Disorganization in the process of transition Firm-level evidence from Ukraine

Most post-communist economies are characterized by an initial collapse in aggregate output. Blanchard and Kremer (1997) and Roland and Verdier (1997) have recently modelled supply-side distortions – disorganization in the links of production – that can lead to a short-term output contraction after market liberalization and a recovery thereafter. This paper is the first to illustrate and test the effects of disorganization in the transition process by using a unique dataset of 300 Ukrainian firms. Our results show that for firms that existed under central planning, disorganization constrains employment and productivity growth during the transition process to a market economy. We also show that the effects of disorganization are greater the more out-dated the capital stock inheritance from the planning system. In contrast, disorganization plays no role in the determination of employment and productivity growth in newly established private firms.
JEL classification: P0, O0, D0.     

Economic integration,industrial structure,and catch-up growth: Firm-level evidence from Poland

We examine if and how deeper economic integration with high-income nations impacts industrial performance. We exploit Poland's accession to the EU in 2004 as a source of variation in the degree of market integration with Germany. Using data on Polish manufacturing firms in the period 1995–2013, we find that EU accession was followed by significant within-firm growth in output and productivity, notably in industries in which Germany was more specialized at the moment of accession. Increased flows of German investment to these sectors played an important role in shaping these effects.     

E-commerce,R&D,and productivity: Firm-level evidence from Taiwan

This study investigates the impact of e-commerce and R&D on productivity, using a unique panel dataset obtained from Taiwanese manufacturing firms for the period from 1999 to 2002. We specifically consider the network externalities of e-commerce and employ the system generalized method of moment (GMM) technique to deal with the endogenous problem of e-commerce adoption. The empirical results show that both e-commerce and R&D capital have a positive influence on productivity, while R&D exhibits a larger productivity-enhancing effect. We also find a complementary relationship between e-commerce and R&D on enhancing productivity. Crucially, the inter-industry network externality of e-commerce significantly contributes to productivity.     

Trade and product market policies in upstream sectors and productivity in downstream sectors: Firm-level evidence from China

This paper explores the heterogeneous productivity impact of trade, product market and financial market policies over the last decade in China. The paper makes a critical distinction between downstream and upstream industries, focusing on the indirect effects of regulation in upstream industries on firm performance in downstream manufacturing industries. We identify the differential effect of these policies on firm productivity growth depending on how far incumbents are relative to the technological frontier. Trade and product market reforms are found to deliver stronger gains for firms that are closer to the industry-level technological frontier, while the reverse holds for financial market reforms. The key conclusion that can be derived from the empirical analysis is that further product, trade and financial market reforms would bring substantial gains in China and could therefore speed up the convergence process. Taken at face value, the empirical estimates would imply that aligning product, trade and financial market regulation to the average level observed in OECD countries would bring aggregate manufacturing productivity gains of respectively 9%, 3% and 6.5% after 5 years.     

Financing choice and local economic growth: evidence from Brazil

Journal of Economic Growth - We study how financing non-traditional local activities, conceived here as a proxy for activity diversification, is associated with economic growth. We use...     

The determinants of pollution levels: Firm-level evidence from Chinese manufacturing

Using a large, unique, firm-level dataset from the Chinese manufacturing sector, we study important factors that are related to emission intensity for three pollutants in China – sulfur dioxide, wastewater, and soot. Our main findings are as follows: (1) compared to state-owned enterprises (SOEs), both foreign-owned firms and domestic public-listed firms exhibit less intensive pollutant emissions; (2) firms in regions with less local protection have lower pollution intensity; (3) better property rights protection is negatively correlated with pollutant discharge over and beyond the national standards; and (4) larger firms, firms in industries that export more, and firms with more educated employees pollute less. These results suggest that China should not target foreign firms more harshly in its effort to reduce industrial pollution. Better institutions in the form of more effective law enforcement and lower entry barriers across regional markets are also means of curbing China’s pressing environmental problems during its current stage of economic development.     

Innovation,product development and market value: evidence from the biotechnology industryinnovation in biotechnology industry

The subject of the paper is financial valuation of firm's knowledge assets and returns to innovation in the biotechnology industry, where such assets appear to play key role in the commercial success of a product. The biotechnology industry is extremely research-intensive, and successful R&D drives profitability. Further, the pharmaceutical product development advances in a number of well-defined stages that allow relatively precise measurement of product development outcomes. The study reports recent biotechnology R&D statistics, and provides estimates of private returns to innovation and product development activity in the biotechnology industry. The conclusions indicate that the financial market recognizes the value of drugs in product development stage, as it expects the innovative knowledge embodied in drug development projects to become marketable products in the future.     

Technological spillover through industrial and regional linkages: Firm-level evidence from China

This paper provides new insights into the study of technology spillover effects through the interaction between industrial and spatial linkages. We develop a theoretical model that provides a useful modeling framework for spillover research, and then empirically test the model inferences using Chinese firm-level data. Input-output tables and spatial decay measurements are combined to construct the key spillover variables. Using seemingly unrelated regressions, the paper finds that vertical spillover effects are more significant than horizontal spillover effects, both within- and between-regions; regional characteristics have greater impacts on vertical spillovers than on horizontal spillovers; and regional spillover effects vary across different regions. Regional policies and regional endowments, including human capital, transportation infrastructure, and enterprise ownership, are crucial in explaining these heterogeneities in regional technology spillover. Our empirical results provide many policy implications including strengthening the connection between upstream and downstream industries and devoting more R&D to upstream industries.     

Quantifying the trade-reducing effect of embargoes: Firm-level evidence from Russia

In 2014, Russia responded to sanctions imposed by a coalition of Western countries with a retaliatory import embargo. I draw on this unique case study and a customs data set on firm-level import transactions to investigate the ramifications of Russia's counter-sanctions on firm-level foreign trade. Using detailed data and a triple-difference estimation strategy, I examine micro-level dynamics and heterogeneities that aggregate data alone do not reveal. I identify the effects of the embargo on the extensive margin (the probability that a firm imports a particular product from a given country in a particular time period) and the intensive margin (the value of a firm's import transaction) of firm-level trade, as well as its effects on logged unit values. The main findings of this study show that the embargo had statistically significant negative impacts on extensive and intensive margins of firm-level trade. I also pinpoint evidence of multiple exemptions from the embargo and a large degree of heterogeneity of firm-level responses to the embargo based on firm attributes, such as firm size and government connection.     

Assessing the returns to collaborative research: Firm-level evidence from Italy

We use firm-level data from Italian manufacturing firms to assess the relationship between various types of R&D and total factor productivity growth, including collaborative research with other firms and universities. A novel twist to our empirical analysis is that we estimate a sample selection model, which allows us to treat the decision to conduct R&D as endogenous. We find strong evidence of positive returns to collaborative research with other companies, whereas collaborative research with universities does not appear to enhance productivity. This result implies that firms may conduct R&D with universities when appropriability conditions are weak and the outcomes of such research projects do not yield direct strategic benefits.     

International talent inflow and R&D investment: Firm-level evidence from China

Using firm-level R&D data with regional international talent data, we find that international talent increases the R&D investment of Chinese manufacturing firms, a result that is further confirmed with patent data and under a number of robustness checks. These findings stem from two mechanisms: international talent boosts human capital accumulation and provides a diversified labor force. Further, the R&D promoting effect is stronger if firms are located in eastern China rather than in other regions, of small and medium-sized rather than large-sized, of domestic ownership rather than foreign ownership. The policy implication is, the introduction of international talent can be a new way to promoting R&D investment, especially for skilled-labor constrained countries.     

Inertial inflation, indexation and price stickiness: evidence from Brazil

This paper evaluates the inertial inflation hypothesis for Brazil. The hypothesis posits that indexation created a feedback mechanism such that one-time supply shocks were fully transmitted into permanent changes in inflation. A theoretical model is used to show that this outcome is based on the assumption of perfect price flexibility. However, with price stickiness indexation does not produce inertial inflation. The degree of inertia is then compared for two periods: one without indexation (1945–1963), and one with indexation (1969–1985). Finally, vector-autoregressive representations are estimated for the latter period, allowing for price stickiness. The empirical results do not support the hypothesis.     

Intra-Industry Gaps in Technology and Investments in Technological Capabilities: Firm-level evidence from Chile

This paper develops a theoretical framework to analyse intra-industry gaps in technology, and tests it with enterprise-level data from a developing country. Following neoclassical theory, the existence of inter-firm technological gaps is explained by factor market segmentation that determines different factor prices and therefore different firms' technological choices. However, intra-industry gaps in technology may also result from the nature of the process of technological development, and from the different level of investments in technological capabilities.The empirical analysis is based on a sample of 338 industrial enterprises from Chile, and shows that it is possible to define technological thresholds, characterised by significant shifts in technology, independently of factor market segmentation. The analysis focuses on five major sectors: food processing, textile and garments, woodworking, metalworking and paper. Firms with different levels of technological complexity coexist within the same industry, and differences in technology are discrete, with different clusters sharing similar characteristics within the same industry. These results also have important policy implications for industrial development, which are drawn in a final section.     

The long-run dynamics of product and process innovations for a multi-product monopolist

This paper introduces the dynamical framework which combines product and process innovations. The model contributes to the theoretical literature on innovations in two ways. First, it permits for the simultaneous dynamics of both types of innovations which is rarely considered in the literature. Second, the products being generated by the innovations are heterogeneous in their investment characteristics. This allows for the formation of the dynamic interdependency between both types of innovations. As a result, the steady-state levels of process innovations for each product are different and influence the dynamics of product innovations in turn.     

Inequality and criminality revisited: further evidence from Brazil

The objective of this study is to shed light on the determinants of criminality rates in Brazil. A panel data model was estimated using Brazilian states’ data. Our main result suggests that income inequality plays an important role in the determination of the crime rate. Furthermore, there are evidence suggesting that both unemployment and urbanization rates are positively related to crime. Based on a GMM approach we find the existence of an “inertial effect” on criminality. Besides that, the GMM results show that public security spending is effective in reducing criminality rates. Contrary to the common wisdom, we could not find evidence that poverty increases violent crimes. Finally, we have evidence that income inequality Granger causes crime, but not the reverse.     

Battle royal in biotechnology: R&D vs. product vs. process innovations

Companies regard innovation as a central element of their business. However, as not all innovation types are the same, the central question is: should their announcements bring about the same effect on performance? This article analyses potential differences in firm value derived from the innovation-type announcements ‘R&;D’, ‘product’, and ‘process’, made by intensive news-generating firms such as biotech companies. The empirical application shows a significantly positive reaction to innovation announcements, with the prospect of future innovation (‘R&;D’ investment announcements) having greater impact on firm value than ‘product’ and ‘process’ innovations. Firm experience also acts as a moderator in this innovation–performance relationship, which is particularly relevant for entrepreneurs who need to develop and send credible signals indicating the value of the firm's intangible assets to the market.     

Firm-level Innovation Models: Perspectives on Research in Developed and Developing Countries

This paper provides a critical review of firm-level innovation models based on research in the industrially advanced countries (IACs) and draws implications for firms in industrialising countries such as Korea and Taiwan. The paper summarises different categories of innovation model and identifies their achievements and weaknesses, showing how a few researchers have successfully linked IAC models to innovation processes found within the more advanced developing nations such as Korea. One of the chief contributions of IAC models is that many of them go substantially into the management of innovation and the decision-making processes within the firm. However, in general, there is a lack of empirical evidence to verify existing models, weak theoretical underpinnings and, in some cases, a failure to sufficiently recognise the diversity and unpredictability of innovation processes. The paper suggests how best to use innovation models and how to overcome some of the difficulties in future research.     

Firm-level Innovation Models: Perspectives on Research in Developed and Developing Countries

This paper provides a critical review of firm-level innovation models based on research in the industrially advanced countries (IACs) and draws implications for firms in industrialising countries such as Korea and Taiwan. The paper summarises different categories of innovation model and identifies their achievements and weaknesses, showing how a few researchers have successfully linked IAC models to innovation processes found within the more advanced developing nations such as Korea. One of the chief contributions of IAC models is that many of them go substantially into the management of innovation and the decision-making processes within the firm. However, in general, there is a lack of empirical evidence to verify existing models, weak theoretical underpinnings and, in some cases, a failure to sufficiently recognise the diversity and unpredictability of innovation processes. The paper suggests how best to use innovation models and how to overcome some of the difficulties in future research.