Using regression tree ensembles to model interaction effects: a graphical approach

Multiplicative interaction terms are widely used in economics to identify heterogeneous effects and to tailor policy recommendations. The execution of these models is often flawed due to specification and interpretation errors. This article introduces regression trees and regression tree ensembles to model and visualize interaction effects. Tree-based methods include interactions by construction and in a nonlinear manner. Visualizing nonlinear interaction effects in a way that can be easily read overcomes common interpretation errors. We apply the proposed approach to two different datasets to illustrate its usefulness.     

Employment Effects of Product and Process Innovation in Europe

This paper develops a model of the employment impact of innovation considering, on the one hand, the interactions with demand and labour costs and, on the other, the variety of patterns of technological change. Different technological strategies are considered. First, a search for technological competitiveness is based on product innovation and productivity rooted in quality advantages; second a strategy of active price competitiveness has productivity growth rooted in process innovation-based restructuring; third a passive price competitiveness strategy is pursued by non-innovators relying on cost-cutting. The new European innovation database drawn from the Community Innovation Survey 1994-96, merged with structural and macroeconomic data 1994-99 drawn from the OECD are analysed at a sectoral level across eight European countries: Italy, France, Germany, Denmark, Netherlands, Finland, the UK, and Sweden. The innovation survey data provide information on several quantitative and qualitative aspects of firms' innovative activities. A comparison of the results from the first (1990-92) and second (1994-96) Community innovation survey data is also carried out. The results show that, in the last decade, technological change has had a major impact on employment in manufacturing industry, associated with the dominance of an active price competitiveness strategy.     

Platform strategies: how the position in the network drives success

Scholars have focused on platform strategies for a long time, moving from a product perspective to an industry-wide one. In particular, the decision to open the platform to external complementors has been studied through the perspective of platform leadership. The digital age is now moving from a closed approach versus an open approach. Is being a platform leader still imperative or is participating in a network of existing platforms still a suitable strategy as well? What kind of collaborations within an ecosystem leads to better performances? Leveraging social network analysis is performed within the network formed by mobile apps in the Health and Fitness category; this research shows how the decision of being (or not) a platform provider has an impact on the performances, but the position within the network mediates this impact. Based on the results obtained, research and managerial implications can be established.     

Estimating potential output and the output gap for the euro area: a model-based production function approach

This paper provides an analysis of multivariate unobserved components models for the estimation of potential output and the output gap in the euro area. Bivariate models of output and inflation and multivariate model-based implementations of the production function approach are considered; according to the latter potential output is derived from the permanent components of the factors of production consistent with stable inflation, whereas the output gap results from the combination of the transitory components. This approach allows to measure the contribution of the various factors of production to potential output growth, and to assess the reliability of the output gap estimates. Various alternative statistical specifications for the separation of trend and cycle are considered entertaining different economic hypotheses. The paper also provides an assessment of the reliability of the alternative output gap estimates and analyses their predictive validity by means of a rolling forecast exercise that provides an evaluation of the capability to forecast future inflation. A preliminary version of this paper appeared as EUI working paper ECO2002/09 and was presented at the European Central Bank, the European University Institute, the Growth and Business Cycles in Theory and Practice conference, Manchester UK, 20–21 June 2002, the Common Features in Rio conference, Rio de Janeiro, 29–31 July 2002. We thank the participants, Michael Artis, Gerard Korteweg, Geoff Kenny, Neale Kennedy, Manuel da Mota Freitas Martins, Gerard Ruenstler, and three anonymous Referees for useful discussions and valuable comments. The paper was largely written while the first author was acting as consultant for the ECB. The views expressed in it do not necessarily reflect those of the ECB. All correspondence to Alberto Musso.     

Persistence of shocks on seasonal processes

The paper addresses the issue of measuring the persistence of shocks on seasonally integrated processes observed at quarterly intervals. We show that the amplitude of the limiting cycle described by the cumulated impulse response function provides a parametric measure of persistence and that Cochrane's normalized variance ratio can correspondingly be extended as a non-parametric counterpart. For illustrative purposes the latter is applied to the Italian GDP and to the output of the agricultural sector.     

Contractual networks: an organizational model to reduce the competitive disadvantage of small and medium enterprises (SMEs) in Europe’s less developed regions. A survey in southern Italy

International Entrepreneurship and Management Journal - Limitations faced by southern Italy’s small enterprises due to their dimensions may be overcome by cooperation strategies and network...     

The European Framework for Regulating Telecommunications: A 25-year Appraisal

Review of Industrial Organization - The European telecommunications sector has been radically transformed in the past 25 years: from a group of state monopolies to a set of increasingly...     

Evaluating the Stability of School Performance Estimates over Time

When using school performance indicators for the purposes of accountability and school choice, it is very important that measures are stable over time. This issue is very relevant when the system is based on the allocation of students to the same teachers for the whole educational cycle (e.g. at primary school level). Using administrative data provided by the National Evaluation Committee for Education (INVALSI), we explore the stability of performance estimates for Italian primary schools. We first construct school performance metrics using INVALSI standardised tests, by taking advantage of a rich array of individual‐level variables (including prior achievement) that allow us to estimate a school effect in a ‘value added’ perspective. We assess differences in performance across schools and the persistence of these differences across cohorts. We find that controlling for compositional differences is important; therefore, estimates of school performances are unstable across metrics, and correlations across cohorts decline over time.     

How do Scientists Contribute to the Performance of Innovative Start‐ups? An Imprinting Perspective on Open Innovation

Our study illustrates how scientists contribute to the performance of innovative start‐ups through an analysis of 211 Italian start‐ups with and without scientist founders. Building upon imprinting theory, we hypothesize and find that scientists provide an advantage to innovative start‐ups to the extent that they stimulate open innovation (i.e., search breadth and depth). However, for this to effectively occur, the involvement of multiple scientist founders is needed, so that their career imprints internalized in the lab are successfully transferred to the start‐up. Moreover, if the start‐up embraces business practices (i.e., strategic planning) or departs from scientific logics (i.e., pursuing non‐commercial goals), scientists’ contribution is further increased. Therefore, our study illustrates how the scientist career imprint can provide an advantage to innovative start‐ups with multiple scientists, but also how it can act as a rigidity if the start‐up does not pursue strategic planning or emphasizes non‐commercial goals.