African growth looking forward
Marco Annunziata 16 August 2014
Africa has generated a lot of enthusiasm lately. The cynical view of the continent as a hopeless basket case has been replaced by the lofty narrative of Africa Rising. This column argues that Africa’s progress is impressive, and there is more to the story than a commodity boom. But Africa is at a crossroads. The opportunities are huge, but the road ahead is long, and will require persistent and patient effort from policymakers as well as business.
Views on Africa’s growth prospects have jumped from utter pessimism to extreme enthusiasm. The latter has been centre-stage with the US–Africa Summit hosted in Washington DC from 4–6 August 2014, with the participation of top political and business leaders. My coauthors Todd Johnson and Shlomi Kramer and I have tried to take a sober assessment of Africa’s progress and prospects, looking beyond the current hype and the inevitable frustration that doing business in the region still generates (Annunziata et al. 2014).
development, growth, Africa, human capital, trade, innovation, infrastructure, commodity boom
Agglomeration and product innovation in China
Hongyong Zhang 21 July 2014
The Chinese government has been actively promoting innovation via policies such as R&D subsidies, tax relief, and location policies. Since 1995, central and local governments have established more than 100 clusters in over 60 cities. This column presents new evidence on the effect of the concentration of firms on product innovation (new products) in the manufacturing industries.
Spatial agglomeration of economic activities is generally assumed to improve productivity and spur firms’ innovation through localisation economies and urbanisation economies.1 There is an extensive empirical literature investigating the effects of localisation and urbanisation on firm-level productivity. Despite its economic importance, there are few empirical studies focusing on agglomeration and product innovation. Feldman and Audretsch (1999) and De Beule and Van Beveren (2010) are two of the few exceptions.
Productivity and Innovation
R&D, productivity, China, spatial concentration, innovation, subsidies, clusters, agglomeration
Protection of intellectual property to foster innovations in the service sector
Masayuki Morikawa 20 July 2014
Innovation is a key driver of productivity growth, but innovation in the service sector has received relatively little attention. This column shows that the total factor productivity gap between Japanese firms with and without innovations is larger in services than in manufacturing. Whereas the percentage of firms holding patents is much higher in manufacturing than in services, trade secrets are just as important in both sectors. These results suggest that the protection of trade secrets makes an important contribution to productivity growth.
Given the declining labour force due to population ageing, accelerating the productivity growth of industries – especially the service industries – is an important element of the growth strategy in Japan and most advanced countries. While there are a variety of factors affecting productivity, innovation is one of the key determinants of productivity growth. However, innovation in the service sector has not been studied well. I present findings on innovation in the service sector by focusing on the effect of intellectual property rights on innovation.
Productivity and Innovation
R&D, growth, productivity, patents, Japan, innovation, services, intellectual property, trade secrets
Trust-based working time spurs innovation
Holger Görg, Olivier N. Godart, Aoife Hanley, Christiane Krieger-Boden 08 July 2014
Many firms are replacing traditional working hours with more flexible arrangements, reflecting new thinking on employee motivation. This column presents evidence from Germany that trust-based working time is associated with increased innovation. However, trust-based working hours also contribute to the blurring of workers’ professional and private lives, and may lead to excessive overtime. Careful design of trust-based working arrangements is required to reap the innovations gains while avoiding the health pitfalls.
The organisation of work has changed dramatically over the last few decades. In particular, the formerly rigidly regulated working time has been replaced by flexible working hour schemes in numerous firms around the world. Taking Germany as an example, in 2010, 36% of employees were entitled to some form of flexible working hours scheme (Figure 1).
Health economics Labour markets Productivity and Innovation
Germany, working hours, trust, health, innovation, motivation, overtime, flexibility, working time
R&D internationalisation during the Global Crisis
Bernhard Dachs, Georg Zahradnik 06 July 2014
The Global Crisis brought a halt to three decades of R&D internationalisation, in which foreign firms’ share of total R&D expenditure had increased in almost all countries where data is available. However, this column argues that the crisis did not lead to a new global distribution of overseas R&D expenditure, despite the erosion of the EU’s share. The persistence of R&D expenditure is attributed to the costs of relocating R&D and to the autonomy of foreign subsidiaries.
Foreign firms’ share of total business R&D expenditure increased during the last three decades in almost all countries where data is available, but this trend stopped with the Global Crisis of 2008–2009. In most countries, R&D of foreign firms was more severely affected by the crisis than R&D of domestic firms. However, the crisis did not lead to a new global distribution of overseas R&D expenditure.
Global crisis Productivity and Innovation
R&D, globalisation, multinationals, FDI, innovation, global crisis, persistence, autonomy, subsidiaries
How highly educated immigrants raise native wages
Giovanni Peri, Kevin Shih, Chad Sparber 29 May 2014
Immigrants to the US are drawn from both ends of the education spectrum. This column looks at the effect of highly educated immigrants – in particular, those with degrees in Science, Technology, Engineering, or Mathematics – on total factor productivity growth. The authors find that foreign STEM workers can explain 30% to 60% of US TFP growth between 1990 and 2010.
Immigration to the US has risen tremendously in recent decades. Though media attention and popular discourse often focus on illegal immigrants or the high foreign-born presence among less-educated workers, the data show that immigrants are drawn from both ends of the education spectrum. At the low end, immigrants grew from 5% of workers with a high school degree or less in 1970 to 20.8% in 2010. At the high end, the figure rose from 7.3% to 18.2% for those with graduate degrees over the same period.1
Labour markets Migration Productivity and Innovation
US, growth, productivity, wages, immigration, innovation, complementarities, STEM
Internationalisation and innovation of firms: Give them one roof
Carlo Altomonte, Tommaso Aquilante, Gábor Békés, Gianmarco I.P. Ottaviano 21 March 2014
Internationalisation and innovation policies are frequently considered to be key drivers of growth. This column documents a strong positive association between internationalisation, innovation, and productivity at the firm-level across seven European countries. This association continues to hold after controlling for country, size, industrial sector, and firm specific characteristics, with some evidence of causality running from innovation to internationalisation. The analysis suggests that policymakers should coordinate, if not integrate, innovation and internationalisation policies in order to boost productivity and growth.
Policymakers traditionally have attempted to encourage internationalisation based on the implicit rationale that the latter is associated with productivity and/or employment growth. At the same time, since innovation is the key driver of productivity growth, much attention has been devoted to the specific channels through which trade and innovation are linked (see Aiginger 2011). However, in most European countries, as well as at the EU level, these policies are carried out through various, often unrelated agencies – as found by EIM (2010), a European report reviewing some 130 programmes.
Productivity and Innovation
internationalisation, innovation, productivity growth
Offshoring and its effects on innovation in emerging economies
Ursula Fritsch, Holger Görg 23 September 2013
Outsourcing is a controversial practice. This column looks at its effects on firm-level innovation in emerging markets. The authors find robust evidence that outsourcing is positively related to various innovation measures. However, outsourcing only leads to increased R&D spending in countries where intellectual-property rights are well-protected.
Most empirical studies of the impact of outsourcing on firms look at industrialised countries. However, outsourcing is also common in emerging economies, and firms in middle-income countries split up their production processes similarly to firms in developed countries (see figures in Miroudot et al. (2009) on trade in intermediates). Recent research analyses the benefits to firms from outsourcing, focusing mainly on productivity and innovation effects. The latter are particularly important, since innovation is a key determinant of productivity improvements and – ultimately – growth.
International trade Productivity and Innovation
R&D, offshoring, innovation, international trade, emerging markets, outsourcing, technology transfer
Creativity, cities and innovation
Neil Lee, Andrés Rodríguez-Pose 24 August 2013
In recent years, policymakers have enthusiastically backed the fashionable ‘creative industries’. This column presents new research on the creative sector, creative occupations and innovation in the UK. The results raise questions about the dominant perception of the creative industries as an ‘innovative’ sector. Instead, it might be more appropriate for policymakers to focus on creative workers regardless of the sector in which they work.
The creative industries are seen as an economically important source of innovation in many developed countries. Definitions vary, but the creative industries are normally seen as including both obviously ‘creative’ sectors, such as the arts, and more mundane activity like software or publishing. This diverse set of industries has seen significant growth in many countries (see UNCTAD 2010).
Productivity and Innovation
innovation, creative industries