Innovative than Private Firms?

The effect of information spillovers is analysed in a mixed duopoly where a profit‐maximizing private firm and a market‐share‐maximizing public firm decide whether to invest in a process innovation. It is shown that, when the spillover effect is rather strong, the public firm innovates in order to acquire a larger market share, while the private firm prefers that its rival invests in the new technology and reaps the benefits of technological leakages if investment costs are moderate. Thus, when information spillovers are taken into account, the public firm sometimes behaves more innovatively than the private firm, which is contrary to the well‐known results. Furthermore, in a mixed duopoly where only the public firm invests, its average cost exceeds that of its competitor, but investment remains an efficient strategy compared with non‐investment.     

IS CORPORATE R&D INVESTMENT IN HIGH‐TECH SECTORS MORE EFFECTIVE?

This paper discusses the link between R&D and productivity across the European industrial and service sectors. The empirical analysis is based on both the European sectoral OECD data and on a unique micro‐longitudinal database consisting of 532 top European R&D investors. The main conclusions are as follows. First, the R&D stock has a significant positive impact on labor productivity; this general result is largely consistent with previous literature in terms of the sign, the significance, and the magnitude of the estimated coefficients. More interestingly, both at sectoral and firm levels the R&D coefficient increases monotonically (both in significance and magnitude) when we move from the low‐tech to the medium‐ and high‐tech sectors. This outcome means that corporate R&D investment is more effective in the high‐tech sectors and this may need to be taken into account when designing policy instruments (subsidies, fiscal incentives, etc.) in support of private R&D. However, R&D investment is not the sole source of productivity gains; technological change embodied in gross investment is of comparable importance on aggregate and is the main determinant of productivity increase in the low‐tech sectors. Hence, an economic policy aiming to increase productivity in the low‐tech sectors should support overall capital formation.     

Ownership, investment climate and firm performance

The importance of a country's ‘investment climate’ for economic growth has recently received much attention. In this paper we use a new survey of 1,500 Chinese enterprises in five cities to measure more precisely components of the investment climate and their effects on firm performance. Our firm‐level analysis reveals that both ownership and investment climate measures matter for investment, productivity and growth. In particular, firm performance is positively correlated with foreign and domestic private ownership, light regulatory burdens, limited corruption, technological infrastructure and labour market flexibility. In contrast, gains from improving banking access and physical infrastructure are quite limited.     

东北老工业基地经济增长对科技投入影响的计量分析

选择部分宏观经济指标和科技投入指标,对1991～2003年间东北地区经济增长与科技投入变化的相关性进行了初步分析,并通过经济增长与科技投入相关性模型的建立,对东北地区未来科技投入的趋势做出判断,在实证分析的基础上,提出东北老工业基地优化科技投入的具体对策建议.     

Technical Change,Effective Demand and Employment

Ricardo and Marx saw technological change as a possible cause of long-period unemployment. Neoclassical and Schumpeterian economists regard technological unem ployment as a transitory phenomenon. This paper argues that the capital critique (i) demolishes the neoclassical claim that market mechanisms will restore full employment whenever workers are displaced by technical change, and (ii) rehabilitates the old Ricardian argument that automatic compensation factors are generally absent. The neo-Schumpeterian notion of autonomous investment is also rejected, in favour of the view that, in the long period, all investment is induced. By extending Keynes's theory of effective demand to the long period through a model based on the supermultiplier, this paper suggests that the ultimate engines of growth are located in the autonomous components of effective demand--exports, government spending and autonomous con sumption. Technical change plays a role in the accumulation process through its effects on consumption patterns and the material input requirements. However, the impact of technical change is now seen to depend upon circumstances such as income distribution, the availability of bank liquidity and exchange rate policy.     

中国技术创新影响因素的行业差异研究——以高技术产业为例

本文利用中国16个高技术行业的面板数据,对高技术行业的技术创新影响因素进行了实证分析,不仅研究了R＆D投入对高技术行业技术创新的影响,还考虑了行业融资结构、所有制结构、企业规模以及市场集中度等因素的影响作用。实证结果表明,R＆D投入是高技术产业技术创新的主要影响因素;技术创新的融资结构对高技术产业技术创新能力有显著影响,政府资金和金融机构资金在技术创新融资中的比例增加不利于提高高技术企业的技术创新能力;企业的产权制度改革对高技术行业技术创新能力有明显的促进作用;行业内的企业规模越大、市场集中度越高对高技术行业技术创新能力的正向影响越显著。     

Technological innovation and multinational expansion: A two-way link?

The paper examines how investment in research influences the form of foreign expansion chosen by the firm, and vice versa. We consider a two-country model where a monopolist producing in one country can choose between export and foreign direct investment. We assume process innovation, where the cost-reducing technological innovations are an outcome of the firm's investment in R&D. The role of technology transfer costs is explored. The model shows that, with low costs of technology transfer, there is a two-way link between the firm's R&D effort and multinational expansion. We also prove that both the research choice and the multinational choice have a positive effect on consumers' welfare in both countries.     

When green isn't mean: economic theory and the heuristics of the impact of environmental regulations on competitiveness and opportunity cost

The conventional neoclassical economic wisdom argues that the opportunity costs of environmental regulations are high, with negative implications for costs and profits and, by implication, for growth and per capita gross domestic product (GDP). The minority view that environmental controls induce cost offsets that minimise such opportunity costs is marginalised by the conventional wisdom, which assumes that economic agents are x-efficient in production. A behavioral model of the firm is presented in this paper, whereby x-inefficiency in production prevails even in a world of perfect product market competition that is dominated by rational economic agents. In this model, environmental regulations affect both the level of x-efficiency and the extent of technological change and greener firms can be cost competitive and profitable. However, private economic agents cannot be expected to adopt ‘Green’ economic policy independent of regulations since, in this model, there need not be any economic advantage accruing to the affected firms in becoming greener.     

Identification of technological threats and opportunities by firms

A number of models and approaches are being developed in attempts to anticipate the nature and direction of technological change and its impact on the firm. Under what conditions might we expect firms to use one or more of these models in an organized way and under what conditions might we expect the resulting information to be used in the firm's planning process? The basic hypothesis of this paper is that effective use by firms of models for anticipating technological change can be explained based upon: the nature and extent of uncertainty in the firm's environment,the firm's strategy for growth, and the degree of definition of communication networks (both formal and informal) within the firm and between the firm and its environment. Technology planners and managers of 29 firms in a variety of industries have been interviewed concerning the ways in which technological threats and opportunities are identified and analyzed and the ways in which this information is integrated into the firm's normal planning cycle. A follow-up questionnaire is being designed to be sent to a larger number of respondents.     

Corporate Investment and Information Technologies: The Case of the Greek Refining Industry

The need to improve competitiveness and the enforcement of stringent environmental regulations created the need for the technological modernization of the Greek oil refining industry. The emphasis in this paper is on the pattern of investment decisions, the linkages between the acquisition of production processes and supporting IT applications and on the influence exercised by new technological investment projects on the availability of endogenous resources required to facilitate the adoption of technical change at the firm level. The Greek experience suggests that the role of IT application is becoming increasingly important in large-scale investment projects. The successful implementation of these projects depends, to a large extent, on the learning processes and the accumulation of knowledge at the firm level. These learning processes are directly linked to the specific requirements of the production process and our evidence support that there is a lack of positive feedback between administrative applications and the successful introduction of new manufacturing technologies.     

Corporate Investment and Information Technologies: The Case of the Greek Refining Industry

The need to improve competitiveness and the enforcement of stringent environmental regulations created the need for the technological modernization of the Greek oil refining industry. The emphasis in this paper is on the pattern of investment decisions, the linkages between the acquisition of production processes and supporting IT applications and on the influence exercised by new technological investment projects on the availability of endogenous resources required to facilitate the adoption of technical change at the firm level. The Greek experience suggests that the role of IT application is becoming increasingly important in large-scale investment projects. The successful implementation of these projects depends, to a large extent, on the learning processes and the accumulation of knowledge at the firm level. These learning processes are directly linked to the specific requirements of the production process and our evidence support that there is a lack of positive feedback between administrative applications and the successful introduction of new manufacturing technologies.     

Rapid Technology Change, ‘Technological Visions’, Corporate Organisation And Market Structure

This paper is a contribution to the analysis of how rapid technology change influences market structure. The paper uses a simple simulation model to explore the effects of four main factors on the development of market structure. These are: (1) the variance (or unpredictability) of the technology trajectory; (2) the speed with which the organisation's ‘technological vision’ adjusts to ongoing technological developments; (3) the absorptive capacity of each division in the multi-divisional firm to experience gained in other divisions; (4) the extent to which competence-destroying innovations generate greater cost penalties for the division of a multi-divisional firm than for a comparable mono-divisional firm. Simultion results are obtained for 100 technological trajectories, and a variety of parameterisations. While there is a tendency for noisier trajectories to disadvantage the larger multi-divisional firm, there are conditions under which such a firm benefits from a noisy technological environment. When competence-destorying innovations affect the division of a multi-divisional firm no worse than the comparable mono-divisional firm, the multi-divisional firm is not disproportionately affected by a noisy trajectory. It may, however, be seriously damaged by a slow adjustment of technological vision, especially when all scale economies are dynamic (rather than static). The simulations confirm that the absorptive capacity of each division to experience from others can be critical in determining the ultimate market structure. A brief empirical motivation for the model is offered by reference to some case studies of the semiconductor industry.     

Impact of Knowledge Capital on the Production of Hungarian Firms

Several studies identified a positive relationship between a firm’s knowledge assets and its productivity. Knowledge assets are usually considered as the level of human and technological capital of the firm. Knowledge assets of the firm may also increase by the so-called spillover effect, especially in less developed host economies of foreign direct investment, which means diffusion of the technology, knowledge and managerial skills from foreign companies to local ones. Beyond the impact of the human and technological capital of firms, this paper also examines the effect of spillover of knowledge on the firms’ performance in Hungary within a linear regression model. The model is based on individual data of Hungarian enterprises, examining the change in performance as the difference of the variables between 1996 and 2014. The paper shows that knowledge assets (concerning human capital) basically determine the firms’ production in Hungary from 2000. The effect of research and development activity was not significant in the investigated period. Foreign shares in the industries’ total equity (proxy for spillover effect) have a weak and, after 2005, a negative influence on performance. The spillover effect in the Hungarian economy was not demonstrated by the regression model.     

Technological expectations and adoption of improved technology

Attention is focused upon the adoption (demand) rather than the creation (supply) of new technology, which improves from time to time. Based on the expected flow of technological progress over which the firm (demander) has no control, it must decide either to adopt the current best available technology or to postpone adoption. The distinguishing features of the model are that more than one technological innovation is anticipated and expectations about the likelihood of such innovations are revised as time passes since the last innovation. Our analysis shows that the firm will adopt the current best practice if its technological lag exceeds a certain threshold; moreover, as time passes without new technological advances it may become profitable to purchase a technology that has been available even though it was not profitable to do so in the past.     

Real option analysis for effects of emission permit banking on investment under abatement cost uncertainty

The present paper analyzes the investment effects of emission trading scheme (ETS) when emission permits are bankable and there is technological uncertainty with regard to the abatement cost. A real option model is employed to accommodate irreversibility of investment and cost uncertainty. In the absence of abatement cost uncertainty, a bankable ETS reduces a firm's incentive for environmental investment, because the firm can utilize the banked permits for future compliance which act as substitutes for abatement investment. However, when cost uncertainty is prevalent, investment may reduce the opportunity cost of irreversible investment under the banking system, thereby increasing a firm's investment incentive. The condition is derived under which a bankable ETS provides higher investment incentives than a non-bankable ETS does.     

Liquidity default,liquidity management and smooth dividends policy

Our article models liquidity financing constraints with the real options framework. By conducting a comprehensive investigation of the effects of shocks to liquidity constraints on the firm’s optimal investment, financing and dividend policies, our model highlights the importance of liquidity management and extends the liquidity management approach to hedge liquidity default risk. We find that being concerned about liquidity default risk will significantly change a firm’s behaviours, including those related to investment and the optimal capital structure. A firm that is concerned about its liquidity default risk will become more cautious: it will choose to delay investment and have higher leverage when internal liquidity is very low, but choose earlier investment and lower leverage when liquidity is high enough. The dividends policy can alleviate risks from both the external market and internal project volatility and provides an alternative explanation for the ‘smooth dividends policy puzzle’ commonly reported in empirical research.