The missing link between innovation and performance in Brazilian firms: a panel data approach

This study aims to verify if there is a positive relationship between innovation and productivity and/or profit in Brazil using a recursive model in line with the Crépon, Duguet and Mairesse (CDM) model. Using a rich combination of three databases, this paper considers a sample of more than 10,000 Brazilian industrial firms and the period 2001–2008. Besides using R&D expenditure as a measure of innovation input, this study also tests the technical-scientific personnel stock as a more appropriate measure of innovative effort in emerging countries. This variable considers the tacit knowledge intrinsic to the worker and corrects a possible measurement error bias in the R&D expenditure variable. The empirical strategy uses a reduced form of the CDM model in a panel data structure to provide consistent estimates as it controls for selectivity, simultaneity and endogeneity due to unobserved firm effects. There are still few studies that apply the CDM model for panel data, especially regarding developing countries. The main results suggest that technical-scientific workers positively affect the firms’ probability to innovate while R&D expenditure has no effect. The results also highlight the absence of the effect of innovation on productivity and profit, suggesting a missing link between innovative efforts and Brazilian firms’ performance.     

Relationship lending and innovation: empirical evidence on a sample of European firms

This paper investigates the impact of relationship lending on innovation (the probability to innovate and the intensity of innovation). Using a unique dataset providing detailed information on bank–firm relationships across European firms, we relate different proxies of relationship lending (soft information, long-lasting relationships, number of banks and share of the main bank) to innovation. We find a very strong and robust positive effect of ‘soft-information-intensive’ relationships, a less robust positive effect of long-lasting relationships and a negative effect of credit concentration as measured by the number of banking relationships. We also find that ‘soft-information-intensive’ relationships reduce credit rationing for innovative firms, while long-lasting relationships seem to favour innovation via other relational channels. These results raise some concern on the impact of screening processes based on automatic procedures, as those suggested by the Basel rules, on firms' capability to finance innovative activities in Europe.     

The effect of minimum wage on firm markup: Evidence from China

Our paper examines the impact of minimum wage on firm markup in China. We find that minimum wage generates a positive effect on firm markup. More value-enhancing innovative activities, TFP improvement, and efficient labor resource allocation are the potential channels. Further, the positive influence of minimum wage is more pronounced for privately-owned firms, for firms with higher labor intensity and firms with less financial constraints. Besides, these findings are generally robust to different estimation methods. Our results provide new insights into understanding the channels through which labor regulation may cause the change of markup for the emerging markets countries.     

Impact of nontariff measures on firms in Tunisia

This paper analyzes the effect of nontariff measures (NTMs) on firms in Tunisia. It draws a precise picture of NTMs’ effects on firms’ imports. We use firm‐level data to take into account firm heterogeneity. We explore the impact of NTMs on small vs. medium and large firms. We also consider the differentiated impact of NTMs. Some measures have informational content and help reduce information asymmetries. When the endogeneity issue of NTMs is controlled for, results show an overall positive impact of NTMs on imports. They provide evidence that NTMs are more beneficial to the imports of medium and large firms. Moreover, NTMs with informational content have an import enhancing effect. An extended analysis separating importing and exporting firms from those solely importing suggests that both types of firms benefit from the positive effects of NTMs. This result highlights the need to assist small firms facing NTMs. Furthermore, some NTMs with informational content should be addressed carefully and not considered only as barriers to trade to be eliminated. Instead, harmonization efforts between countries can be a better policy.     

Employment And Mobility Of Workers In Industries With Different Intensity Of Innovation: Evidence On Italy From A Panel Of Workers And Firms

In this paper a panel of workers and firms is used to investigate employment composition and dynamics in industries which differ by innovation intensity. To define the latter industry-wide statistics were used (for a subset of 2,800 firms, individual data on R&D expenditures and investments in innovative processes were available from a survey on manufacturing). Firms and workers are observed over the period 1985–1991. The paper document an high rate of labour turnover. Annual separation rates are high in all size-classes, but they decline from 50% in small firms (less than 20 employees) to 13% in large ones (with more than 1,000 employees). Separations are inversely related to an industry's innovative intensity (from 18% in the highly innovative industries to 31% in the traditional industries). A logit model, which controlled for the characteristics of workers and firms, showed that the probability of separation is higher among manual and young workers and decreases monotonically with the firm size. The probability of separation declines as job tenure and, perhaps more importantly, the individual's wage increases. After controlling for these factors, the evidence suggests that the highest probability of separation is in traditional industries, the lowest is in the more innovative industries. The result is strengthened when firm-level data on R&D and other innovative expenditures are used. Other things being equal, firms that invest in R&D have a more stable labour force, and firms that invest in non-innovative processes have a less stable labour force. We therefore find empirical evidence to support the hypothesis that more innovative firms cultivate more durable employer-employee relationships. The fraction of job-to-job moves (with no intervening period of unemployment) on total separations qualifies the turnover of workers. Controlling for firm size, the percentage of job-to-job moves increases fairly regularly with worker's skills and with the industry's innovative intensity. Thus the innovative intensity of he industry appears to have a positive effect on the share of job-to-job moves, while there is some evidence that it lowers the chances of separation. This result may be linked to the skills and specialisations of the workforce; it is certainly related to the higher demand for labour in the High Tech Sectors (where employment is growing) relative to the less innovative sectors.     

Country governance,corruption, and the likelihood of firms’ innovation

Using a sample of firms from the World Bank Enterprise Survey for the period 2006–2016 in emerging and developing countries, we find that corruption has a negative impact on the likelihood of innovations, thus supporting the “sanding-the-wheels” hypothesis. Our empirical results also show that corruption at the firm level, in the manufacturing industry, and in regions with the worst governance or that are more corrupt has a significant negative effect on innovation. In addition, country governance plays a particularly important role in innovative activity for corrupt firms. The policy implication is that the government or authority should strengthen the positive role of government effectiveness, rule of law, regulatory quality, and control of corruption in order to improve firms’ innovation within an environment of corruption.     

INNOVATION ACTIVITIES EXPLAINED BY FIRM ATTRIBUTES AND LOCATION

In this paper, innovation activities of a firm are observed as its R&D spending and participation in three categories of innovation systems. The various factors that can influence a firm's innovation efforts are divided into, (i) firm location reflecting the regional milieu and (ii) firm attributes such as corporate structure, nature of the knowledge production, type of industry and a set of specific firm characteristics. The study is based on information about 2094 individual firms, which may be non-affiliated or belong to a group (multi-firm enterprise). The empirical analysis applies a novel data set to examine the influence of location versus a vector of firm attributes. Among innovative firms, the location of a firm does not influence neither the R&D intensity nor the frequency of interaction in horizontal and vertical innovation systems, when controlling the skill composition, physical capital intensity, industry, firm size and market extension. The paper contributes to the literature by observing that innovative firms have similar characteristics irrespective of where they are located, although the share of innovative firms differs between regions.     

Measuring and Explaining Innovative Capability: Evidence from Southeast Asia

What causes firm‐level product innovation in developing economies? This paper answers this question by emphasizing the role of process improvements that are influential in product innovation. We construct a firm‐level innovative capability score using novel, broad‐based, but detailed data on various process improvement practices obtained from firms in Southeast Asia. We then investigate the factors that may affect innovative capability. We also estimate the effect of the innovative capability score on product innovation controlling for research and development intensity and other firm characteristics. Our empirical investigation identifies a chief executive officer (CEO)'s past experience at a foreign or large firm, and buyer pressure to adopt international standards as key determinants of innovative capability. Novel and unique findings from our examination include: (i) the impact of a CEO's past experience at a foreign or large firm on the innovative capability is larger for local enterprises and small‐ and medium‐sized enterprises; (ii) the impact of share of foreign workers in the upper managerial levels only appears to be significant in foreign firms and larger firms; and (iii) buyer pressure is a more likely contributor to innovative capability compared with capital tie‐ups with multinational enterprises or joint venture buyers that capture vertical technology transfers. Finally, our empirical results show that a firm in Southeast Asia is more likely to achieve product innovation if the firm has had a higher innovative capability.     

Open technology innovation activity and firm value: evidence from Korean firms

Despite the importance of Open Technology Innovation Activity (OTIA) for firm value, the literature investigating effects of OTIA announcements of developing country firms is not known in international academic circles. Our study using an event study approach examines the effects of OTIA (technology import and joint R&D) announcements of firms in Korea, one of the leading developing and highly innovative countries. We find that the announcements of OTIA produce positive average abnormal returns. Interestingly, unlike the prior studies on developed country firms, OTIA with firms in the homogenous industry leads to greater firm value than that involving firms in heterogenic industries. This implies an importance of a technological fusion with external firms in different industries for value of developing country firms. In addition, this article finds no home bias that a nationality of partner firms is not essential for the relation between OTIA and value of firms.     

Determinants of firms’ investment behaviour: a multilevel approach

This article investigates the determinants of firms’ investment behaviour using firm data from 101 developing and emerging economies. A substantial number of firms does not invest in fixed capital or invests little relative to sales revenue. Using a multilevel probit model we study what factors trigger investment, and using a multilevel Heckman selection model we study what factors influence a firm’s investment-to-sales ratio. We find that firms’ investment behaviour has relatively little dependency on a country’s macroeconomic setting. Additionally, we find that, on average, firms that are completely foreign-owned have a relatively lower investment-to-sales ratio. Finally, we find evidence which suggests that the probability of investing is higher for firms located in countries with more control of corruption and we find some evidence which suggests that partially foreign-owned firms located in countries with relatively less corruption have a relatively higher investment-to-sales ratio.     

The nonlinear effects of firm size on innovation: an empirical investigation

ABSTRACT

In conventional studies, large firms tend to emphasize more on process innovation than product innovation. This paper explores factors that could indicate a distinct pattern of firms’ innovation-size relationship: threshold size that implies a positive effect of firm size on the probability of product innovation success; cannibalization effect that creates incentives for large firms to favor product innovations; and financial constraints that have differential effects given different firm sizes. A hypothesis about a non-monotonic relationship between the proportion of product innovation and firm size is tested with nonlinear and dynamic econometric models. For the large firms, empirical evidence shows product innovations result in an overall larger share of new products in total sales, relative to existing products in which process innovations are rooted.     

Persistence and economic effects of technological innovations: a dynamic and sequential analysis of Uruguayan manufacturing firms

This paper analyzes the long-term relationship between research and development (R&D), innovations and productivity in 400 Uruguayan manufacturing firms during the period 2001–2009 based on a modified version of the structural model of Crepon, Duguet and Mairesse. The paper also analyzes thoroughly the decision of these firms to engage in R&D activities by using a novel categorical dependent variable, which takes three values: non-performance R&D activities, occasional performance or continuous performance over the period. Furthermore, the study investigates whether these manufacturing ?rms innovate persistently or discontinuously over the period. The results suggest a positive link between the intensity of R&D activities and the generation of product and process innovations. They also indicate that innovation probability is temporally persistent at the ?rm-level only for product innovations. Finally, the empirical findings reveal that these technological innovations have a positive effect on firm’s productivity.     

Heterogeneous firms,corporate taxes and export behavior: A firm-level investigation for Italy

This paper analyses the effect of home corporate taxes on a firm’s decision to expand the scale of its activity through exports using a rich dataset on Italian firms. Starting out from the observation that firms’ export activity vary greatly among them and tend to be systematically related to firm’s characteristics, we relate differences in firms’ export choices to firm level incidence of corporate taxes. Our results suggest that (i) corporate taxes matter at both the extensive and the intensive margin and (ii) higher corporate taxes may increase the probability of new firms’ entry in the foreign market while they decrease the export intensity of incumbent exporters.     

INEQUALITY,INCOMPLETE CONTRACTS,AND THE SIZE DISTRIBUTION OF BUSINESS FIRMS*

This article analyzes the effects of intrafirm bargaining on the formation of firms in an economy with imperfect capital markets and contracting constraints. In equilibrium, wealth inequality induces a heterogeneous distribution of firm sizes, allowing for firms both too small and too large in terms of technical efficiency. The findings connect well to empirical facts such as the missing middle of firm‐size distributions in developing countries. The model can encompass a nonmonotonic relationship between aggregate output and inequality. It turns out that an inflow of capital may indeed decrease output in absolute terms.     

Innovation and Performance: Benchmarking Australian Firms

This article empirically analyses the link between innovation and performance using a sample of large Australian firms, with a specific aim of developing benchmarking tools. Innovation is measured by firms' investment in R&D and applications for patents, trademarks and designs. An innovation index is constructed to provide one method of benchmarking. The index incorporates a firm's innovative activities into a single figure after accounting for firm size. The index provides a ranking of the most innovative firms in Australia. A second method of benchmarking uses a stochastic production frontier. This type of analysis identifies the firms which are located closest to a ‘best practice innovation frontier’.     

Firm heterogeneity in TFP,sectoral innovation and location. Evidence from Italy

Sectoral and territorial specificities affect a firm’s capabilities of being productive. While there is a wide consensus on this, a quantitative measure of these effects has been lacking. To this end, we combine a data-set of Italian firms with some meso regional and sectoral variables and apply a cross-classified model that allows for a clear distinction between firm, region-specific and sector-specific effects. After observing a marked TFP heterogeneity across firms, the paper addresses the issue of understanding how much differences in firms’ productivity depend on regional localisation and sector specificities. Results refer to 2004–2006 and have three aspects. First, they confirm that the main source of firm variety is mostly due to differences revealed at individual level. Secondly, we find that the sector is more important than location in explaining firms’ TFP. Lastly, the results show that firm TFP increases when it belongs to more innovative sectors. Similarly, companies get benefits from belonging to sectors where there is a high proportion of firms using R&D public support and a high propensity to collaborate in innovative projects.     

Input-trade liberalization and firm export decisions: Evidence from Argentina

Trade openness contributes to the diffusion of the modern technologies embodied in imported intermediate goods, which play a central role in the economic growth of developing countries. This paper investigates the micro-economic effects of input-trade liberalization. Previous work has found positive effects of access to foreign inputs on firm performance. If the availability of imported intermediate goods yields firm productivity gains, we would also expect a positive effect of input-trade liberalization on firm export decisions. This paper contributes to this literature by looking at the relationship between changes in input tariffs and within-firm changes in export status. Using detailed firm-level data from Argentina, I demonstrate that the probability of entering the export market is higher for firms producing in industries that have experienced greater input tariff reductions. These empirical findings are robust to alternative specifications that control for other trade-policy reforms, and industry and firm characteristics.     

异质性、出口与中国企业技术创新

本文使用来自中国企业的大样本微观数据,运用Probit模型对影响企业创新的异质性特征从全要素生产率（TFP）因素进行了拓展,同时将所有制异质性作为“基础因子”,综合考察了多维度异质性特征、出口等对中国企业技术创新的影响。结果发现：(1)TFP因素对所有类型企业的创新倾向均具有显著的正向影响,即表现出明显的“创新自选择”效应;(2)出口参与因素显著提高了各类型企业的创新倾向,但出口密度因素对国有和民营企业的技术创新影响存在显著的倒U型关系,而对外资企业技术创新影响的非线性关系并不明显;(3)其他影响因素如企业规模、人力资本等异质性特征在不同类型企业的创新决策中表现各异。     

Does R&D spending boost tangible investment? An analysis on European firms

This article investigates the relationship between firm’s R&D intensity, expressed as R&D expenditure over sales, and investment intensity in tangible assets. It is commonly acknowledged that R&D requires additional physical investment to be implemented. R&D increases a firm’s productivity and return to tangible investments, thus, providing to the firm incentives to bear high tangible capital costs and to invest more. This represents a crucial issue for a firm’s growth, particularly considering the strong interaction between physical capital accumulation and technological progress. The analysis is based on a large sample of manufacturing firms across seven European countries in the period 2007–2009. Since the sub-sample of firms performing R&D might not be random, there may potentially be an endogeneity issue. The analysis also considers that firms may decide to spend on R&D and investment in physical capital simultaneously. The questions of both endogeneity and simultaneity are dealt with by employing an instrumental variable two-step procedure. We find a positive and significant impact of R&D intensity on firms’ tangible investment intensity. The econometric results highlight the importance of financial factors, particularly with respect to firms’ internal resources. Exposure to international trade has a negative impact on investment, possibly depending on the time-span of the sample used.

Abbreviations: Technological Innovation and R&D; Investment Capital; Industry Studies; Firm Behavior; Empirical Analysis     

Firm age and the probability of product innovation. Do CEO tenure and product tenure matter?

This paper examines the influence that the age of a firm has on the probability of product innovation by taking into account two factors: the role of the CEO’s tenure and the lifecycle of the last product introduced. In a sample of Italian manufacturing firms (n = 2163), analysis reveals that the new entrants’ high innovative activity is mainly driven by the new CEO’s innovation propensity, which is strictly dependent on his tenure. Likewise, the lower innovation activity observed in mature firms is mostly explained by the dynamics of the product’s lifecycle and the CEO’s tenure. More generally, the existence of a negative relationship between innovation and firm age is questioned, as controlling for time-related variables that overlap during the company’s lifecycle —product age and CEO’s tenure — turns the relationship positive. Finally, the innovative behavior of incumbent companies turns out to be dependent on the renewal abilities of newly appointed external CEOs, whereas CEOs from within the family play a minor role.