Publications
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PDF Corporate R&D intensity decomposition: Theoretical, empirical and policy issues
Research and development (R&D) indicators are increasingly used not only to facilitate international comparisons, but also as targets for policies… Show more stimulating research. An example of such an indicator is R&D intensity. The decomposition method of R&D intensity was conceived with the aim of evaluating aggregate R&D intensity and explaining the differences in R&D intensity between countries. For policy purposes, it is particularly important to determine whether the differences are intrinsic (e.g. due to firms' underinvestment in R&D) or structural (e.g. due to differences in the sectors that make up an economy). Despite its importance for analytical purposes, the theoretical and methodological framework enabling decomposition of corporate R&D intensity has been elaborated only recently, and it is still not commonly used in the literature. Moreover, examination of the R&D intensity of firms in different industries and at different layers of aggregation leads to mixed results, the reasons for which are not fully understood. This paper aims to review the theoretical and methodological frameworks of corporate R&D intensity decomposition and how it is applied in the literature in order to determine the policy implications of empirical results that at first sight may seem to be contradictory. More specifically, this paper surveys the literature to determine (i) the theoretical framework of determinants of corporate R&D intensity, (ii) the methodologies that have been put in place to decompose corporate R&D intensity and the empirical results reached and (iii) the likely reasons for the contrasting results. Finally, the paper points out the possible policy implications and suggests some potential avenues for future research in this area. Show less
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PDF Who's doing who? Growth of sales, employment, assets, profits and R&D entangled in a curious five-way love triangle
Understanding causal relationships among key economic variables is crucial for policy makers, who wish to e.g. stimulate private R&D growth.… Show more To this end, we applied a technique recently imported from the Machine Learning community (Structural Vector Autoregressions (SVARs) identified using Independent Components Analysis (ICA)) to a set of the world's largest R&D investors. Our analysis highlights the key role of sales growth, rather than profits growth, in stimulating R&D growth. R&D growth appears at the end of the causal ordering of the growth process.Our results suggest that policies to increase private R&D would do better to target sales rather than profits. Show less
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PDF EU corporate R&D intensity gap: What has changed over the last decade?
This paper contributes with new findings to the literature on corporate research and development (R&D) intensity decomposition by examining the… Show more effects of several parameters on R&D intensity and investigating its comparative distribution among top R&D firms, sectors and world regions/countries. It draws on a longitudinal company-level micro-dataset from 2005 to 2013, and uses both descriptive statistics and decomposition computation methods. The results confirm the structural nature of the EU R&D intensity gap. In the last decade the gap between the EU and the US has widened, whereas the EU gap with Japan and Switzerland has remained relatively stable. The study also uncovers differences in R&D intensity between EU and US companies operating in the sectors more responsible for the aggregate R&D intensity gap. In contrast, the BRIC (Brazil, Russia, India and China) and Asian Tiger countries (Hong Kong, Singapore, South Korea and Taiwan) R&D intensity gap compared to the EU has remained relatively stable, while companies from the rest of the world are considerably reducing such gap. Finally, the study shows a high concentration -sustained over time- of R&D investment in a few countries, sectors and firms, but in the EU there are fewer smaller top R&D firms that invest more intensively in R&D, than in the most closed competing countries. Show less
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PDF Sector dynamics and demographics of top R&D firms in the global economy
This paper investigates the sectoral dynamics of the major economies during the last decade through the lens of the top… Show more 1000 R&D investors worldwide and looks at how firms' demographics are related to sector distribution. In doing so, it contributes to the literature on the EU corporate R&D intensity gap as well as on that on industrial dynamics. Contrary to the common understanding, the results show that in the EU the distribution of R&D among sectors has changed more than in the USA, which has experienced a shift mainly towards ICT-related sectors. In both the EU and the USA the pace of R&D change is slower than in the emerging economies. Furthermore, the EU has been better able than the USA and Japan to maintain its world share of R&D investment. Even more interestingly, the results show that age is strongly related to the sector (and dominant technology) in which firms operate. This suggests that focusing on sector (technological) dynamics could be even more relevant from a policy perspective than focusing only on young leading innovators. In fact, EU firms are less able to create or enter new high-tech sectors in a timely way and fully exploit the growth opportunities offered by first mover advantages. Show less
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PDF Technological diffusion as a recombinant process
In this work we analyse patterns of technological development using patent applications at the United States Patent and Trademark Office… Show more (USPTO) over the 1973-2012 period. Our study focuses on the combinations of technological fields within patent documents and their evolution in time, which can be modelled as a diffusion process. By focusing on the combinatorial dimension of the process we obtain insights that complement those from counting patents. Our results show that the density of the technological knowledge network increased and that the majority of technological fields became more interconnected over time. We find that most technologies follow a similar diffusion path that can be modelled as a Logistic or Gompertz function, which can then be used to estimate the time to maturity defined as the year at which the diffusion process for a specific technology slows down. This allows us to identify a set of promising technologies which are expected to reach maturity in the next decade. Our contribution represents a first step in assessing the importance of diffusion and cross-fertilization in the development of new technologies, which could support the design of targeted and effective Research and Innovation and Industrial policies. Show less
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PDF Employment Effect of Innovation
This paper estimates and decomposes the employment effect of innovation by R&D intensity levels. Our microeconometric analysis is based on… Show more a large international panel data set from the EU Industrial R&D Investment Scoreboard, and our proxy for innovation intensity is a measurable and continuous variable. Employing flexible semi-parametric methods - the generalised propensity score - allows us to recover the full functional relationship between R&D investment and firm employment, and to address important econometric issues, which is not possible in the standard estimation approach used in previous literature. Our results suggest that modest innovators do not create and may even destruct jobs by raising their R&D expenditures. Most of the jobs in the economy are created by innovation followers: increasing innovation by 1% may increase employment up to 0.7%. The job creation effect of innovation reaches its peak when R&D intensity is around 100% of the total capital expenditure, after which the positive employment effect declines and becomes statistically insignificant. Innovation leaders do not create jobs by further increasing their R&D expenditures, which are already very high. Show less
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PDF Patent Boxes Design, Patents Location and Local R&D
Patent boxes have been heavily debated for their role in corporate tax competition. This paper uses firm-level data for the… Show more period 2000-2011 for the top 2,000 corporate research and development (R&D) investors worldwide to consider the determinants of patent registration across a large sample of countries. Importantly, we disentangle the effects of corporate income taxation from the tax advantage of patent boxes. We also exploit a new and original dataset on patent box features such as the conditionality on performing research in the country, and their scope. We find that patent boxes have a considerable effect on attracting patents, mostly because of their favourable tax treatment, especially for high-quality patents. Patent boxes with a large scope in terms of tax base definition also have stronger effects on the location of patents. The size of the tax advantage offered through patent box regimes is found to deter local innovative activities, whereas R&D development conditions tend to attenuate this adverse effect. Our simulations show that, on average, countries imposing such development conditions tend to grant a tax advantage that is slightly greater than optimal from a local R&D impact perspective. Show less
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PDF Key Enabling Technologies and Smart Specialization Strategies. European Regional Evidence from Patent Data
The paper aims at investigating whether Key Enabling Technologies (KETs) can have a role in facilitating regional Smart Specialization Strategies… Show more (S3). Drawing on the economic geography approach to S3, we formulate some hypotheses about the impact that KETs-related knowledge can have on the construction of new regional technological advantages (RTAs). By crossing regional data on patent applications, in KETs-mapped classes of the International Patent Classification (IPC), with a number of regional economic indicators, we test these hypotheses on a panel of 26 European countries over the period 1980-2010. KETs show a positive impact on the construction of new RTAs, pointing to a new 'enabling' role for them. KETs also exert a negative moderating role on the RTAs impact of the density of related pre-existing technologies, pointing to the KETs capacity of making the latter less binding in pursuing S3. Overall, the net-impact of KETs is positive, pointing to a new case for plugging KETs in the S3 policy tool-box. Show less
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PDF Multinationality, R&D and Productivity Evidence from the top R&D investors worldwide
The paper investigates the impact that the multinational scope of firms' activities can have on their productivity. First, we argue… Show more that such an impact is both direct and indirect, and that the latter is channelled through higher incentives to invest in R&D. Second, we posit that the composition of these direct and indirect effects is different if multinationality is measured at the intensive margin (higher share of multinational on total activities) rather than at the extensive margin (greater geographical dispersion of multinational activities). Using a large sample of top R&D investors in the world, we propose an econometric model based on an R&D and a productivity equation, which are both allowed to depend on multinationality. With this model we can disentangle the direct and indirect effects of multinationality on productivity appropriately. We find i) a positive direct impact of multinational intensity on productivity, while the geographical dispersion of multinationality is negatively correlated with productivity; ii) multinationality (along both dimensions) has a positive indirect impact through higher investments in R&D; iii) this positive indirect effect is however not large enough to compensate the negative direct one at the extensive margin. Results are largely consistent with a theoretical approach that combines transaction cost theory with an economic analysis of how incentives to invest in R&D depend on multinationality. Show less
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PDF R&D profitability: the role of risk and Knightian uncertainty
This paper provides the first empirical attempt of linking firms' profits and investment in R&D revisiting Knight's (1921) distinction between… Show more uncertainty and risk. Along with the risky profit-maximizing scenario, identifying a second, off-setting, unpredictable bias that leads to heterogeneous returns to R&D investments is crucial to fully understand the drivers of corporate profits. Show less