R&D and patents: is it a two way street?

ABSTRACT

This paper provides empirical evidence on the link between firms’ R&D expenditure and patent registrations by applying the Granger causality test. We use a panel of Spanish manufacturing firms for the period 1990–2013. We first, examine the R&D-patents relationship in the manufacturing firms as a whole and subsequently, manufacturing was broken down into three groups of firms according to the technological level of the industries to which the firms belonged: high and medium-high (HMHT), low medium (LMT) and low (LT) technology firms. For the entire panel, our results provide support for a bidirectional relationship between R&D and patents, supporting both the traditional view and the reverse causality approach (patents cause R&D). When the sample is split into the three technology levels, we also find strong support for a bidirectional relationship in HMHT firms and weak support in LT ones. We found no evidence of this bidirectional link in LMT firms.     

When is FDI a capital flow?

In this paper we analyze the conditions under which a foreign direct investment (FDI) involves a net capital flow across countries. For this purpose, we investigate how multinational firms finance their foreign affiliates, globally or locally. We develop a contract theoretical model in which the financing structure is used to govern the incentives of managers. We find that the investment tends to be financed locally if managerial incentive problems are large. Thus, microeconomic governance problems may have macroeconomic implications for the net capital flow to host countries. Our results are consistent with survey data on German and Austrian investment flows of firms to Eastern Europe.     

Is there a “true” diversity?

Jost [Jost, L., 2006. Entropy and diversity. Oikos, 113: 363-374.] recently discussed Hill's [Hill, M., 1973. Diversity and evenness: a unifying notation and its consequences. Ecology, 54: 427-431.] effective number of species and concluded by naming it the “true” diversity. In this note we comment on parts of Jost's work and argue that the true diversity is not what the name suggests.     

What is a recession?: A reprise

This paper draws its title from a paper written over 35 years ago by Geoffrey H. Moore (1967). Why the need for a reprise? First, there would appear currently to be somewhat diverging views as to what properly constitutes a recession. Second, largely as a result of this, in many countries other than the US, there does not exist a single, widely accepted business cycle chronology for the country in question. This paper will argue that, in addition to output, there are other important aspects to aggregate economic activity that need to be taken into account in determining the business cycle, viz., income, sales and employment. As such, our perspective would seem to be at odds with the apparent position taken by some other recent commentators on this issue who argue that GDP is all that is needed to represent a country's business cycle. We will also argue against using the currently popular ‘two negative quarterly growth rate’ rule in dating the onset of a recession.     

When is multidimensional screening a convex program?

A principal wishes to transact business with a multidimensional distribution of agents whose preferences are known only in the aggregate. Assuming a twist (= generalized Spence-Mirrlees single-crossing) hypothesis, quasi-linear utilities, and that agents can choose only pure strategies, we identify a structural condition on the value b(x,y) of product type y to agent type x — and on the principal?s costs c(y) — which is necessary and sufficient for reducing the profit maximization problem faced by the principal to a convex program. This is a key step toward making the principal?s problem theoretically and computationally tractable; in particular, it allows us to derive uniqueness and stability of the principal?s optimal strategy — and similarly of the strategy maximizing the expected welfare of the agents when the principal?s profitability is constrained. We call this condition non-negative cross-curvature: it is also (i) necessary and sufficient to guarantee convexity of the set of b-convex functions, (ii) invariant under reparametrization of agent and/or product types by diffeomorphisms, and (iii) a strengthening of Ma, Trudinger and Wang?s necessary and sufficient condition (A3w) for continuity of the correspondence between an exogenously prescribed distribution of agents and of products. We derive the persistence of economic effects such as the desirability for a monopoly to establish prices so high they effectively exclude a positive fraction of its potential customers, in nearly the full range of non-negatively cross-curved models.     

What is a commodity? Two axiomatic answers

Summary. We identify conditions under which preferences over subsets of a consumption world can be reduced to preferences over bundles of "commodities". We distinguish ordinal bundles, whose coordinates are defined up to monotone transformations, from cardinal bundles, whose coordinates are defined up to positive linear transformations.Received: 27 March 2002, Revised: 17 March 2003, JEL Classification Numbers: D11.I am grateful to S. Barberá, C. Chambers, K. Nehring, and O. Sprumont for stimulating conversations and useful remarks. I also thank a referee for helpful comments, and the Social Sciences and Humanities Research Council of Canada for support.     

How much of a threat to economic growth is a mature AIDS epidemic?

The article models the impact on economic growth of HIV/AIDS when the epidemic is in a mature phase, in contrast with previous studies focused on periods of expansion as it is typically the case in African countries. Simulations for Honduras, the epicentre of the epidemic in Central America, show that AIDS is not likely to threaten economic growth neither through labour nor capital accumulation channels. Impacts are estimated between 0.007 and 0.27% points of Gross Domestic Product (GDP) growth annually for the period 2001 to 2010. Increasing spending on prevention, higher public treatment subsidies and increasing treatment access will not jeopardize economic growth prospects. Critical factors that slash economic growth in Africa (such as human capital reductions and shifts in relative skills) are not strong in Honduras.     

In-house R&D,external R&D and cooperation breadth in Spanish manufacturing firms: is there a synergistic effect on innovation outputs?

ABSTRACT

This study explores the nature of relationship between in-house R&D, external R&D and cooperation breadth and their joint impact on patent counts as well as technological, product and process, innovations in Spanish manufacturing firms. With regards to patent counts, empirical findings from a Generalized Method of Moments (GMM) estimator suggest a complementarity effect of internal and external R&D activities conditional on the breadth of R&D cooperation. Concerning technological innovation, results from dynamic random-effects probit models indicate no synergistic effects. In addition, we find evidence of persistence of all three innovation output measures. Our results suggest policy implications in relation to strengthening firms’ absorptive capacity that could have long-run effects.     

More is Less? Regulation in a Rent Seeking World

Competition between two interest groups that engage in strategic lobbying to influence regulatory decisions is examined. It is shown that increases in gross surplus can be detrimental to all parties. The circumstances under which this might occur, along with several applications, including the decision to deregulate, are considered. It is also shown that a simultaneous increase in both groups marginal lobbying costs benefits the low cost group and harms the high cost group.     

How helpful is a long memory on financial markets?

Summary. How should portfolio decisions depend on the past? In a simple model with boundedly rational agents we show that there is no universal answer to this question. Both, long and short memory, can be optimal in the appropriate environment. In most cases there is an equilibrium where both dispositions are equally successful. We characterize such equilibria for the case of two assets and two states. For dynamics based on average payoff, equilibria are global attractors whereas discrete choice dynamics in general do not converge to the equilibrium. Received: August 31, 1998; revised version: November 15, 1999     

Who is a fiduciary?--implications of Supreme Court rulings

The determination of who is a fiduciary under ERISA is of extreme importance in assessing potential ERISA liability. The analysis used in making this determination once seemed clear, but that may no longer be the case in the wake of recent Supreme Court decisions that redefine the line between fiduciary and nonfiduciary conduct.     

Are complementary reforms a “luxury” for developing countries?

This paper investigates the impact of complementarity reforms on growth and how it depends on GDP per capita. Based on reform data for six policy areas compiled from various sources during the period 1994–2006 for over 100 countries, we compute composite indicators of reform level and complementarity. We provide qualitative justification for the existence of pair-wise complementarities among policy areas. We then use cross-section and panel data estimates to test the effect of reform level and complementarity on GDP per capita growth. We found reforms to be positively related and their dispersion (or the inverse of complementarity) negatively related to growth, controlling for initial conditions, monetary stability and other structural and institutional variables, as well as endogeneity of reform level and complementarity. We show that the effect of policy complementarity is a stronger condition for sustainable growth in developing than in advanced countries, to conclude that complementary reforms are not a ‘luxury’ for developing countries.     

Is there a “reform fatigue” in the euro area?

The absence of monetary policy within a currency union increases the need for structural reforms that make the participating economies more flexible. However, the absence of exchange rate risk with respect to the other members of the union may reduce the urgency for such reforms. A number of other considerations also suggest that theory is ambiguous about the impact of participating in a currency union on progress in structural reforms. This paper addresses this issue empirically for the euro area. The results suggest that reforms in the euro area seem to have decelerated following the introduction of the euro, but from a fast pace. The paper discusses a number of possible explanations, including “reform fatigue,” the absence of “market punishment,” and “good-times” complacency. Estimates from an empirical growth model suggest that the slowing of reforms may slow down annual output growth by up to 0.2%. However, the results are preliminary and depend on the area of reform considered. Furthermore, the reform dynamics may change with the euro area starting slowing at the end of 2007.     

National culture and national savings: is there a link?

We study the effect of national culture on economic decisions, focusing on GLOBE cultural dimensions of uncertainty avoidance and future orientation. Specifically, we study the effect of divergence between cultural values and practices (societal aspirations), on the aggregate savings decision. Using the life-cycle model of savings as our basic model, we find that societal aspirations are important in explaining national savings behavior. In particular, we show that societal aspirations relating to future orientation and uncertainty avoidance have a positive effect on the rate of savings. We interpret our findings to indicate that such societal aspirations lead to mistrust in the societal arrangements and institutions, and induce savings as a means of securing the future and reducing uncertainty. To substantiate this interpretation, we utilize the microfinance industry; showing that high societal aspirations are associated with preference for savings through member-owned microfinance institutions (MFIs) over savings through non-member-owned MFIs.     

Diversification versus optimality: is there really a diversification puzzle?

In this paper, we provide a general valuation of the diversification attitude of investors. First, we empirically examine the diversification of mean-variance optimal choices in the US stock market during the 11-year period 2003–2013. We then analyze the diversification problem from the perspective of risk-averse investors and risk-seeking investors. Second, we prove that investors’ optimal choices will be similar if their utility functions are not too distant, independent of their tolerance (or aversion) to risk. Finally, we discuss investors’ attitude towards diversification when the choices available to investors depend on several parameters.