Young SMEs as a Motor of Europe’s Innovation Machine

Intereconomics - Using large scale EIB Investment Survey evidence for 2016 covering 8,900 non-financial firms from all size and age classes across all sectors and all EU member states, the authors...     

Fostering the Industrial Component of the European Green Deal: Key Principles and Policy Options

Intereconomics - The necessity to meet climate and environmental targets, while at the same time ensuring economic and social sustainability,requires a transformation that will generate enough...     

The revaluation of assets as a signalling device: a theoretical and an empirical analysis

In many countries, firms can choose whether or not to report a revaluation in the financial statements. An analytical model is developed to indicate conditions in which it is more likely that successful firms will choose not to revalue assets as a credible signal to potential investors. These industry settings include a high variance in performance and low equity-to-debt ratios. The empirical results for Belgium confirm that successful firms are less likely to revalue assets in those industries. However, only the revaluation of fixed tangible assets and not financial assets seems to be a credible signal. Finally, the results support the choice to revalue, but not the amount of revaluation, as a signalling device.     

Stable R&D Cooperation with Spillovers

The literature on the incentives for R & D cooperation with spillovers typically deals only with the factors affecting cooperative profits. This paper focuses on the incentives to cheat and the stability of such cooperative agreements in a repeated game framework. It is shown that the stability of cooperation is influenced by the nature and magnitude of spillovers, relative to the nature and degree of product market competition. While cooperative profits are higher with large positive (exogenous, unintended) know-how spillovers, such as in fundamental research, our anslysis shows that it may be easier to sustain cooperation in areas with lower spillovers, such as applied research, because of the smaller incenfives to cheat on the initial agreement, at least when firms produce substitutes. Alternatively, the possibility of technology sharing (i.e., intended or endogenous spillovers), besides R&D coordination, not only increases cooperative profits but also reduces the incentives to defect from a cooperative equilibrium.     

Collaboration in R&D: An Assessment of Theoretical and Empirical Findings

Focusing on the management of voluntary and involuntary transfers of know-how in imperfect competition, the Industrial Organisation models on R&D cooperation have generated results that seem to be robust across a wide variety of models. This paper reviews the mainstream IO models and results. A major finding is that when spillovers exceed some critical level, cooperation in R&D is beneficial to technical progress and leads to higher profits for the partners. Trying to further enrich these models, recent theoretical developments have studied the issues of stability of R&D cooperation, explaining why attractive alliances are not always formed. The various mechanisms, which this literature suggests to turn R&D cooperation into stable profitable agreements, are discussed. Finally, the scarce empirical evidence that exists to test some of the theoretical hypotheses is reviewed.     

Foreign subsidiaries as a channel of international technology diffusion: Some direct firm level evidence from Belgium

The use of foreign direct investment as a channel of international spillovers is by now fairly established in the empirical literature on innovation and growth. It is often argued that subsidiaries of foreign multinational enterprises are a mechanism through which technological know-how flows across borders. For foreign subsidiaries to be channels of international spillovers, these subsidiaries need to source know-how internationally and transfer their know-how to the local economy. Using direct firm level evidence from the Belgian Community Innovation Survey on the occurrence of technology transfers, we find that foreign subsidiaries are indeed more likely to acquire technology internationally. But after controlling for the superior access to the international technology market that foreign subsidiaries enjoy, we find that these firms are not more likely to transfer technology to the local economy as compared to local firms.     

Strategic incentives for multinational operations

A simple game-theoretic model is set up to analyze when strategic considerations may dominate and possibly counteract the traditional motives for MNE operations such as locational and firm-specific advantages. Firms can choose to operate internationally out of defensive considerations to avoid a worse outcome where they would have to compete with rival MNEs while not enjoying the cost advantages associated with multinational operations. The model further specifies when the timing of the decision to become a MNE may entail strategic advantages, with the first mover restricting the multinational expansion of its rival.     

Young leading innovators and the EU's R&D intensity gap

Europe's innovation gap relative to the USA is often attributed to its industrial structure in which new firms do not play a significant role, especially in high-tech sectors. This view of a structural European Union (EU) innovation deficit is popular in European innovation policy discussions, but has received little or no thorough empirical investigation. This article aims to address this ‘evidence gap’. Using industrial R&D Scoreboard data from leading world innovators, we find that compared to the USA, the EU has fewer young firms among its leading innovators. Using a decomposition analysis, we show that having fewer young firms accounts for about one-third of the EU–US differential in R&D intensity, while 55% of the differential is due to the fact that young leading innovators in the EU are less R&D intensive than their US counterparts. Further analysis shows that this is almost entirely due to a different sectoral composition. We thus confirm that the EU–US private R&D gap is indeed mostly a structural issue.