Papers in Evolutionary Economic Geography

September 24, 2017

# 17.26 Analyzing the impact of R&D policy on regional diversification

Filed under: 2017 — Noegg Blogger @ 6:34 pm

Tom Broekel and Lars Mewes

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Existing studies on regional diversification highlight the importance of local path dependencies and related competences. However, little attention has been paid to other factors potentially contributing to diversification processes. Foremost, this concerns the role of R&D policy. This study investigates the relation between R&D policy and regional technological diversification in German labor market regions from 1996 to 2010. We find no evidence for proactive R&D policies, as subsidized R&D projects do not promote regional technological diversification. In contrast, R&D subsidies’ allocation is rather risk-averse with subsidies being more likely allocated to already established technologies and those related to region’s technology portfolio.

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September 23, 2017

# 17.25 Big or small cities? On city size and economic growth

Filed under: 2017 — Tags: , , — mattehartog @ 8:03 pm

Susanne A. Frick, Andrés Rodríguez-Pose

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Policy-makers and academics frequently emphasize a positive link between city size and economic growth. The empirical literature on the relationship, however, is scarce and uses rough indicators for the size for a country’s cities, while ignoring factors that are increasingly considered to shape the relationship. In this paper, we employ a panel of 113 countries between 1980 and 2010 to explore whether (1) there are certain city sizes that are growth enhancing and (2) how additional factors highlighted in the literature impact the city size/growth relationship. The results suggest a non-linear relationship which is dependent on the country’s size. In contrast to the prevailing view that large cities are growth-inducing, for the majority of countries relatively small cities of up to 3 million inhabitants are more conducive to economic growth. A large share of the urban population in cities with more than 10 million inhabitants is only growth promoting in countries with an urban population of 28.5 million and more. In addition, the relationship is highly context dependent: a high share of industries that benefit from agglomeration economies, a well-developed urban infrastructure, and an adequate level of governance effectiveness allow countries to take advantage of agglomeration benefits from larger cities.

# 17.24 Multinational enterprises, service outsourcing and regional structural change

Andrea Ascani, Simona Iammarino

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This paper offers a joint analysis of two phenomena characterizing most advanced economies in recent decades: the rise of foreign ownership in manufacturing activities and the pervasiveness of the service economy. The aim of the study is to examine the structural transformation of regional economic systems within the UK by focusing on the role played by foreign multinational enterprises (MNEs) in manufacturing in facilitating the development of services. From a conceptual perspective, this research relies on different strands of literature on the impact of foreign direct investment (FDI) on recipient economies, on outsourcing and regional structural transformation, and on the identification of local multipliers. The empirical analysis focuses on a specific demand-side channel for structural change: the forward linkage established by foreign manufacturing MNEs with local service providers through outsourcing. Descriptive evidence shows that service outsourcing by foreign plants operating in manufacturing is pervasive compared to outsourcing by their domestic counterparts. On this basic premise, we estimate the multiplicative effects that foreign manufacturing activity has on the creation of service jobs in local labour markets. In order to produce reliable estimates of a local multiplier, the methodology adopts an instrumental variable approach. Our findings suggest that foreign presence in manufacturing can be a catalyst of regional structural change by stimulating the generation of new jobs in the tertiary sector via demand linkages.

# 17.23 The visible hand of cluster policy makers: An analysis of Aerospace Valley (2006-2015) using a place-based network methodology

Filed under: 2017 — Tags: — mattehartog @ 8:01 pm

Delio Lucena Piquero, Jérôme Vicente

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The paper focuses on cluster policies with particular attention to the role of R&D collaborative incentives in the structuring of knowledge networks in clusters. We disentangle the main network failures in regional innovation systems, and discuss the selection procedures designed by policy makers to enhance the production of innovation outputs. We draw evidence from the French Aerospace Valley cluster from 2006 to 2015. The empirical analysis relies on a dataset of 248 granted research consortia, from which we build 4-cohorts knowledge networks enable us evidencing the evolving structural properties of the cluster over time. We suggest avoiding the bias and limitations of 1 and 2-mode network analysis by developing an original place- based network methodology that emphasizes on structural equivalence and groups behaviors. We discuss the results focusing on the convergence degree between the network statistical findings and the policy makers’ objectives. Finally, the methodology allows us identifying who are the agents of the structural and technological changes observed during the period.

September 5, 2017

# 17.22 R&D Policy and Technological Trajectories of Regions: Evidence from the EU Framework Programmes

Filed under: 2017 — Tags: , , , — mattehartog @ 6:00 pm

Wolf-Hendrik Uhlbach, Pierre-Alexandre Balland and Thomas Scherngell

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It is widely acknowledged that new technological specializations of regions are to a large extent driven by the recombination of existing knowledge and capabilities. Since this process is path-dependant and self-reinforcing, it can easily lead to technological lock-ins. A key issue is therefore to evaluate whether public policy can impact technological trajectories of regions and how it can be more effective. To address this issue, we analyze quantitatively and systematically the relation between R&D subsidies and new technological specializations of European regions from 1999 to 2010. R&D subsidies are identified by using the EU Framework Pro- grammes (FP) from the EUPRO database, and matched with patent documents from the OECD-REGPAT database. Using a fixed-effects linear probability model, our results indicate that FP participations have a positive but relatively small effect on the development of new specializations of regions, and that it can compensate for a lack of local related capabilities. We also find evidence that R&D subsidies have the highest impact if the level of relatedness with the new technology is neither too low (policy can not build a cathedral in the desert) nor too high (if all the capabilities are already present there is no need for policy).

# 17.21 A concise history of the knowledge base literature: challenging questions for future research

Filed under: 2017 — mattehartog @ 5:59 pm

Ron Boschma

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This chapter aims to sketch a short history of the differentiated knowledge base (DKB) literature that has been initiated and pioneered by Bjorn Asheim. In its formative years, the DKB approach described three knowledge bases and explored the nature of knowledge sourcing and its geographical extent within each knowledge base. We identify seven claims proposed by DKB scholars concerning the geography of knowledge bases. Lately, DKB 1.0 has been challenged on several grounds. In recent years, a second generation of DKB literature, dubbed as DKB 2.0, has emerged, becoming more tightly connected to the evolutionary approach in economic geography. DKB 2.0 takes a combinatorial approach to innovation and links it to evolutionary concepts like related variety and proximity. Its prime focus is on identifying combinations between knowledge bases and, to an increasing extent, combinations within knowledge bases, and assessing whether these combinations enhance innovative performance. As DKB 2.0 is still in an embryonic stage, we identify promising avenues for future research, inspired by evolutionary thinking.

# 17.20 The Determinants of Foreign Direct Investment in sub-Saharan Africa: What Role for Governance?

Andrés Rodríguez-Pose and Gilles Cols

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For the past quarter of a century, foreign direct investment (FDI) flows have grown exponentially across the world. Sub-Saharan Africa has, however, lagged behind and only lured on average a mere 2% of global FDI. The investment that the region attracts tends, moreover, to be concentrated in a number of commodity-rich countries. Natural resources and the size of national markets have generally been considered as the main drivers of FDI. The quality of local institutions has, by contrast, attracted less attention. This paper uses institutional data for 22 countries in order to demonstrate that the quality of governance plays a far from negligible and enduring role in the distribution of FDI in sub-Saharan Africa. It is shown that factors such as political stability, government effectiveness, lower corruption, voice and accountability, and the rule of law not only are more important determinants of FDI than the size of local markets, but also that their influence on the capacity of African countries to attract FDI is long-lasting.

July 19, 2017

# 17.19 Industrial Clusters, Organized Crime and Productivity Growth in Italian SMEs

Filed under: 2017 — Tags: , , , , — mattehartog @ 2:30 pm

Roberto Ganau, Andrés Rodríguez-Pose

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We examine whether organized crime affects firms’ performance (defined using Total Factor Productivity growth) both directly and indirectly, by downsizing the positive externalities arising from the geographic concentration of (intra- and inter-industry) market-related firms. The analysis uses a large sample of Italian small- and medium-sized manufacturing firms over the period 2010-2013. The results highlight the negative direct effects of organized crime on firms’ productivity growth. Any positive effect derived from industrial clustering is thoroughly debilitated by a strong presence of organized crime, and the negative moderation effect of organized crime on productivity growth is greater for smaller than for larger firms.

# 17.18 Following Your Job

Filed under: 2017 — mattehartog @ 2:29 pm

Martijn J. Smit

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Evolutionary economic geography has awoken an interest in the question how regions can attract new human capital. One method is to attract migration firms, who will bring (part of) their existing employees. These people can then attract or generate new jobs (Hoogstra, van Dijk, & Florax, 2005). In this paper, we study the mobility of employees when their firm decides to move: do they stick with their employer or not? And if they do, do they commute or not? Finally, we link the decision to commute longer distances to the availability of a company car. We use microdata on individual firms and employees to test whether employees choose to follow their firm to another region. We control for personal and job characteristics. We find that having a company car is not correlated with the decision to stay with or to leave the current firm, but those who have one are less likely to move house, as long as the employee has a wage in the top quartile, or lives in the urban areas of the Randstad with their stressed housing market. Employees who already experienced long commutes before their employer moved are not influenced by the presence of a company car.

July 1, 2017

# 17.17 Smart Specialization policy in the EU: Relatedness, Knowledge Complexity and Regional Diversification

Pierre-Alexandre Balland, Ron Boschma, Joan Crespo and David L. Rigby

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Smart specialization has become a hallmark of the EU’s Cohesion Policy. Envisaged as a bottom-up initiative identifying local knowledge cores and associated competitive advantages, the operationalization of smart specialization has been rather limited, as a coherent set of analytical tools to guide the policy directives remains elusive. To tackle the weak underpinning of smart specialization policy, we propose a policy framework around the concepts of relatedness and knowledge complexity. We use EPO patent data to provide evidence on how EU regions develop new technologies in the period 1990-2009. We find that diversifying into more complex technologies is highly attractive but difficult for EU regions to accomplish. Regions can overcome this diversification dilemma by developing new complex technologies that build on local related capabilities. We use these findings to construct a policy framework for smart specialization that highlights the potential risks and rewards for regions of adopting competing diversification strategies. We show how potential costs of alternative strategies in regions may be assessed by making use of the relatedness concept, and how potential benefits of various smart specialization strategies can be derived from estimates of the complexity of technologies. A series of case-studies of different types of regions illustrate the utility of this policy framework.

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