Regional resilience and fat tails: A stochastic analysis of firm growth rate distributions of German regions

This paper breaks down the distributional analysis of firm growth rates to the domain of regions. Extreme growth events, i.e. fat tails, are conceptualized as an indicator of competitive regional environments which enable processes like structural adaptation or technological re-orientation. An understanding of the heterogeneous dynamics at the level of firms, the 'turbulence underneath the big calm' (Dosi et al. 2012), provides a micro-funded empirical perspective on the evolutionary dimension of regional resilience. Therefore, the flexible Asymmetric Exponential Power (AEP) density is fitted to firm data for each German region during the years of economic downturn (2008-2010). Peculiarities of employment growth are explicitly taken into account by applying a new maximum likelihood estimation procedure with order statistics (Bottazzi 2012). The estimated parameters, which measure the tails' fatness, are then related to various region-specific factors that are discussed in the literature on regional resilience. Results show that firm growth rate distributions remain asymmetric and fat tailed at the spatially disaggregated level, but their shape markedly differ across regions. Extreme growth events, i.e. firm-level turbulences, are primarily a phenomenon of economically better performing regions at the aggregate level and further intensified by the presence of a higher qualified workforce. Besides, the fatness of the tails depends on the regions' industrial structure

Growth dynamics in regional systems of technological activities - A SVAR approach

This paper analyses the causal relationships in regional technological systems within a structural vector autoregression (SVAR) framework. Applying a data-driven identification strategy based on Independent Component Analysis, it shows how the regional growth dynamics of economic, research, innovation and educational activities affect each other instantaneously and over time in five different industries. Referring to the type of industry and its knowledge base, expectations are derived on how industry-specific growth processes unfold. Knowledge on the causal relations among the various activities in such regional technological systems is of utmost relevance to the design and implementation of efficient policy instruments

Chinese firm dynamics and the role of ownership type: A conditional estimation approach of the Asymmetric Exponential Power (AEP) density

This paper investigates the impact of ownership type on the entire growth rate distributional mass of Chinese firms, using a conditional estimation approach of the Asymmetric Exponential Power (AEP) density that goes beyond simple location-shift analysis. We first find a Chinese growth puzzle, i.e., a deviation from the stylized fact of the variance-scaling relationship commonly found in Western European economies. We then find, through five hypotheses, that the ownership type mainly affects the tails of the growth rate distributions. Our results also indicate that barriers of becoming a high growth firm, such as financial constraints, are especially prevalent in the Chinese private sector

Characteristics of Regional Industry-specific Employment Growth - Empirical Evidence for Germany

Regional growth dynamics significantly deviate from a normal process. Using industry-specific employment data for German regions, we find that the asymmetric Subbotin distribution is able to account properly for extreme positive and especially negative growth events. This result confirms previous studies on growth rates of firms and countries and fills an important research gap at the meso-level of regions. Furthermore, we show that regional growth patterns emerge to a considerable degree from the aggregation of micro-level firm growth rates distributions and that the knowledge intensity of the respective industries increases the regions' risk of being effected by extreme growth events

Modelling Firm and Market Dynamics - A Flexible Model Reproducing Existing Stylized Facts

This paper presents a firm and market model that is able to reproduce the empirically observed patterns on firm growth and its statistical characteristics. It goes beyond the existing firm models by reproducing all stylized facts established in the literature. Furthermore, the model is flexible so that it can be adapted to certain industries and life-cycle stages. We analyse and discuss the options that are provided by the various parameters in this sense

Joint R&D subsidies, related variety, and regional innovation

Subsidies for R&D are an important tool of public R&D policy, which motivates extensive scientific analyses and evaluations. The paper adds to this literature by arguing that the effects of R&D subsidies go beyond the extension of organizations monetary resources invested into R&D. It is argued that collaboration induced by subsidized joint R&D projects yield significant effects that are missed in traditional analyses. An empirical study on the level of German labor market regions substantiates this claim showing that collaborative R&D subsidies impact regions innovation growth when providing access to related variety and embedding regions into central positions in cross- regional knowledge networks

Motives behind the mobility of university graduates - A study of three German universities

The mobility of university graduates is influenced by economic factors and individual attitudes. The paper at hand focuses on individual characteristics influencing the spatial preferences of graduates from three universities in Hesse (Germany). Using survey data from prospective graduates in 2012 we find that the majority has preferred locations during the job search, which are on average farther away if the respondents focus on broad availability of job opportunities and leisure/cultural activities. Social ties and a focus on good infrastructure leads to a search dominantly at familiar places, i.e. the home or university region

Joint R&D subsidies, related variety, and regional innovation

Subsidies for R and D are an important tool of public R and D policy, which motivates extensive scientific analyses and evaluations. The paper adds to this literature by arguing that the effects of R and D subsidies go beyond the extension of organizations' monetary resources invested into R and D. It is argued that collaboration induced by subsidized joint R and D projects yield significant effects that are missed in traditional analyses. An empirical study on the level of German labor market regions substantiates this claim showing that collaborative R and D subsidies impact regions' innovation growth when providing access to related variety and embedding regions into central positions in cross-regional knowledge networks

Industry-specific firm growth and agglomeration

This paper studies the industry-specific relationship between industrial clustering and firm growth. The literature usually considers industrial clusters as positive for the general economic development of regions. In particular, their relationship with the formation rate of new firms and the survival rate of existing firms is well documented. However, the impact of agglomeration effects on growth prospects of firms is less clear. Because of the heterogeneity of industries, different agglomeration mechanisms, or the way how industrial clusters are identified and spatially delimited, the conclusions which are drawn in the empirical literature on the impact agglomerations and clusters on firm growth are partly contradictory. Hence, FRENKEN, CEFIS and STAM (2011) consider this as one of the key questions in economic geography at large. The study at hand analyses and compares the relationship between firm growth and industrial clusters for 23 industries separately. Therefore, for each firm a micro-geographically defined agglomeration measure is calculated, which is free of the modifiable areal unit problem (MAUP), that means it is independent from the chosen regional aggregation level and the shape of the regional boundaries. To assess the impact of related economic as well as knowledge generating activities, the space is modelled by using travel time distances between all actors and a flexible two-parameter log-logistic distance decay function framework based on behavioural assumptions. The resulting model is estimated by using quantile regression techniques to account for the stochastic properties of firm growth rates and to shed light on differences in the relationship between highly growing and declining firms and agglomeration economies. It is found that the firms? growth prospects are not affected or even hampered by the agglomeration of own-industry employment. On the contrary, the impact of proximate scientific publications tends to be positive. In general, better performing firms are less affected by their spatial surrounding, which becomes more influential for declining firms. However, these findings depend on both the kind and the age, i.e. the lifecycle, of an industry. Furthermore, the optimal decay function specifications, which are endogenized in this modelling approach, indicate that the spatial range of agglomeration effects considerably vary both between the industries and variables. Three illustrative cases of industries are discussed in more details

Industry-specific firm growth and aggolmeration

This paper studies the industry-specific relationship between industrial clustering and firm growth. Micro-geographically defined agglomeration measures, free of the modifiable areal unit problem (MAUP), are used to study 23 industries. The spatial impacts of agglomeration of related economic and knowledge generating activities are examined by using travel time distances, a flexible log-logistic decay function framework and quantile regression techniques. We find that firms' growth prospects tend to be hampered by the agglomeration of own-industry employment, but improved by proximate scientific activity. Results depend on the kind and age of industry. Furthermore, the optimal decay functions that measure agglomeration effects considerably vary both between the industries and variables. Three illustrative cases of industries are discussed in more details