Spillovers in product and process innovation: evidence from manufacturing firms

This paper proposes a new empirical approach to assess the impact of knowledge spillovers on firms' productivity and demand. I consider a model where process innovations spillovers to other firms raise firms relative efficiency and technological diffusion of product innovations enhances firms' demand. By modelling knowledge capital as a function of own investment in R\ and D and spillovers, I can compare the impact of these two complementary sources of knowledge on both the supply and the demand side. The results obtained confirm the findings already highlighted by previous empirical studies that technological externalities affect significantly firms' productivity growth. The new result obtained is that technological diffusion of product innovations is larger than the one deriving from process innovations, both in magnitude and pervasiveness

Spillovers in product and process innovation: evidence from manufacturing firms.

This paper proposes a new empirical approach to assess the impact of knowledge spillovers on firms' productivity and demand. I consider a model where process innovations spillovers to other firms raise firms relative efficiency and technological diffusion of product innovations enhances firms' demand. By modelling knowledge capital as a function of own investment in R\ and D and spillovers, I can compare the impact of these two complementary sources of knowledge on both the supply and the demand side. The results obtained confirm the findings already highlighted by previous empirical studies that technological externalities affect significantly firms' productivity growth. The new result obtained is that technological diffusion of product innovations is larger than the one deriving from process innovations, both in magnitude and pervasiveness.

Mergers and innovation: the case of the pharmaceutical industry

This paper takes a new look at the effects of mergers on innovation by analysing the relationship between ex-ante technological (and product) relatedness of acquirers and targets and post-merger performances. The analysis is conducted using data on consolidations in the pharmaceutical industry for the period 1988-2004. Empirical results show that merger deals are more likely to be signed between firms with related technologies and drug portfolio. I .find that merged companies have on average, worst performances than the group of non-merging firms and that, contrary to what may be the common wisdom, higher levels of technological relatedness are associated with poorer performances. Finally, consolidations between large pharmaceutical companies seem to have a detrimental impact on the incentives of competitors to undertake research in those therapeutic areas where both acquirer and target are active players.

SPILLOVERS IN PRODUCT AND PROCESS INNOVATION: EVIDENCE FROM MANUFACTURING FIRMS

This paper proposes a new empirical approach to assess the impact of knowledge spillovers on firms' productivity and demand. I consider a model where process innovations spillovers to other firms raise firms relative efficiency and technological diffusion of product innovations enhances firms' demand. By modelling knowledge capital as a function of own investment in R\&D and spillovers, I can compare the impact of these two complementary sources of knowledge on both the supply and the demand side. The results obtained confirm the findings already highlighted by previous empirical studies that technological externalities affect significantly firms' productivity growth. The new result obtained is that technological diffusion of product innovations is larger than the one deriving from process innovations, both in magnitude and pervasiveness.

Assessing the effectos of measurement errors on the estimation of the production function.

This article explores the reasons why GMM estimators of production function parameters are generally found to produce unsatisfactory results. I attribute this finding to the inaccurate construction of the variables used in production function analysis. In particular, I suggest that the problem lies in the use of common price deflators as well as in a capital variable that does not reflect the true flow of capital services because of short-run equilibrium effects. I show that the practice of using industry-wide deflators leads to lower scale estimates, mainly due to a relevant downward bias in the labour coefficient. At the same time, it introduces a large upward bias in estimating the elasticity of output with respect to technological innovation. Moreover, a significant improvement in the estimates of capital coefficients is obtained if the information on the degree of capacity utilization is adequately exploited.

Assessing the effects of measurement errors on the estimation of the production function

This article explores the reasons why GMM estimators of production function parameters are generally found to produce unsatisfactory results. I attribute this finding to the inaccurate construction of the variables used in production function analysis. In particular, I suggest that the problem lies in the use of common price deflators as well as in a capital variable that does not reflect the true flow of capital services because of short-run equilibrium effects. I show that the practice of using industry-wide deflators leads to lower scale estimates, mainly due to a relevant downward bias in the labour coefficient. At the same time, it introduces a large upward bias in estimating the elasticity of output with respect to technological innovation. Moreover, a significant improvement in the estimates of capital coefficients is obtained if the information on the degree of capacity utilization is adequately exploited

Using proxy variables to control for unobservables when estimating productivity: A sensitivity analysis

The use of proxy variables to control for unobservables when estimating a production function has become increasingly popular in empirical works in recent years. The present paper aims to contribute to this literature in three important ways. First, we provide a structured review of the different estimators and their underlying assumptions. Second, we compare the results obtained using different estimators for a sample of Spanish manufacturing firms, using definitions and data comparable to those used in most empirical works. In comparing the performance of the different estimators, we rely on various proxy variables, apply different definitions of capital, use alternative moment conditions and allow for different timing assumptions of the inputs. Third, in the empirical analysis we propose a simple (non-graphical) test of the monotonicity assumption between productivity and the proxy variable. Our results suggest that productivity measures are more sensitive to the estimator choice rather than to the choice of proxy variables. Moreover, we find that the monotonicity assumption does not hold for a non-negligible proportion of the observations in our data. Importantly, results of a simple evaluation exercise where we compare productivity distributions of exporters versus non-exporters shows that different estimators yield different results, pointing to the importance of making suitable timing assumptions and choosing the appropriate estimator for the data at hand.Total factor productivity, Semiparametric estimator, Simultaneity, Timing assumptions, Generalized Method of Moments

The Effects of the Universal Metering Programme on Water Consumption, Welfare and Equity

There is consensus that meters are necessary for the promotion of efficient water usage. However, available evidence on the benefits and costs of metering is scant, and often based on small samples. We use data from the first large-scale compulsory metering programme in England to study its impact on consumption, social efficiency and distributional outcomes. We find a decrease in consumption of 22% following meter installation, a considerably higher value than assumed as a policy target. This result implies that, overall, the benefits of metering outweigh its costs. We also document a large heterogeneity in reaction, with many households showing low sensitivity to the new tariff. This novel finding suggests that selective metering, where only more price-sensitive households receive meters, would deliver even higher social welfare. Looking at distributional effects, we find similar reduction in consumption across income groups, although only high-income households gain financially from the new tariff