Employment Effects of Different Innovation Activities: Microeconometric Evidence

Extending a recently developed multi-product model and distinguishing between different product and process innovation activities, this paper reports new results on the relationship between innovation and employment growth in manufacturing and service firms in Germany. The model is tailor-made for analysing firm-level employment effects of innovations using specific information provided by CIS data. It establishes a theoretical link between employment growth and innovation output. The econometric analysis confirms that product innovations have a positive impact on employment. In contrast to previous studies, this effect is independent of the novelty degree. Moreover, different employment effects between manufacturing and service firms regarding process innovations were found. Finally, from a cross country perspective the results for Germany are similar to those found for Spain and the UK. --Innovation,employment,applied econometrics,manufacturing,services

Persistence of Innovation Stylised Facts and Panel Data Evidence

This paper investigates whether firms innovate persistently or discontinuously over time using an innovation panel data set on German manufacturing and service firms for the period 1994–2002. It turns out that innovation behaviour is permanent at the firm–level to a very large extent. Using a dynamic random effects discrete choice model and a new estimator recently proposed by Wooldrigde (2005), I further shed some light on the driving forces for this phenomenon. The econometric results show that past innovation experience is an important determinant for manufacturing as well as for service sector firms, and hence confirm the hypothesis of true state dependence. In addition, the results highlight the important role of knowledge provided by skilled employees and unobserved individual heterogeneity in explaining the persistence of innovation.Innovation; persistence; state dependence; unobserved heterogeneity; dynamic random effects panel probit model

Short-term borrowing for long-term projects: Are family businesses more susceptible to 'irrational' financing choices?

There are noticeable differences between the roles that various forms of credit financing play in family businesses and in other businesses. Family businesses take out more often bank loans specifically to finance investments and innovations, and they particularly often resort to the short-term and relatively expensive option of an overdraft. How can we explain these differences in financing choices? Do family businesses tend to use shorter-term, more expensive sources of financing because they face more restrictions than other or are there other motives such as financial independence at play? Our econometric approach to these issues is to study the financing behaviour and creditworthiness. For both of these aspects, we compare family businesses with non-family-run businesses that otherwise have the same characteristics. Our results do not confirm that family businesses are faced by stronger financial constraints but they indicate that family firms are prepared to accept higher financing costs in order to preserve their financial independence. --Corporate financing,innovation,family businesses,financing restrictions

Innovative capability and financing constraints for innovation: More money, more innovation?

This study presents a novel empirical approach to identify financing constraints for innovation based on the concept of an ideal test as suggested by Hall (2008). Firms were offered a hypothetical payment and were asked to choose between alternatives of use. If they selected additional innovation projects, they must have had some unexploited investment opportunities that were not profitable using more costly external finance. We attribute constraints for innovation not only to lacking financing, but also to firms' innovative capability. Econometric results show that financial constraints do not depend on the availability of internal funds per se, but that they are driven by innovative capability. --Innovation,financing constraints,innovative capability,multivariate probit models

The contribution of international R&D to firm profitability

The internationalisation of corporate R&D opens up the chances to participate in international knowledge sharing. This increasingly motivates firms to accelerate the pace and extent of their international R&D activities in order to enhance innovativeness and consequently competitiveness and profitability. Such business ventures, however, might be associated with huge organizational costs as well as risks of outgoing knowledge spillovers. In this paper we empirically address the question whether international R&D activities boost profitability. We employ a large data set of about 1300 firms from the German Community Innovation Survey (CIS). The empirical results demonstrate that R&D location matters for profitability. Firms with both domestic and foreign R&D activities make significantly higher profits than all other firms, including those that carry out solely domestic R&D. We furthermore ascertain that the degree of R&D internationalisation affects profitability. Our findings suggest that medium decentralised firms which innovate in two or three foreign countries outperform firms with centralized or highly decentralized international R&D strategies. Notwithstanding, decentralized firms achieve a higher firm performance than firms that solely conduct R&D activities in their home country. --R&D,Innovation,Internationalisation,Firm performance,Profit

Churning of R&D personnel and innovation

This paper explores the role of R&D worker mobility on innovation performance. As one main novelty, we employ churning as a measure for worker mobility. Churning depicts the number of workers which are replaced by new ones. It is a very informative indicator since a firm may be exposed to simultaneous leave and inflow of R&D workers even if the size of R&D employment remains unchanged. Hence, we can separate the effect of replacement from net change in R&D workforce. Our results from estimating various knowledge production functions suggest an inverse u-shaped relationship. The exchange of R&D personnel fosters innovation through inter-firm knowledge spillovers and improved job-match quality up to certain threshold. The point when costs of churning exceed the benefits is reached faster if the R&D knowledge is non-duplicative. --innovation,churning,mobility

Strategy-proof division with single-peaked preferences and initial endowments

We consider the problem of (re)allocating the total endowment of an infinitely divisible commodity among agents with single-peaked preferences and initial endowments. We propose an extension of the so-called uniform rule and show that it is the unique rule satisfying strategy-proofness, Pareto optimality, and an equal-treatment condition. This last condition is implied by the combination of anonymity and translation invariance, which fact is used to obtain a second characterization. The resulting rule turns out to be peaks-only and individually rational: the allocation assigned by the rule depends only on the peaks of the preferences, and no agent is worse off than at his initial endowment.mathematical economics and econometrics ;