Explaining Firms’ Export Behaviour: R&D,Spillovers and the Destination Market*

We examine the importance of a firm's own R&D activity and intra‐sectoral spillovers on the decision to export and the export intensity using firm level panel data for Spain for the period 1990–98. Own R&D activity is found to be an important determinant of export activity. There is little evidence to suggest that Spanish firms benefit from spillovers of the exporting activity of others. However, there is evidence that R&D spillovers exert positive effects on firms’ export ratios. We find a larger marginal impact of R&D spillovers on export intensity of firms exporting to other OECD countries than those exporting to non‐OECD nations.     

Knowledge spillovers in US patents: A dynamic patent intensity model with secret common innovation factors

During the past two decades, innovations protected by patents have played a key role in business strategies. This fact enhanced studies of the determinants of patents and the impact of patents on innovation and competitive advantage. Sustaining competitive advantages is as important as creating them. Patents help sustaining competitive advantages by increasing the production cost of competitors, by signaling a better quality of products and by serving as barriers to entry. If patents are rewards for innovation, more R&D should be reflected in more patent applications but this is not the end of the story. There is empirical evidence showing that patents through time are becoming easier to get and more valuable to the firm due to increasing damage awards from infringers. These facts question the constant and static nature of the relationship between R&D and patents. Furthermore, innovation creates important knowledge spillovers due to its imperfect appropriability. Our paper investigates these dynamic effects using US patent data from 1979 to 2000 with alternative model specifications for patent counts. We introduce a general dynamic count panel data model with dynamic observable and unobservable spillovers, which encompasses previous models, is able to control for the endogeneity of R&D and therefore can be consistently estimated by maximum likelihood. Apart from allowing for firm specific fixed and random effects, we introduce a common unobserved component, or secret stock of knowledge, that affects differently the propensity to patent of each firm across sectors due to their different absorptive capacity.     

A micro-econometric analysis of the role of R&D spillovers using a nonlinear translog specification

This paper assesses the impact of Research and Development (R&D) spillovers on production for a panel of 1,203 Italian manufacturing firms over the period 1998–2003.The estimations are based on a nonlinear translog production function augmented by a measure of R&D spillovers which combines the geographical distance between firms, the technological similarity within each pair of firms and the technical efficiency of each firm. The estimation method takes into account the endogeneity of regressors and the potential sample selection issue regarding the decision by firms to invest in R&D. Results show that the translog production function is more suitable than the Cobb-Douglas for modelling firm behaviour and that returns to scale are increasing. Moreover, the internal and external stocks of technology exert a significant impact on firms’ production. Finally, it emerges that, for Italian manufacturing firms, R&D capital and R&D spillovers are highly substitutes.     

Channels of R&D spillovers: An empirical investigation of Swiss firms

Research and development (R&D) spillovers are, potentially, a major source of endogenous growth in various recent ‘new growth theory’ models. According to these models, firms engage in R&D in order to seek rents. Public aspects of this R&D then spill over to other firms, thereby creating increasing returns relating to scale and long-term growth. The actual mechanisms by which spillovers occur has, however, not been systematically studied. In order to provide empirical facts on this issue the paper investigates the effectiveness of various channels of R&D spillovers. The analysis is based on a survey conducted among 358 Swiss R&D executives representing 127 different lines of business, mainly in the manufacturing sector. The results can be summarized as follows. First, undertaking independent R&D was perceived by the R&D executives questioned as the most effective channel of R&D spillovers at the intra-industry level. This was followed by reverse engineering for product innovations and the utilization of publications and information from technical meetings for process innovations. Second, learning methods that rely on interpersonal communication were judged as moderately effective in the following order of importance: (i) publications and technical meetings; (ii) conversations with employees from innovating firms; and (iii) hiring away employees from innovating firms. The last method, especially, is not valued as effective in the Swiss context. Third, learning methods related to the patent system—licensing technology and patent disclosures in the patent office—were seen as moderately effective or not effective at all. Fourth, the effectiveness of the various channels of R&D spillovers varies from one industry to another. Fifth, the various channels of R&D spillovers can be reduced to subgroups, so that patterns of learning of competitive technology can be established.     

Spillovers,absorptive capacity and agglomeration

I study knowledge spillovers in an industry where firms are heterogeneous in their ability to adopt knowledge (absorptive capacity). I set up a model in which firms choose locations anticipating potential gains and losses from other firms’ R&D activity. I apply the model to the US software industry and obtain the following results: the data supports localized knowledge spillovers; firms that have higher absorptive capacity are sorted into more agglomerated counties; ignoring firm heterogeneity leads to biased estimates of gains from spillovers; spillovers play an important role in explaining the geographic distribution of firms, but only within regions with high R&D activity.     

Endogenous Technological Spillovers: Causes and Consequences

We develop a new approach to endogenizing technological spillovers. We analyze a game in which firms can first invest in cost-reducing R&D, then compete on the human-capital market for their knowledge-bearing employees, and finally enter the product market. If R&D employees change firms, spillovers arise. We show that technological spillovers are most likely when they increase total industry profits. We use this result to show that innovation incentives are usually stronger for endogenous than for exogenous spillovers and that endogenous spillovers may reverse the result that innovation incentives are stronger under quantity competition than under price competition. Finally, we explore the robustness of our results with respect to contractual incompleteness and the number of R&D workers.     

Do We Still Need Cities? Evidence on Rates of Innovation from Count Data Models of Metropolitan Statistical Area Patents

Evidence of the importance of urban agglomeration and the offsetting effects of congestion are provided in a number of studies of productivity and wages. Little attention has been paid to this evidence in the economic growth literature, where the recent focus is on technological change. We extend the idea of agglomeration and congestion effects to the area of innovation by empirically looking for a nonlinear link between population density and patent activity. A panel data set consisting of observations on 302 USA metropolitan statistical areas (MSAs) over a 10-year period from 1990 to 1999 is utilized. Following the patent and R&D literature, models that account for the discreet nature of the dependent variable are employed. Strong evidence is found that agglomeration and congestion are important in explaining the vast differences in patent rates across US cities. The most important reason cities continue to exist, given the dramatic drop in transportation costs for physical goods over the last century, is probably related to the forces of agglomeration as they apply to knowledge spillovers. Therefore, the empirical investigation proposed here is an important part of understanding the viability of urban areas in the future.     

Favorable strategies for the success of entry into new technological areas: an entrepreneurial perspective

This study considers the act of entering into new technological domains for R&D purposes as one of the most intense entrepreneurial activities within large established firms, referring to it as R&D entrepreneurship. Attempting to detect factors that could strengthen (or weaken) the impact of R&D entrepreneurship on innovation performance, I examine the moderating role of three important R&D strategies, namely the knowledge plurality, internal focus, and R&D collaboration. I empirically test the hypotheses developed in this study on secondary, longitudinal economic and patent data from a sample of 139 firms from the industries of pharmaceuticals, biotechnology, and chemicals for a 7-year period, using fixed-effects negative binomial regression models. Findings support that the relationship between R&D entrepreneurship and innovation performance is positively moderated by knowledge plurality but negatively by internal focus and R&D collaboration.

     

Real options game models of R&D competition between asymmetric firms with spillovers

Using real options game models, we consider the characterization of strategic equilibria associated with an asymmetric Research and Development (R&D) race between an incumbent firm and an entrant firm in the development of a new innovative product under market and technological uncertainties. The random arrival time of the discovery of the patent protected innovative product is modeled as a Poisson process. Input spillovers on the R&D effort are modeled by the change in the leader’s hazard rate of success of innovation upon the follower’s entry into the R&D race. Asymmetry between the two competing firms include sunk costs of investment, stochastic revenue flow rates generated from the product, and hazard rates of arrival of success of R&D efforts of the two firms. Under asymmetric duopoly, we obtain the complete characterization of the three types of Markov perfect equilibria (sequential leader–follower, preemption and simultaneous entry) of the firms’ optimal R&D entry decisions with respect to various sets of model parameters. Our model shows that under positive input spillover, preemptive equilibrium does not occur in the R&D race due to the presence of dominant second mover advantage. The two firms choose optimally to enter simultaneously if the sunk cost asymmetry is relatively small; otherwise, sequential equilibrium would occur. When the initial hazard rate is low relative to the level of input spillover, simultaneous entry would occur as an optimal decision, signifying another scenario of dominant second mover advantage. On the other hand, when the initial hazard rate is sufficiently high so that the first mover advantage becomes more significant, simultaneous equilibrium does not occur even under high level of positive input spillover.     

R&D in a strategic delegation game

This paper studies how a separation of ownership and management affects firms' R&D and production decisions in Cournot quantity competition. It is found that when R&D spillovers are small, owners strategically direct their managers away from profit maximization towards sales. Consequently, managerial firms invest more in R&D and have higher output and lower prices compared to their entrepreneurial counterparts. On the other hand, when spillovers are large, owners ‘penalize’ managers for sales. In this case, managerial firms have lower R&D, lower output and higher prices. Nonetheless, managerial firms have lower profits than their entrepreneurial counterparts regardless of spillovers. This paper also examines the welfare effects of a separation of ownership and management. It is found that in terms of first-best social welfare, managerial firms are more (less) efficient than their entrepreneurial counterparts with low (high) spillovers. However, in terms of second-best social welfare, managerial firms are less efficient with all spillovers. © 1997 John Wiley & Sons, Ltd.     

Investigating Collaborative R&D Using Patent Data: The Case Study of Robot Technology in Japan

The growing trend of collaborative R&D initiated by firms has been well documented. However, the evidences regarding basic questions such as the benefits of collaboration and the motives of firms are still mixed. The main novelty of this paper is to investigate these questions by using comprehensive patent data with a focus on information concerning inventors. We consider the case of robot technology in Japan since early 1990s and get the following results. First, collaboration with external research partners lead to a higher quality of the invention. Second, the determinants and motives, which encourage firms to engage in collaborative research, differ depending on the partner they are collaborating with. Copyright © 2011 John Wiley & Sons, Ltd.     

Strategic location choice under dynamic oligopolistic competition and spillovers

This paper investigates firms׳ optimal location choices explicitly accounting for the role of inwards and outwards knowledge spillovers in a dynamic Cournot oligopoly with firms that are heterogeneous in their ability to carry out cost-reducing R&D. Firms can either locate in an industrial cluster or in isolation. Technological spillovers are exchanged between the firms located in the cluster. It is shown that a technological leader has an incentive to locate in isolation only if her advantage exceeds a certain threshold, which is increasing in firms׳ discount rate, in industry dispersion, and in the intensity of knowledge spillovers. Scenarios are identified where although it is optimal for the technological leader to locate in isolation, from a welfare perspective it would be desirable that she locates in the cluster.     

Firm performance and knowledge spillovers from academic, industrial and foreign linkages: the case of China

Firm performance may be enhanced by linkages with academic institutions, other firms, and foreign markets that confer knowledge spillovers as well as internal R&D that creates firm-specific knowledge. In particular, firm productivity and innovation may be enhanced by positive externalities from knowledge and technology produced by universities and research institutions (URIs) and diffused to the domestic economy. Productive contributions from such linkages might be particularly expected in China, where policy measures have explicitly supported and facilitated connections between URIs and firms to stimulate economic development and competitiveness. In this paper, we measure the performance impact of such knowledge spillovers in Chinese firms by using a variety of specifications, estimators, and robustness checks, including an ??instrumental variable?? specification that controls for endogeneity. We find more patent activity in Chinese firms with URI connections and enhanced firm productivity particularly from linkages with research institutions (RIs). Introduction of new products, processes, and new businesses is also positively associated with linkages with research institutions, as well as with linkages with other firms.     

Issues in Assessing the Effect of Interindustry R&D Spillovers

This paper aims to clarify three issues concerning the weighting methodol ogy generally used to evaluate interindustry R&D spillovers. These issues concern the likely nature of the spillovers estimated through different types of supporting matrices; the similarity between input–output (IO), technology flows and technological proximity matrices; and the relevance of the assumption that a single matrix can be used for different countries. Data analyses of weighting components show that technology flows matrices are in an intermediate position between IO matrices and technological proximity matrices, but closer to the former. The various IO matrices, as well as the three technological proximity matrices, are very similar to each other. The panel data estimates of the effect of different types of interindustry R&D spillovers on industrial productivity growth in the G7 countries reject the hypotheses that a technology flows matrix can be approximated by an IO matrix and that a single IO matrix can be usedfor different countries. By transitivity, the procedure that comprises using a single technology flow for several countries is not reliable. The international comparison shows that each country benefits from different types of R&D externality. In Japan and, to a lesser extent, in the US, the rate of return to direct R&D is very high and is likely to compensate for relatively weak interindustry R&D spillover effects. In the five other industrialized countries, the reverse observation is true: strong social rates of return to R&D counterbal ance the poor performances of direct R&D.     

Technological Opportunity and Productivity of R&D Activities

Economists have managed to find a positive impact of R&D efforts on productivity. However, the empirical results of their studies have not explained the observed sectoral differences in this important impact. With due reference to three global industries, namely, chemical, computer, and electrical/electronic, the objective of this study is to evaluate the impact of technological opportunity on the productivity of R&D activities. Technological opportunity refers to the ease of achievement of innovations and technical improvements, which could be jointly represented by the intensities of knowledge spillovers, inter-firm research overlap and scope of research. In this study, the degree of technological opportunity is quantified by patent statistics. The empirical findings confirm a positive relationship between technological opportunity and the productivity of R&D effort, and the estimated rate of return falls within the range as reported by past studies.     

R&D,Interindustry and International Technology Spillovers and the Total Factor Productivity Growth of Manufacturing Industries in Canada, 1974-1989

The paper presents new econometric evidence on the relationship between total factor productivity growth and the R&D expenditures of Canadian manufacturing industries in the presence of interindustry and international spillovers of technology. In contrast to studies that presume that international spillovers are incorporated in imports of intermediate and/or capital equipment goods, the present paper assumes that the principal channel of transmission of new technology is foreign direct investment. Three original proxies for international spillovers use information on patenting, the size and the origin of foreign ownership in the host country and the R&D expenditures in the country of origin. The results suggest that the nexus between industry's own R&D expenditures and the TFP growth is significant and positive, especially for the process-related R&D. Domestic interindustry spillovers of new technology have a larger effect on TFP than industry's own R&D expenditures. All three proxies for international technology spillovers are associated positively and significantly with TFP growth. However, international spillovers contribute to TFP growth less than domestic interindustry spillovers and less than own process-related R&D.     

Residual income claimancy,monitoring, and the R&D firm: Theory with application to biotechs

This paper models the assignment of residual income claimancy to an R&D manager and applies the model to biotechnology firms. Residual income claimancy provides incentives for the manager to monitor the R&D process. Since the nature of R&D and of monitoring scientific effort is different, our model predicts stark differences in the residual income claimancy of managers and in other aspects of organization for innovative R&D firms like biotechs. In particular, R&D firms are expected to be more owner‐managed, more expert‐managed, and smaller in size. Cross‐sectional data on biotechnology firms is consistent with these implications. Additionally, longitudinal data indicate that as firms alter their focus on biotech research, their organizational structure changes as expected. Our approach suggests a process of firm and industry evolution related to technological maturity and points to the importance of incentives rather than risk sharing in determining organizational form, similar to the original analysis of franchising. Copyright © 2004 John Wiley & Sons, Ltd.     

International endogenous growth,macro anomalies,and asset prices

This paper develops a two-country production economy with complete and frictionless financial markets and international trade in which investments in research and development (R&D) by entrants lead to endogenous new firm creation and economic growth. Innovative entrants use both consumption goods in their innovation technologies to capture international technological spillovers. Households also consume both goods. Specifically, I compare the equilibrium implications from the model with technology spillovers to the ones from an equivalent model without technology spillovers, i.e. a model where entrants only use domestic final goods in their R&D expenditures. With these two models at hand, new insights on the interplay of endogenous growth and long-run risks, technology spillovers, complete financial markets, and international trade are obtained, particularly with respect to international macro and asset pricing anomalies. The novel technology spillover channel has the potential to help explaining a number of these anomalies.     

R&D Spillovers on a Salop Circle

The paper describes quality/price equilibrium and welfare effects of R&D spillovers when firms are located around the circumference of a Salop circle, and the extent of the spillovers may depend on the geographic proximity between firms. In particular, we show that an increase in competition may have a positive effect on the provision of quality and firms' profits. We also extend the model allowing a multinational enterprise to locate at the centre of the circle. In this scenario it is important to understand the interplay of local R&D spillovers with the spillovers that propagate from and to the centre. Copyright © 2015 John Wiley & Sons, Ltd.