Programme 2016 Barcelona Workshop on Regional and Urban Economics

The INNOREDES Project is pleased to announce the Provisional Programme of the 2016 Barcelona Workshop on Regional and Urban Economics, to be held in Barcelona on October 27th-28th, 2016:  [+]

The workshop will be focused on innovation and the spatial diffusion of knowledge with emphasis in collaboration networks. Its aim is to bring together researchers in urban and regional economics who are working in topics where the broad concept of the geography of innovation plays a fundamental role.

The keynotes speakers will be:

  • Maryann Feldman (Department of Public Policy at the University of North Carolina)
  • Karen Maguire (Regional Innovation Unit of the OECD Regional Development Policy Division)

A round table will be held during the workshop with the participation of:

  • Fernando Hervás (Territorial Development Unit, Joint Research Center, European Comission).
  • Mònica Duran (Enterprise Europe Network coordinator, Innovation Dept. ACCIO. Generalitat de Catalunya)
  • Jordi Gríful (Innovation Group, Industry Commission, Chambre of Commerce of Barcelona)

Participants will be required to register using the online form that is available at the workshop website until October 21st, 2016: [+]

 

For further information, please visit the workshop website www.ub.edu/aqr/workshop/2016 or contact to aqr_workshop@ub.edu.

Is innovation driving employment growth?

Does innovation cause employment loses?

Using a panel of around 10.000 firms over the 2004-2013 period from the PITEC database, it is observed that employment is affected by the great recession experiencing a downturn. Concentrating on the dynamic behaviour of employment and if and how it reacts to innovation in firms, two alternative econometric estimations support the positive and significant impact of innovation on employment, both for product and process innovation. Employment in R&D follows a similar pattern, but, as expected, is much more sensible to the innovation variables. Our estimates also report that the growth of sales due to the introduction of new products is followed by an increase of net employment in firms. Contrary to the samples in other countries, we do not observe that the innovation process is causing employment loses.

Is this relationship different in the crisis? 

Dividing our sample by subperiods, in order to investigate the impact of the Great Recession on this relationship, we conclude that firms that made process innovations created more (or less destroyed) jobs during the recession period. The policy implications of our findings confirm that innovation policies are not against employment creation. They should be persistent over time.

Firm exports, innovation, … and regions

Firm heterogeneity is a crucial element for explaining export activity (Bernard et al., 2003). In particular, some empirical studies have compared the export performance of innovative and non-innovative firms, concluding in favour of a significant positive correlation between innovation and exports (e.g. Caldera, 2010; Becker and Egger, 2013). Building on this evidence, this paper shows that the effect of firm’s innovation on the propensity to export varies across regions. Using a representative sample of Spanish manufacturing firms, the effect of product and process innovation on the probability of exporting in each Spanish NUTS2 region is estimated. In a second stage, the estimated coefficients for each region are combined with the sample values of firm characteristics to compute counterfactual average propensities to export in each region, under a counterfactual scenario for the propensity to innovate in products and in processes. Comparison of actual and counterfactual regional export propensities allows a more intuitive assessment of the impact of regional differences in innovation on those observed in export performance.

Results in the paper show that innovative firms are more prone to export than otherwise similar non-innovative firms. For the entire of Spain, the probability of exporting for firms that declared to innovate in products was 35 percentage points (pp) higher than for similar firms that did not innovate. The size of the effect is similar for process innovation and for the measure that accounts for both types of innovations. Interestingly, results confirm substantial disparities across regions in the impact of innovation. The estimated increase in the probability of exporting associated to product innovation is above 40pp in Aragon and La Rioja, while on the opposite side, apart from the island regions, the lowest impact is shown by firms in Asturias and Catalonia. Regional disparities are also observed in the impact of process innovation, with the highest marginal effect in Murcia, Aragon, and Galicia, and the lowest in the two island regions, and in Asturias, and Andalusia. Overall, it can be concluded that the increase in the propensity of exporting due to innovation is larger in regions where the share of exporting firms is high; this result being robust to the alternative measures of innovation considered in the analysis.

The counterfactual exercise confirms that the increase in the share of exporting firms would be substantial in regions with an actual low extensive margin. Increasing the propensity to innovate in products leads to a rise of about 10pp or more in regions with a share of exporting firms far below the country average, such as Andalusia, Balearic Islands, Cantabria, Castile La Mancha, and Extremadura. In turn, the impact is much lower (3-4pp) in regions with a share above or about the country average (Valencia, Madrid, Navarra, and the Basque Country). A similar pattern is observed when using process innovation, though in this case the change in the above-mentioned share is less pronounced in all regions. The only region that clearly deviates from this pattern is the Canary Islands, as its extensive margin is the lowest in Spain while it is among the regions where the effect of increasing innovation is less intense. In fact, the correlation between the change in the extensive margin and its actual value in the set of Spanish regions excluding the Canary Islands is significantly negative (-0.70, -0.88, and -0.88 for product, process and both innovations respectively). This result leads us to conclude that, other things equal, increasing innovation propensity, particularly in products, would contribute to narrow the regional gap in the proportion of exporting firms.

An immediate implication of the evidence in this study is that policies aiming at stimulating innovation (for instance through technological cooperation), which are likely to be effective in promoting exports by increasing the number of exporting firms, will not exert the same effect on exports in all regions. Therefore, the a priori assessment of innovation policies should include the positive expected effect on export performance, but taking into account that geography and certain locational endowments are likely to affect the particular impact of these policies in each region. In addition, results on the effect of innovation on export status lead us to recommend focusing the effort of direct policies aiming at promoting exports just on the group of innovative firms in each region that are not exporting yet. They are the potential candidates to become exporters if locational disadvantages are compensated in some way by the effect of these policies.

 

Becker S. and Egger P. (2013) Endogenous product versus process innovation and a firm’s propensity to export, Empirical Economics 44, 329-354.

Bernard A., Eaton J., Jensen B. and Kortum S. (2003) Plants and productivity in International trade, American Economic Review 93, 1268-1290.

Caldera A. (2010) Innovation and exporting: evidence from Spanish manufacturing firms, Review of World Economics 146, 657-689.

Innovation, heterogeneous firms and the region

Are there important differences in innovation and in R&D collaboration activities across Spanish regions?

It is observed that the share of innovative firms (in product and in process) varies substantially between regions, as it does the measures of firm’s absorptive capacity (performing continuous R&D activities, cooperate in innovation and employ high-skilled labour) and the external factors (GERD which is the share of the region’s gross expenditures in R&D on GDP, the percentage of population living in urban areas, the availability of highly educated workers, and the GDP per capita). Absorptive capacity, as measured by the three indicators, seems to be more abundant in regions in which the proportion of innovative firms is high, whereas it is scarce in those with low numbers of innovative firms. The share of firms performing R&D activities continuously is between one quarter and one third in Catalonia, the Basque Country, and Madrid, which is far beyond the numbers in low innovative regions (less and about 10 per cent). Similar disparities are observed as regard the proportion of firms that cooperate in innovation activities, whereas figures for the average share of highly skilled workers reveal that this type of labour is much more frequent in firms located in regions at the top of the innovation ranking; the opposite being also true. Overall, these figures suggest that regions differ sharply in the characteristics of their firms’ population, in particular with respect to those that determine the firm’s absorptive capacity. They also confirm, at the aggregate level, the positive relationship between absorptive capacity in general, and cooperation in particular, and innovation.

Do environmental factors related to innovation differ across regions?

 We also confirm the existence of outstanding regional disparities in the environmental factors that have been told to affect firm’s innovation. Once again, R&D intensity is much higher in regions with a large share of innovative firms. Regions also differ as regard urban population and the endowment of human capital. However, the relationship with the share of innovative firms is not as clear for these magnitudes. For instance, the share of urban population in Catalonia, which is the region with the largest share of innovative firms, is below that in some regions with a much lower share of innovative firms (e.g. Asturias and Murcia). Similarly, the value of the measure of human capital in Catalonia is similar and even below that in less innovative regions (e.g. Aragon and Castile Leon). Finally, the per capita GDP figures reproduce the well-known regional disparities in productivity and income per capita in Spain. They are supposed to capture the effect of other external determinants of innovation that are not accounted for by the other three indicators.

Does the effect of cooperation activities vary across regions?

Estimates for the empirical model that accounts for the internal and external determinants of product innovation, including the interaction between the two, indicates that cooperation is a crucial element for the success of activities aiming at innovating in product in all firms. But it is more important for firms located in regions with a weak system of innovation than for those in regions characterised by a favourable R&D environment. As a matter of example, the probability of innovating in product is almost six times higher in the firms that cooperate and locate in the region with the lowest R&D effort (Balearic Isl.), while it is 2.75 times higher in the region with the highest (Madrid).

As for the results of process innovation, the gap in the probability to innovate in process between firms that cooperate and those that do not varies with the region’s R&D effort, being wider in regions in which the R&D environment is less favourable. This means that cooperating in technological activities is important when explaining innovation in process, but it seems to be crucial for firms located in regions in which the aggregate R&D effort is low.

The effect exerted by the level of R&D expenditures in the region on the impact of cooperation on product and process innovation is summarised by the figure below: stimulating technological cooperation could be an effective way of improving the innovation output in firms located in less favoured regions.

Effect of firm’s technological cooperation depending on the R&D effort of the region

entrada-blog-5

Does absorptive capacity determine collaboration returns to innovation? A geographical dimension

Do Spanish firms collaborate in research activities with international partners?

Research alliances can be seen as a vehicle for voluntary knowledge exchanges. Descriptive statistics, based on our sample of Spanish firms from the PITEC, show that the proportion of international alliances with partners in more distant geographical areas (US, China, India and other countries), although lower in number if compared to research alliances with geographically closest partners, has increased over the period 2004-2011. This suggests that firms are expanding technological interaction with different and increasingly geographically dispersed actors.

Percentage of cooperative firms by type of alliance

2005 2007 2009 2011
% Cooperative firms over innovative firms 0.358 0.339 0.353 0.378
 
Geographical areas of alliances (% of each category over cooperative firms)
  National exclusively 67.76 64.20 62.53 58.18
  International exclusively 5.12 5.25 4.32 4.46
  National & International 27.12 30.54 33.15 37.36
  Total 100 100 100 100
  International alliances
  European exclusively 79.86 71.09 75.49 69.57
  US exclusively 3.60 7.03 6.86 6.52
  Asian/Others exclusively 7.19 6.25 9.80 11.96
  Multiple foreign areas (at least two) 9.35 15.63 7.84 11.96
  Total 100 100 100 100

Are national and international collaboration agreements equally beneficial?

 We find that the impact of extra-European cooperation on innovation performance is larger than that of national and European cooperation, indicating that firms tend to benefit more from interaction with international collaborators as a way to access new technologies or specialized and novel knowledge that they are unable to find locally. Our findings also show that extra-European alliances, especially with US partners, impact on innovation more importantly probably due to the fact that in some sectors, the US conducts research at the technological frontier. But also cooperation with other areas has a greater impact on innovative performance than national alliances.

Which is the role of absorptive capacity on the returns to collaboration agreements?

We find evidence of the positive role played by absorptive capacity, concluding that it implies a higher premium on the innovation returns to cooperation in the international case and mainly in the European one. Firms that have high absorptive capacity are more efficient at translating external knowledge from cooperative agreements into new, specific commercial applications. Further, this absorptive capacity seems especially efficient when the partner is international, probably due to the fact that such absorptive capacity gives the ability to better understand and assimilate the knowledge from a different national system of innovation. Interestingly enough, we obtain that although cooperating exclusively with European partners may imply benefits, they do not seem to surpass the costs of managing such international cooperation unless the firm combines it with a higher absorptive capacity to reduce the barriers posed by national differences.

 

Call for Papers 2016 Barcelona Workshop

AQR-IREA is pleased to announce the 2016 Barcelona Workshop on Regional and Urban Economics, to be held in Barcelona on October 27th-28th, 2016.

The workshop will be focused on innovation and the spatial diffusion of knowledge with emphasis in collaboration networks. Its aim is to bring together researchers in urban and regional economics who are working in topics where the broad concept of the geography of innovation plays a fundamental role. Particular attention will be paid to papers dealing with the mechanisms and actors of knowledge diffusion (knowledge spillovers, networks, technological collaboration, and knowledge relatedness). Although the Workshop will focus on empirical papers, theoretical studies are also welcome.

The keynotes speakers will be:

  • Maryann Feldman (Department of Public Policy at the University of North Carolina)
  • Karen Maguire (Regional Innovation Unit of the OECD Regional Development Policy Division)

Audience: We will accommodate around 8-10 papers, to be presented in plenary sessions that will complement the keynote speakers’ presentation.

 Important dates:

  • Deadline for papers submission: September 9th 2016 (Papers should be sent in pdf format to aqr_workshop@ub.edu. Extended abstracts or incomplete drafts will also be considered, but full papers will be favoured)
  • Notification of acceptance: September 16th 2016
  • Preliminary programme: September 30th 2016
  • Final programme: October 15th 2016

 

For further information, please visit the workshop website www.ub.edu/aqr/workshop/2016, or contact to aqr_workshop@ub.edu.