Globalisation,industrial diversification and productivity growth in large European R&D companies

This paper aims to assess the impact of both geographic and industrial diversification of economic activities on the productivity performance of large European R&D Multinational Enterprises (MNEs). Based on the worldwide subsidiaries of these firms, we measure the performance of the firms according to their level of industrial diversification and globalisation that we proxy with the presence and importance of subsidiaries in the EU, North America and Asia–Pacific regions. The sample consists of large R&D firms that represent about 80 % of total European R&D. In general, the results indicate a positive impact from globalisation on firms’ R&D productivity, especially in the US, while a negative impact for industrial diversification is found.     

Policies to benefit from the globalization of corporate R&D: An exploratory study for EU countries

This article explores how the globalization of corporate R&D has led to the emergence of new policy strategies across the EU, involving a more proactive role of governments and a closer connection between innovation policies and FDI promotion policies. The first part presents an analytical framework encompassing the main policy objectives and instruments at stake, which aims at facilitating the design and evaluation of policies geared towards the globalization of corporate R&D. Both the policies to attract inward FDI in R&D and those towards R&D offshoring are addressed, as well as the distinct policy implications of alternative entry modes. The second part provides evidence of the evolution of European policies in response to the globalization of corporate R&D, pointing out a set of country-specific examples and suggesting avenues for policy intervention at the EU level. Although the focus is on the EU, this study may inform policy learning in other developed and developing countries alike.     

R&D subsidies and export performance of manufacturing industries

One of the main purposes of government R&D subsidies is to give domestic enterprises a competitive edge in international trade of high technology products. The empirical evidence, however, is disappointing: cross-section regression approach for six industries and five countries yielded a negative impact of R&D subsidies on exports of research intensive goods. An analysis of the distribution of public funds suggests that this poor performance could at least partially be explained by the high concordance of national technology policies and the concentration of public funds on big science projects.     

Determinants of bank interest margins in Central and Eastern Europe: A comparison with the West

We investigate the determinants of bank interest margins in the Central and Eastern European countries (CEEC). We assess to what extent the relatively high bank margins in CEEC can be attributed to low efficiency or non-competitive market conditions, controlling for the macroeconomic environment and the influence of foreign and state-owned banks. We systematically compare CEEC banks with Western European banks. Our results indicate that banking in the CEEC is on a virtuous path, at least in the EU accession countries: Increased efficiency benefits customers, while capital adequacy supports systemic stability. In the non-accession countries, important policy actions are required.     

Fostering product innovation: Differences between new ventures and established firms

This study combines insights from the entrepreneurship, competency-based view and innovation policy literature to analyze the relationships among different types of public incentives designed to foster innovation and product innovation at both new ventures and incumbent firms. To test our hypotheses, we ran a system of regression models on a cross-national sample comprised of 5238 firms from 29 European countries and found a different pattern for new ventures and incumbents. Our results suggest that support for attendance or participation in trade fairs and networking with other companies are the most effective methods of promoting product innovation for new ventures. However, for incumbent firms, we found that the most effective policies consisted of tax reduction for R&D expenditures and subsidies for acquiring buildings or other infrastructure(s) for innovation activities. This distinction prompts interesting insights related to theory development in research on entrepreneurship and innovation policy.     

Governance and effects of public R&D subsidies: Evidence from China

This study examines the effects of public research and development (R&D) subsidies and the governance of such subsidies on firm productivity based on the analysis of a firm-level panel dataset between 1998 and 2007 in China. It is found that public R&D subsidies tend to support more productive firms and the productivity of these government-backed firms is improved further after they get the government support. Less attention is paid to the observable or measurable performance measurements in ex-ante project selection, and the ex-post effects are stronger when the governance of the public R&D subsidies becomes more decentralized due to an exogenous policy change. In other words, better decentralization of governance is associated with more pronounced effects of R&D subsidies. Identification concerns are addressed with various approaches to confirm the treatment effect of public R&D subsidies and the governance of such subsidies.     

Are systems of innovation in Eastern Europe efficient?

This paper explores the determinants of productivity in the countries of Eastern Europe (EE) through the perspective of ‘narrow’ and ‘broad’ national systems of innovation (NSI). Based on panel econometrics, it examines the extent to which systems in EE could be considered ‘(in)efficient’. Our results suggest that the EE countries have lower levels of productivity than might be expected given their research and development (R&D), innovation and production capabilities. The inefficiencies of ‘broad’ NSI are compounded by the inefficiencies of ‘narrow’ NSI in terms of generating numbers of science and technology publications and resident patents relative to R&D employment compared to the rest of the world. Our results point to an important distinction between technology and production capability as the drivers of productivity improvements and provide some policy implications.     

Impact of R&D and Technology Diffusion on Productivity Growth: Empirical Evidence for 10 OECD Countries

This paper examines the empirical evidence on the impact of performed R&D and of R&D embodied in intermediate and capital goods on productivity performance in 10 major OECD countries over the last two decades. To quantify intersectoral and international technology flows, industry-level embodied R&D variables were constructed from an input–output (IO) R&D embodiment model. The productivity variables used are discrete Divisia growth indexes of total factor productivity (TFP), which were estimated from an IO growth accounting model. The results from pooled regressions indicate that the rates of return of the R&D variables were positively significant and increasing in the 1980s. In particular, embodied R&D is an important source for TFP growth in services, indicating very high social returns of the flows of capital-embodied technology into this sector. Moreover, the information and communi-cation technology (ICT) cluster of industries played a major role in the generation and cquisition of new technologies at the international level.     

The R&;D and productivity relationship of Korean listed firms

This study analyzes the relationship between R&D investment and the productivity of Korean R&D-engaged firms. An interdependent chain of equations including the propensity to invest, R&D investment and productivity are estimated in a multi-step procedure accounting for selectivity and simultaneity biases. Using Korean firm level panel data of listed firms from 1986 to 2002, we find four main empirical results. First, there is a two-way causal relationship between R&D investment and productivity for Korean listed firms. Second, Chaebol firms were associated with lower R&D growth as well as lower labor productivity growth in comparison to non-Chaebol firms. Third, there was a substantial reduction in growth rates both in R&D investment and labor productivity in 1997-1998, immediately following the Asian financial crisis. Fourth, considering the positive feedback effect from productivity growth to R&D growth, a decrease in R&D investment growth after the Asian financial crisis should have been harmful by further decreasing productivity growth.     

Innovation dynamics and fiscal policy: Implications for growth,asset prices,and welfare

We study the equilibrium implications of different fiscal policies on macroeconomic quantities and welfare by utilizing an endogenous growth model that matches asset pricing data well. The fiscal instruments of interest are (i) subsidies to R&D expenditure, consumption and capital investment, and (ii) cuts in labor and corporate tax rates. Our equilibrium analysis provides new insights on the interplay of innovation dynamics and fiscal policy. Importantly, we find growth and welfare to be inversely related when changing R&D subsidies. However, this depends on how well the model reproduces asset pricing dynamics. Moreover, only subsidies to capital investments and cuts in the corporate tax rate have the potential to increase both growth and welfare.     

The impact of R&D on factor-augmenting technical change – an empirical assessment at the sector level*

The aim of the paper is to quantify endogenous factor-augmenting technical change driven by R&D investments in a panel of 11 OECD countries over 1987–2007. This paper contributes to the scant empirical evidence on the speed, sources and direction of technical change for various sectors and production factors. Assuming cost-minimization behavior, a CES framework is used to derive a system of equations that is estimated by a GMM system estimator. The estimated factor-augmenting technology parameters show that in most sectors, technical change was labor-augmenting and labor-saving. Statistically significant effects of manufacturing and services R&D were found on factor-augmenting technical change (with the highest R&D elasticities found in the high-tech manufacturing and transport, storage and communication sectors). Whereas ‘in-house’ R&D stimulates total factor productivity, R&D spilled over to other sectors has a capital-augmenting effect accompanied by a higher use of labor. The results of this study provide a starting point for incorporating endogenous factor-augmenting technical change in impact assessment models aimed at broad policy analysis including economic growth, food security or climate change.     

On the R&D/marketing interface in knowledge intensive entrepreneurial firms

In this paper we focus on the performance impact associated with whether R&D or marketing takes the lead in product innovations and/or product development. We examine empirically the performance of a sample of entrepreneurial firms across 10 European Union countries for which we can identify alternative regimes in which R&D, or in which marketing, is viewed as being relatively more important in creating and sustaining the firm’s competitive advantage. We find that when R&D is the dominant strategy, firms realize greater growth in sales, other factors held constant.     

The impact of technological relatedness, prior ties, and geographical distance on university-industry collaborations: A joint-patent analysis

Empirical studies on R&D collaborations between universities and firms have mainly centered their attention on universities and firms' characteristics that favor the establishment of collaborative agreements. In this paper, I extend the current research framework investigating the role that specific technological and relational attributes may play on the relevance of such collaborations. Specifically, I focus on the effects exerted by three relevant factors, namely technological relatedness, prior collaboration ties, and geographical distance, on university-industry joint innovation value. I develop testable hypotheses about their impact on the innovative performance of R&D university-industry collaborations, and test them on a sample of 796 university-industry joint patents, developed by 33 universities located in 12 different European countries. Our results suggest that partners' technological relatedness has an inverted U-shaped relationship with innovation value. In addition, prior ties and geographical distance between universities and firms are both positively related to the achievement of higher innovative outcomes.     

Is R&D spending influenced by disinvestment and local political corruption? The case of Indian central public sector enterprises

The current study examines the effect of disinvestment (dilution of state ownership) and local political corruption on R&D spending in enterprises owned by the central government of India. Based on certain characteristic features of innovation as a strategy available to state-owned enterprises, I build two sets of hypotheses formalising the channels of how these variables may affect the possibility and amount of R&D. Data is drawn from multiple sources to compile a dataset that covers all manufacturing central government-owned enterprises in India over a period of ten years from 2007 to 2016. The study employs an instrumental variable technique to reduce the endogeneity between disinvestment and R&D decisions. We find that, while disinvestment and local political corruption have strong negative effects on whether a firm invests in R&D or not, it has no effect on the amount of R&D. In fact, the amount is driven by a host of firm-specific factors such as size, profit and proficiency of the share of skilled labor, managerial strength and non-unionisation of labor. We also find that the effects are strongly driven by the size of firms, special status awarded to firms and the ideology of the state where the enterprise operates.     

The R&D knowledge base in city-agglomerations and knowledge searching in product innovative SMEs

ABSTRACT

This paper looks at the relation between the R&D knowledge base of city-agglomerations and knowledge sourcing in product innovative small and medium-sized enterprises (SMEs). The small open Belgian economy is used as a test case. The characteristics of the city-agglomeration’s R&D knowledge are posited to be instrumental for SMEs’ reliance on particular sources of information for innovation. The R&D knowledge base is studied as a multidimensional concept consisting of R&D capacity, R&D specialization and R&D diversification. A representative sample of product innovative SMEs drawn from two waves of the Community Innovation Survey between 2008 and 2012 reveals that a strong R&D capacity at city-agglomeration level favours private external information sources for innovation, but has no influence on the likelihood to rely on public sources for innovation. Accordance between specialization of the private R&D knowledge base and the SME’s activities positively influences the use of clients as information sources for innovation, whereas under these circumstances supplier responsiveness turns out to be less frequently solicited for. A more diversified private R&D environment reduces the reliance on universities and public research organizations as information sources for innovation. A public R&D knowledge base specialized in natural sciences or engineering favours information sources from universities.     

The contribution of research and innovation to productivity

This paper examines the impact of investment in research and innovation on Australian market sector productivity. While previous studies have largely focused on a narrow class of private sector intangible assets as a source of productivity gains, this paper shows that there is a broad range of other business sector intangible assets that can significantly affect productivity. Moreover, the paper pays special attention to the role played by public funding for research and innovation. The empirical results suggest that there are significant spillovers to productivity from public sector R&D spending on research agencies and higher education. No evidence is found for productivity spillovers from indirect public funding for the business enterprise sector, civil sector or defence R&D. These findings have implications for government innovation policy as they provide insights into possible productivity gains from government funding reallocations.     

Growth and welfare effects of corruption penalties

This paper analyses the steady-state effect of business corruption penalties on economic growth, corruption and welfare. To that end, the baseline horizontal R&D growth model is extended to include corruption, which is generated in intermediate goods production. Taxation on corruption depresses profits in production but also wages, leading to labor being reallocated from production to R&D, and, therefore, to a higher economic growth rate. Moreover, it also reduces corruption and increases welfare if preferences towards a corruption-free environment are strong enough. The results are in line with the data observed for 15 EU countries.     

Are innovation and R&D the only sources of firms’ knowledge that increase productivity? An empirical investigation of French manufacturing firms

The economic literature presents knowledge accumulation as one of the most important characteristics of innovation. The accumulation of knowledge arises from complex and dynamic interactions between a firm??s own internal capacity and external expertise. Research and development (R&D) remains important in the innovation process, but it must be integrated with knowledge from other sources, such as training and knowledge capitalization. This paper investigates the relationship between such knowledge sources and the productivity of French firms. Using asymptotic least squares, a Cobb-Douglas function including R&D, innovation, training expenditure and ISO 9000 certification is estimated for 1,213 French manufacturing firms. Our results show that innovation, training and ISO 9000 certification have a positive and significant impact on firms?? productivity.     

Corporate R&D and firm efficiency: evidence from Europe’s top R&D investors

The main objective of this study is to investigate the impact of corporate research and development (R&D) activities on firm performance, measured by labour productivity. To this end, the stochastic frontier technique is used on a unique unbalanced longitudinal dataset comprising top European R&D investors over the period 2000–2005. In this framework, this study quantifies technical inefficiency of individual firms. From a policy perspective, the results of this study suggest that if the aim is to leverage firms’ productivity, the emphasis should be put on supporting corporate R&D in high-tech sectors and, to some extent, in medium-tech sectors. On the other hand, corporate R&D in the low-tech sector is found to have a minor effect in explaining productivity. Instead, encouraging investment in fixed assets appears important for the productivity of low-tech industries. Hence, the allocation of support for corporate R&D seems to be as important as its overall increase and an ‘erga omnes’ approach across all sectors appears inappropriate. However, with regard to technical efficiency, R&D intensity is found to be a pivotal factor in explaining firm efficiency and this turns out to be true for all industries.     

Strategies for innovation and productivity in Japan and America

The purpose of this paper is to describe the types of organizational settings in the West that have been especially conducive for innovation and productivity. Then the same predictive factors are tested for a sample of 44 Japanese factories in order to investigate the extent to which similar relationships are found in both nations.The results suggest that R&D and the innovation function is handled somewhat differently in Japan, but that the consequences of the scale of operations for innovation and productivity are basically similar. In general, large scale operations are more productive, but less innovative in both nations. However, emphasis on specialized R&D seems to be more characteristic of U.S. industry. Many small firms in Japan achieve innovative performances with relatively little expenditure on R&D per se. However, to what extent the Japanese formula which has worked in the past will continue to work in the high technology era of the 1980s remains an open question.