Innovation Policy Challenges in Transition Countries: Foreign Business R&D in the Czech Republic and Hungary

R&D expenditures of national firms decreased considerably and structural changes of R&D financing followed the fall of planned economy in the transition period of Central Eastern European economies. In the middle of the 1990s, business R&D started to grow in the Czech Republic and Hungary due to investments of foreign affiliates and restructuring of domestic companies. Nowadays multinational companies have a decisive share in business R&D in these countries, which entails special challenges for national innovation policy. In this paper, we look through the development of the Czech and Hungarian innovation policy considering MNEs R&D. We use case studies of the Czech automobile industry, the Hungarian pharmaceutical industry, and the new MNE-related university units and private universities to show how these companies influence innovation systems in transition economies.      

THE TECHNOLOGY FACTOR AND THE EXPORT PERFORMANCE OF U.S. MANUFACTURING INDUSTRIES

The paper examines two central theories advanced to explain the revealed comparative advantage of U.S. industries. The neo-technological account centers on the process of innovation among industries and is represented in the regression analysis by an R&D intensity variable. The neofactor theory advances both human and "physical" capital as important variables in determining countries' comparative advantage. Foreign protection is postulated to affect the export performance of U.S. industries. Generally the results suggest that U.S. revealed comparative advantage is most pronounced in R&D intensive industries that give the U.S. a temporary technological lead in world markets.     

Boeing’s Diffusion of Commercial Aircraft Technology to Japan: Surrendering the U.S. Industry for Foreign Financial Support

Japanese firms have become increasingly important first-tier suppliers to the U.S. commercial aircraft industry (large passenger jets). Over time, this relationship has evolved from a simple “build to print” subcontractor arrangement to a turnkey “design and build” risk-sharing partnership. Using the Boeing 767, 777, and 787 as examples, we argue that the motives for Boeing’s commercial outsourcing to Japan are to access the Japanese market, spread risk, gain access to capital, and lower U.S. spending on research and development (R&D). This has clear implications for U.S. trade and employment, in that Japanese-subcontracting boosts foreign imports and reduces the need for domestic production workers and U.S. suppliers. From a trade perspective, however, a troubling feature of allowing the Japanese to produce large commercial aircraft subassemblies is that major Japanese public financial supports are involved which contravene existing international agreements on production subsidies. We review the types of production contracts that Japanese companies have sought on the Boeing 767, 777, and 787 programs. These contracts have allowed the Japanese to develop new capabilities in terms of production capacity, tooling, design, and final assembly. Ultimately, these capabilities imply that Japan will eventually enter the market as a fully-fledged producer of commercial aircraft. This does not bode well for the U.S. commercial aerospace sector.     

Comparison of Localisation Motives for R&;D Investment of Multinational Enterprises in the New and Old EU Member Regions

The issue of localisation motives is one of the key topics in attracting and motivating MNEs to establish or enhance their R&D activities abroad. The paper aims to compare localisation motives for R&D investment of multinational enterprises in the new and old EU member regions and to find out main localization motives differences among them. We have found out the key motives were technology/supply side factors, which strongly influence decision-making at MNEs in locating and maintaining R&D in all regions. In the more developed regions, the localisation is positively influenced also by the presence of other important/large (high-tech) companies and important universities in the region, which provide relevant services to MNEs. Localisation decisions in the new EU member regions were positively influenced particularly by presence of a quality and cheap labour force and a suitable R&D infrastructure and experience in R&D in these regions. Considerable differences between the old and new EU member states reflects their distinctive economic history, recent re-opening of their economies and consequences of the process of post-communist transition.     

LAST OF THE DINOSAURS? BIG WEAPONS,BIG SCIENCE,AND THE AMERICAN STATE FROM HIROSHIMA TO THE END OF THE COLD WAR

This article examines the origins and recent crises in linkages between big science, big weapons, and the U.S. state during and after the cold war. We examine the sources of legitimacy of military dominance of U.S. research and development (R&D) in the first decades of the cold war and argue that the exigencies of a nuclear arms race between two superpowers gave the military an unprecedented peacetime claim on science and technology resources. We argue that economic crises, political challenges by peace movements, and technological exhaustion of the nuclear arms race in the 1980s weakened military claims to science and technology leadership, but that the 1991 Persian Gulf war deflected what might have been a major shift in U.S. R&D priorities. We conclude by examining U.S. post-cold war R&D policy and find that military priorities remain preeminent.     

ESTIMATION OF THE DEPRECIATION RATE OF PHYSICAL AND R&D CAPITAL IN THE U.S. TOTAL MANUFACTURING SECTOR

Numerous studies on production and cost, the sources of productivity, and endogenous growth have recognized the pivotal role played by physical and R&D capital stocks. Analysis of the contributions of these capitals often requires measures of the stocks of physical and R&D capital, which in turn requires measuring their depreciation rates. In this paper we specify a model of factor demand that allows us to estimate the depreciation rates of both physical and R&D capital jointly with other model parameters. The model is estimated for the U.S. total manufacturing sector.     

Unions and innovative activity in Germany

This study is the first attempt to investigate the influence of unions on innovative activities in Germany at the industry level. Econometric models estimated by a highly robust method and submitted to a number of specification tests indicate that trade unions do not have a negative impact on innovative activity which is measured by either the percentage of revenues spent on R&D or the percentage of employees working in R&D. This finding is consistent with evidence on the influence of unions on productivity in Germany and with considerations about the German system of industrial relations.     

Corporate social responsibility driven innovation

This study identifies the substantial relationship between corporate social responsibility (CSR) and innovation activities of firms. Using the French Vigeo sustainability rating and the Thomson Reuters, we divided 619 firms into groups by their industry sectors, regions, and firm characteristics such as size and age. We premise that innovative investment is needed to prepare tomorrow's profits not only by considering investments in technology and in R&D, but also by dealing with sustainability to human, social, environmental, technical, and economic investments. Consequently, when the firm manipulates its short- and long-run business strategies, the consideration of the correlation between types of investment and CSR initiatives will lead to more cooperating effect on the outcome of investments. The findings provide a comprehensive understanding on the effect of sustainable management strategies on the innovation and sustainability of firms.     

Evaluating knowledge benefits of automotive lightweighting materials R&D projects

This paper presents a set of metrics used to evaluate short-run knowledge benefits that accrued from research and development (R&D) projects funded in fiscal years 2000–2004 by automotive lightweighting materials (ALM) of the U.S. Department of Energy (DOE). Although DOE presents to Congress energy, environmental, and security benefits and costs of its R&D efforts under the Government Performance and Results Act, DOE has yet to include knowledge benefits in that report [U.S. Department of Energy. (2007). Projected benefits of federal energy efficiency and renewable energy programs: FY2008 budget request. NREL/TP-640-41347 (March). Washington, DC: National Renewable Energy Laboratory for DOE Energy Efficiency and Renewable Energy. Retrieved February 12, 2007 from http://www1.eere.energy.gov/ba/pba/2008_benefits.html].ALM focuses on development and validation of advanced technologies that significantly reduce automotive vehicle body and chassis weight without compromising other attributes such as safety, performance, recyclability, and cost [U.S. Department of Energy. (2005a). Automotive lightweighting materials 2004 annual progress report. Washington, DC: DOE Energy Efficiency and Renewable Energy. Retrieved March 30, 2005 from http://www.eere.energy.gov/vehiclesandfuels/resources/fcvt_alm_fy04.shtml]. The ultimate goal of ALM to have lightweighter materials in vehicles hinges on many issues, including the (1) collaborative nature of ALMs R&D with the automobile industry and (2) manufacturing knowledge gained through the R&D effort.The ALM projects evaluated in this paper yielded numerous knowledge benefits in the short run. While these knowledge benefits are impressive, there remains uncertainty about whether the research will lead to incorporation of lightweight materials by the Big Three automakers into their manufacturing process and introduction of lightweight vehicles into the marketplace. The uncertainty illustrates a difference between (1) knowledge benefits and (2) energy, environmental, and security benefits emanating from R&D.     

Evaluation of technological competence and operations efficiency in the defense industry: The strategic planning of South Korea

This research aims to contribute to efficiency improvement by providing the implications for decision-making on continuous defense R&D investment strategies and acquisition methods via analyzing the current position and measuring the efficiency of overall weapon systems on technological competence and operations. This research is distinctive in comparison to previous studies because it is structured in a two-stage DEA analysis for efficiency by distinguishing between the technology and operations of the current eight fields of weapon systems and by adding the external index for government competence and market competence. In 2016, in comparison to the year 2013, the eight major weapon systems’ efficiency fields of the overall system of Korea, efficiency of technological competence, and efficiency of operations all increased. This research introduced the input and output variable that fits in with the defense industry by connecting the weapon systems efficiency with the national innovation system and the sectoral innovation system that are both projected in this industry. It also formed the concepts of technological competence efficiency and operations efficiency using the two-stage Network DEA method.     

Research and Development Spillovers in Central and Eastern Europe

The present study considers the implications of different stages of economic integration for endogenous growth models with horizontal differentiation of the intermediate goods. It investigates the decline of the domestic R&D (research and development) sector for countries with lower initial stock of R&D due to partial integration in the form of free trade. The problem is investigated with empirical analysis for panel data for 12 EU accession countries in the period of 1990–2001. The specification relating the growth of total factor productivity, the domestic and the available foreign stock of R&D is estimated with first-differences, ordinary least-squares, dynamic panel data, and GMM methods. The time series are highly persistent and the applied procedures have different advantages according to the assumptions and the purpose of the analysis. All methods establish the comparable result that the foreign R&D stock interacted with the import share is a substantial and significant factor for the growth of total factor productivity. The role of the domestic R&D is insignificant for the growth of total factor productivity, verifying the decline of the sector with free trade.     

Measuring relative efficiency of government-sponsored R&D projects: A three-stage approach

Without considering differences in operating environment, traditional methods of efficiency evaluation are suffering from external environmental influences. This study presents an alternative approach for assessing the relative efficiency of government-sponsored research and development projects (GSP). A three-stage approach employing data envelopment analysis to evaluate efficiency and Tobit regression to control external variables was applied to 110 projects over 9 years. This study finds that firm size, industry, and ratio of public subsidy on research and development (R&D) budget of recipient firm significantly influences the technical efficiency of GSP in Taiwan. After controlling these external variables, the mean value of technical efficiency in the third stage increases and becomes significantly different to that in the first stage. Most GSPs increase their returns when their projects are scaled up. Furthermore, government policy makers must establish the upper-limit ratio of subsidies on R&D budgets of recipient firms to avoid inefficient use of public funds.     

A concept for measuring network proximity of regions in R&D networks

This paper proposes a new measure for assessing the network proximity between aggregated units, based on disaggregated information on the network distance of actors. Specific focus is on R&D network structures between regions. We introduce a weighted version of the proximity measure, related to the idea that direct and indirect linkages carry different types of knowledge. First-order proximity arising from direct cross-regional linkages is distinguished from higher-order network proximity, resulting from indirect linkages in the R&D network. We use an macroeconomic application in which we analyse the productivity effects of R&D network spillovers across regions to illustrate the usefulness of a proximity measure for aggregated units.     

Local Economic Opportunity and the Competing Risks of Internal and U.S. Migration in Zacatecas,Mexico1

This article uses a competing risks model to examine the effects of origin economic conditions on the probability of temporary U.S. and internal labor migration in the Mexican state of Zacatecas. We measure origin economic conditions with municipal‐level indices of employment and small‐scale investment opportunities that we constructed from population and economic census data. The results of our analysis demonstrate the important influence of local employment and investment opportunities on migration outcomes. Controlling for the prior municipal rate of U.S. return migration and other factors, positive opportunities for small‐scale investment are associated with a higher risk of temporary migration to the United States. This result is consistent with investment oriented migration predicted by the new economics of labor migration theory. We also find comparable social network effects for both internal and U.S. migration. Having social ties to active migrants of one type (U.S. or internal), encourages migration of the same type and discourages migration of the other type.     

THE IMPACT OF R&D INVESTMENT ON PRODUCTIVITY–NEW EVIDENCE USING LINKED R&D–LRD DATA

This paper uses confidential Census longitudinal microdata to examine the association between R&D and productivity for the period 1972–1985. These data allow for significant improvements in measurement and model specification, yielding more precise estimates of the returns to R&D. Our results confirm the findings of existing studies: 1) positive returns to R&D investment 2) higher returns to company-financed research 3) a productivity "premium" on basic research These results are robust to adjustments for "influential outliers." Also, our evidence suggests that the return to company-financed R&D is an increasing function of firm size.     

R&D AND CREDIT RATIONING IN SMEs

We study the effects of credit rationing on research and development (R&D) investment using survey and accounting data on a large representative sample of manufacturing small‐ and medium‐sized enterprises (SMEs). Our econometric model accounts for the endogeneity of our credit rationing indicator and employs an innovative theory‐based identification strategy. We find that credit rationing has a significantly negative effect on both the probability to set up R&D activities and on the level of R&D spending (conditioned on the R&D decision), but the overall estimated reduction in R&D spending is largely to be associated with the first effect. (JEL G21, D82, O32, C35)     

Skill-biased technical change, educational choice, and labor market polarization: the U.S. versus Europe

This paper analyzes the effect of recent technical change on the labor market and explains the observed differences in wage inequality among advanced countries. In particular, we focus on the difference between the inequality in the U.S. and in continental Europe. Many studies have indicated a rise in wage inequality in the U.S. over the past three decades. On the other hand, there has been little change in wage inequality in continental Europe. By introducing human capital investment into the model by Acemoglu (Am Econ Rev 89:1259–1278, 1999), we show that ex ante homogeneous economies would have distinct ex post wage distribution. The strategic complementarity between human capital investment and firms’ hiring strategies yields the possibility that multiple equilibria exist, which explains the difference in wage distribution between the U.S. and Europe. In addition, we show that differences in tax or education systems can explain the difference in wage distribution between the U.S. and Europe.     

STRATEGIC ENFORCEMENT,INTELLECTUAL PROPERTY RIGHTS,AND CONTRACTUAL R&D

This study examines the role of intellectual property rights (IPRs) in contractual research and development (R&D) in developing countries. We find that strong IPRs provide incentives for firms, both multinational and local, to specialize in R&D activities in which they have competitive advantage (the specialization effect). They also facilitate the switching process from imitators to potential innovators for local firms (the switching effect). Moreover, we also demonstrate that a multinational firm's strategic IPRs enforcement behavior can be an effective instrument for subsidizing contractual R&D in developing countries (the subsidizing effect). We further illustrate how a policy mix of IPRs and a foreign direct investment subsidy in these countries affects R&D activities by adding an offshore R&D subsidiary as an additional organizational form. (JEL L13, O31, O34)     

SULPHUR AND THE U.S. GOVERNMENT: PRICE FIGHTING IN THE 1960s*

The interaction between the domestic sulphur industry and the executive branch of the U.S. Government during the Johnson administration suggests that this important extractive industry was sensitive to governmental “moral suasion.” A narrative is provided of the relationship between the industry and the administration's economists, lawyers and departmental politicians. This narrative is followed by an appropriate least squares price model. It is shown that the administration was successful in its efforts to suppress sulphur prices during 1965-66, that is, during the early stages of the commitment of U.S. forces to combat in Southeast Asia.     

THE VERTICAL CHAIN OF RESEARCH AND DEVELOPMENT IN THE PHARMACEUTICAL INDUSTRY

This paper examines the relationship between basic and applied pharmaceutical research. We focus on three stages of research and development (R & D): government-funded basic research; publication in medical journals; and industry-finded applied R&D. We estimate that a one percent increase in basic research in a particular therapeutic category causes a 0.76 percent increase in industry R&D in that category, and a 1.71 percent increase in other categories, mer seven years. We also find that research incentives differ across government, academic and industry researchers. For example, government funding favors diseases that are less prevalent and more debilitating than industry funding.