R&D,free entry,and social inefficiency

We employ a three-stage game model with cost-reducing research and development (R&D) that is subject to spillovers to consider the problem of excess entry under free-entry equilibrium relative to the social optimum. Firms choose to enter or exit a market in the first stage, choose R&D in the second stage and output in the final stage. Results show that there is socially inefficient or excessive entry in equilibrium. However, we uniquely demonstrate that research spillovers hold the key to whether established results regarding socially inefficient entry hold. Specifically, excessive entry occurs as long as research spillovers are relatively small, but this is not necessarily the case with large spillovers. Some policy implications are discussed.     

Spillovers and absorptive capacity in the decision to innovate of Spanish firms: the role of human capital

This paper investigates whether the existence of knowledge spillovers and the capacity of firms to assimilate them, which we relate with R&D intensity and some human resource management practices, are associated with the decision to innovate of Spanish firms. In order to do this, we employ data from the ‘Central de Balances’ database, which covers both manufacturing and services firms during the period 2003–2007, and use an estimator proposed by Wooldridge [2005. Simple solutions to the initial conditions problem in dynamic nonlinear panel data models with unobserved heterogeneity. Journal of Applied Econometrics 20, no. 1: 39–54] for dynamic random effects discrete choice models. The empirical exercise provides evidence on the positive link between spillovers and the innovative behaviour of companies, not just for the knowledge generated in the same industry, but also for that generated in the same region or by the public sector. Moreover, this link is stronger for those firms with a higher capacity to absorb those spillovers. This ability not only works through firms’ R&D capabilities, but also through factors such as the quality of the labour force, the share of temporary employment and the amount of resources spent in training. In addition to these factors, we find that innovation performance exhibits a high degree of inertia. Further, some other observed firm characteristics, such as size, sales growth, export behaviour, sector capital intensity or financial structure variables, are also found to be relevant determinants of the likelihood of innovation.     

R&D policy in a vertically related industry

In this paper, we analyze the effectiveness of public policy aimed to stimulate business-performed R&D in a vertically related market. We examine the role of an R&D active upstream supplier in a four-stage R&D model, where we incorporate public funding. The considered policy instrument is direct funding of firms’ R&D efforts. We calculate the optimal policies and show that they have a positive impact on firms’ R&D investments. From a welfare point of view, it is optimal to differentiate the subsidy rates between the upstream and the downstream markets. Competition in the product market leads to a higher subsidy rate to the upstream supplier than to the downstream firms. When concentration is high in the downstream market, the optimal solution is an R&D subsidy for these firms, otherwise the optimal solution is an R&D tax for the downstream firms.     

The effectiveness of R&D subsidies

In this paper, the effectiveness of R&D subsidies is analyzed in an oligopolistic model that we apply to the cases of international R&D competition and cooperation. We find that the existence of asymmetric information among firms on whether a rival (or partner) is being subsidized or not may play a key role in explaining whether subsidies are effective or not in increasing R&D investments. In particular, it is shown that if the existence of the subsidy is made public (e.g. because strict information release regulation about R&D subsidies is enforced) and depending on the strategic relationship between the firms’ R&D efforts, an R&D subsidy could even hurt the subsidized firm.     

Network structure and robustness: lessons for research programme design

The information and communication technology (ICT) network of the last two European Research Framework Programmes (FPs) is deeply influenced by two distinct groups of organizations: a small group of hubs (3% of the participants) hold the key to keeping the network together and a second group of non-hub connectors large enough (39% of the participants) with a significant share of the overall networking activity provide a robust base for the network. The ICT network can survive the removal of single important funding instruments such as integrated projects or specific targeted research projects. Increasing policy rhetoric on innovative application in the new FP (Horizon 2020) should be reflected in a shift of core participants from largely public research and teaching organizations to private-sector companies.     

A spatial analysis of R&D: the role of industry proximity

This paper employs individual firm data in order to check the existence of industry-spatial effects alongside other microeconomic determinants of R&D investment. Spatial proximity is defined by a measure of firms’ industry distance based on trade intensity between sectors. The spatial model specified here refers to the combined spatial-autoregressive model with autoregressive disturbances. In modelling the outcome for each location as dependent on a weighted average of the outcomes of other locations, outcomes are determined simultaneously. The results of the spatial estimation suggest that in their R&D decision firms benefit from spillovers originating from neighbouring industries.     

The productivity impact of R&D investment: are high-tech sectors still ahead?

Our aim is to investigate the relationship between a firm's R&D expenditures and its productivity, looking at sectoral peculiarities. We use a unique longitudinal database consisting of 1809 US and European manufacturing and service firms over the period 1990–2008. Our main findings can be summarised as follows. Consistently with previous literature, the knowledge stock has a significant positive impact on a firm's productivity. More interestingly, the coefficient turns out to be significantly larger in the R&D-user services and high-tech manufacturing sectors than in the non-high-tech manufacturing sectors. Contrary to the ‘latecomer advantage’ approach, these outcomes suggest that firms in high-tech sectors are still ahead in terms of impact on productivity of R&D investments.     

Does R&D,human capital and FDI matter for TFP in OECD countries?

ABSTRACT

This study investigates the interplay between research and development (R&D), human capital (HC), foreign direct investment (FDI) and total factor productivity (TFP) in OECD countries. We divide the sample into two sub-groups; the European and the non-European states so as to account for underlying country heterogeneity. The analysis follows a panel data approach over the period 1995–2015, taking into account the modelling on non-stationarity, long-run relationships and short-run dynamics with a panel VAR. Both R&D and HC have a positive effect on TFP, whilst FDI has a positive and significant effect only in the case of non-European countries. Moreover, the contribution of R&D is higher than that of HC and FDI in all cases. Thus, based on these findings, policymakers should design and implement policies to increase resources invested in R&D, with a consistent ongoing spending review, to attract foreign direct investment, especially for the majority of the European and some of the non-European countries and to improve education system on a more productive innovation and research base.     

Signalling,Disclosure And The Implications Of Financial Structure For Uk Corporate R&D ∗

This paper investigates the impact of R&D disclosure and finance variables on the level of R&D expenditures. The question addressed is: what is the impact of changes in disclosure requirements on the relationship between R&D expenditure and the financing of firms? The question is motivated by the possible signalling role that elective disclosure may have had prior to changes in accounting practices to ensure R&D disclosure.     

TACKLING THE ENDOGENEITY OF FERTILITY IN THE STUDY OF WOMEN'S EMPLOYMENT IN DEVELOPING COUNTRIES: ALTERNATIVE ESTIMATION STRATEGIES USING DATA FROM URBAN BRAZIL

Abstract

Opinions differ about whether family structure, especially fertility, should be considered endogenous in models of behavior in developing countries. Faced with a dearth of good instruments, mainstream researchers often urge working in reduced form and, therefore, losing variables of policy interest or limiting the type of questions they ask to those where good instruments are available. Rather than treating endogeneity as a yes or no characteristic, we suggest instead that researchers consider the likely magnitude of endogeneity bias before moving to reduced form. Facing a situation where endogeneity bias is often presented as a concern but where we expect little endogeneity bias, we tackle endogeneity using multiple econometric techniques not available to the average researcher. We find support for our hypothesis that little bias arises due to the assumption of exogeneity of recent fertility in a model of women's employment.