Centre for European Economic Research

Through a survey, private economic value estimates were obtained on 964 inventions made in the United States and Germany and on which German patent renewal fees were paid to full-term expiration in, 1995. A search of subsequent U.S. and German patents yielded counts of citations to those patents. Patents renewed to full-term were significantly more highly cited than patents allowed to expire before their full term. The higher an invention's economic value estimate was, the more the patent was subsequently cited.

This paper compares the role innovation plays in productivity across four European countries, France, Germany, Spain, and the UK, using firm-level data from the internationally harmonized Community Innovation Surveys (CIS3). Despite a considerable number of national firm-level studies analysing this relationship, cross-country comparisons using micro data are still rare. We apply a structural model that describes the link between R&D expenditure, innovation output, and productivity (CDM model). Our econometric results suggest that overall the systems driving innovation and productivity are remarkably similar across these four countries, although we also find interesting differences, particularly in the variation in productivity that is associated with more or less innovative activities.

In recent years, there has been a revival of concerns that automation and digitalisation might after all result in a jobless future. The debate has been fuelled by studies for the US and Europe arguing that a substantial share of jobs is at “risk of computerisation”. These studies follow an occupation-based approach proposed by Frey and Osborne (2013), i.e. they assume that whole occupations rather than single job-tasks are automated by technology. As we argue, this might lead to an overestimation of job automatibility, as occupations labelled as high-risk occupations often still contain a substantial share of tasks that are hard to automate. Our paper serves two purposes. Firstly, we estimate the job automatibility of jobs for 21 OECD countries based on a task-based approach. In contrast to other studies, we take into account the heterogeneity of workers’ tasks within occupations. Overall, we find that, on average across the 21 OECD countries, 9 % of jobs are automatable. The threat from technological advances thus seems much less pronounced compared to the occupation-based approach. We further find heterogeneities across OECD countries. For instance, while the share of automatable jobs is 6 % in Korea, the corresponding share is 12 % in Austria. Differences between countries may reflect general differences in workplace organisation, differences in previous investments into automation technologies as well as differences in the education of workers across countries.

This study analyzes the effects of public R&D policy schemes on the innovation activities of firms in Eastern Germany. The main question in this context is whether public funds stimulate R&D activities or simply crowd out privately financed R&D. Empirically, we investigate the average causal effects of all public R&D schemes in Eastern Germany using a nonparametric matching approach. Compared to the case in which no public financial means are provided, it turns out that firms increase their innovation activities by about four percentage points.

Abstract While both fundamental types of abatement measure mitigate the adverse environmental impacts of production, cleaner production technologies are frequently more advantageous than end‐of‐pipe technologies for environmental and economic reasons. This paper analyzes a variety of factors that might enhance firms' propensity to implement cleaner production technologies instead of end‐of‐pipe technologies. On the basis of a unique facility‐level data set derived from a recent OECD survey, we find a clear dominance of cleaner production in seven OECD countries: 76.8% of the facilities report that they invest predominantly in cleaner production technologies, above all in new production processes, but not so much in new products. Based on a discrete choice model, our estimation results indicate that regulatory measures and the stringency of environmental policies are more important for end‐of‐pipe technologies, while cost savings, general management systems and specific environmental management tools tend to favor clean production. We conclude that improvements towards cleaner production may be reached by the continuous development and wider diffusion of these management tools. Improvements may also be stimulated by widening the cost gap between the two types of technology, for instance by additionally charging for waste and energy use. Copyright © 2006 John Wiley & Sons, Ltd and ERP Environment.

Abstract The paper shows that mispriced deposit insurance and capital regulation were of second-order importance in determining the capital structure of large U.S. and European banks during 1991 to 2004. Instead, standard cross-sectional determinants of non-financial firms’ leverage carry over to banks, except for banks whose capital ratio is close to the regulatory minimum. Consistent with a reduced role of deposit insurance, we document a shift in banks’ liability structure away from deposits towards non-deposit liabilities. We find that unobserved time-invariant bank fixed-effects are ultimately the most important determinant of banks’ capital structures and that banks’ leverage converges to bank specific, time-invariant targets.

The authors adopt the Five-Factor Model of personality structure to explore how personality affected the earnings of a large group of men and women who graduated from Wisconsin high schools in 1957 and were re-interviewed in 1992. All five basic traits—extroversion, agreeableness, conscientiousness, neuroticism, and openness to experience—had statistically significant positive or negative earnings effects, and together they appear to have had effects comparable to those commonly found for cognitive ability. Among men, substantial earnings advantages were associated with antagonism (the obverse of agreeableness), emotional stability (the obverse of neuroticism), and openness to experience; among women, with conscientiousness and openness to experience. Of the five traits, the evidence indicates that agreeableness had the greatest influence on gender differences in earnings: men were considerably more antagonistic (non-agreeable) than women, on average, and men alone were rewarded for that trait.

abstract The outsourcing of research and development (R&D) activities has frequently been characterized as an important instrument to acquire external technological knowledge that is subsequently integrated into a firm's own knowledge base. However, in this paper we argue that these ‘gains’ from R&D outsourcing need to be balanced against the ‘pains’ that stem from a dilution of firm‐specific resources, the deterioration of integrative capabilities and the high demands on management attention. Based on a panel dataset of innovating firms in Germany, we find evidence for an inverse U‐shaped relationship between R&D outsourcing and innovation performance. This relationship is positively moderated by the extent to which firms engage in internal R&D and by the breadth of formal R&D collaborations: both serve as an instrument to increase the effectiveness of R&D outsourcing.

International efforts to provide global public goods often face the challenges of coordinating national contributions and distributing costs equitably in the face of uncertainty, inequality, and free-riding incentives. In an experimental setting, we distribute endowments unequally among a group of people who can reach a fixed target sum through successive money contributions, knowing that if they fail, they will lose all their remaining money with 50% probability. In some treatments, we give players the option to communicate intended contributions. We find that inequality reduces the prospects of reaching the target but that communication increases success dramatically. Successful groups tend to eliminate inequality over the course of the game, with rich players signaling willingness to redistribute early on. Our results suggest that coordination-promoting institutions and early redistribution from richer to poorer nations are both decisive for the avoidance of global calamities, such as disruptive climate change.

Using a sample of approximately 11000 West German firms from all major sectors of the economy, we test predictions on the relationship between legal form, firm survival and employment growth. In our tests, we distinguish between voluntary liquidation without losses to creditors and bankruptcy, that is forced liquidation. We demonstrate that in all sectors firms under limited liability have higher growth and higher insolvency rates than comparable firms under full liability. Firms whose owners are approaching retirement age are characterised by relatively high hazards of voluntary liquidation, while the propensity to declare insolvency is not affected by the owner’s age.

Abstract This study focuses on the impact of innovation policies and R&D collaboration in Germany and Finland. We consider collaboration and subsidies as heterogeneous treatments, and perform an econometric matching to analyze R&D and patent activity at the firm level. In general, we find that collaboration has positive effects. In Germany, subsidies for individual research do neither exhibit a significant impact on R&D nor on patenting, but the innovative performance could be improved by additional incentives for collaboration. For Finnish companies, public funding is an important source of finance for R&D. Without subsidies, recipients would show less R&D and patenting activity, whilst those firms not receiving subsidies would perform significantly better if they were publicly funded. Copyright © 2007 John Wiley & Sons, Ltd.

This study presents a novel empirical approach to identify financing constraints for innovation based on the concept of an ideal test (Hall, 2008). Firms were offered a hypothetical payment and asked to choose between alternatives of use. If they selected additional innovation projects, they must have had some unexploited investment opportunities that were not profitable using more costly external finance. We attribute constraints for innovation not only to lacking financing, but also to firms' innovative capability. Econometric results show that financial constraints do not depend on the availability of internal funds per se but that they are driven by innovative capability.

The impact of environmental innovations on firm performance is ambiguous. On the one hand, regulatory-driven environmental innovation may impose additional costs to firms and lower their profits. On the other hand, eco-innovators could profit from lower uncertainty in innovation due to regulatory standards and demand-generating effects of regulation. In this paper we analyse (a) whether regulation-driven environmental innovation generates similar innovation success compared to other types of product and process innovation, and (b) whether regulation-driven environmental innovation increases or decreases firm success (as measured by return on sales). Using firm data from the German innovation survey, we find that both product and process innovations driven by environmental regulation generate similar success in terms of sales with new products and cost savings as other innovations do. However, we find different effects when looking at the field of environmental regulation that triggered innovations. Regulations in favour of sustainable mobility contribute to higher sales with market novelties while regulations in the field of water management lower this type of innovation success. With regard to a firm's price–cost margin, new processes implemented in order to comply with environmental regulation requirements lower profitability, indicating higher costs for this type of innovation which cannot be passed on through prices. Higher profit margins can be observed for firms with innovations triggered by regulations on recycling and waste management as well as on resource efficiency.

Our study demonstrates empirically that the choice of resource allocation strategy affects innovation performance. Allocating resources to a broader range of innovation projects increases new product sales, an effect that appears to outweigh that of resource intensity. In addition, we find that the performance benefit of breadth is higher for firms that allocate resources selectively at later stages of the innovation process. This breadth‐selectiveness effect is greatest for firms intending to create relatively more novel products, departing further from their knowledge base. Based on these results, we theorize that breadth increases performance because it spreads firms' bets on unproven innovative endeavors. Limiting resource commitments by selecting out deteriorating projects prevents an escalation in the costs of breadth. This advantage increases with the uncertainty implicit in greater innovative intent. The paper thus contributes to theory of how resource allocation strategies influence performance outcomes of innovation project portfolios . Copyright © 2013 John Wiley & Sons, Ltd.

Abstract This paper examines the input and output additionality of public R&D subsidies in Western and Eastern Germany. We estimate the impact of public R&D grants on firms’ R&D and innovation input. Based on the results of this first step we compare the impact of publicly funded private R&D on innovation output with the output effect of R&D funded out of firms’ own pockets. We employ microeconometric evaluation methods using firm‐level data derived from the Mannheim Innovation Panel. Our results point towards a large degree of additionality in public R&D grants with regard to innovation input measured as R&D expenditures and innovation expenditures, as well as with regard to innovation output measured by patent applications. Input additionality has been more pronounced in Eastern Germany during the transition period than in Western Germany. However, R&D productivity is still larger for the established Western German innovation system than for Eastern Germany. Hence, a regional redistribution of public R&D subsidies might improve the overall innovation output of the German economy.

Abstract This paper deals with the problems encountered in defining and measuring the degree of fiscal decentralisation. Drawing on a recent analytical framework of the OECD, different measures of tax autonomy and revenue decentralisation are presented which consider the tax‐raising powers of sub‐central governments. Taking account of changes in the assignment of decision‐making competencies over the course of time, new time series of annual data on the degree of fiscal decentralisation are provided for 23 OECD countries over the period between 1965 and 2001. It is shown that common measures usually employed tend to overestimate the extent of fiscal decentralisation considerably. Evidence is also provided of increasing fiscal decentralisation in a majority of OECD countries during the last three decades.

Artificial Intelligence (AI) is often regarded as the next general-purpose technology with a rapid, penetrating, and far-reaching use over a broad number of industrial sectors. The main feature of new general-purpose technology is to enable new ways of production that may increase productivity. However, to date, only a few studies have investigated the likely productivity effects of AI at the firm-level, presumably due to limited data availability. We exploit unique survey data on firms’ adoption of AI technology and estimate its productivity effects with a sample of German firms. We employ both a cross-sectional dataset and a panel database. To address the potential endogeneity of AI adoption, we also implement IV estimators. We find positive and significant associations between the use of AI and firm productivity. This finding holds for different measures of AI usage, i.e., an indicator variable of AI adoption, and the intensity with which firms use AI methods in their business processes.

Abstract: This study analyses whether stock indices that represent socially responsible investments (SRI) exhibit a different performance compared to conventional benchmark indices. In contrast to other studies, the analysis concentrates on SRI indices and not on investment funds. This has several advantages, since transaction costs of funds, the timing activities and the skill of the fund management do not have to be considered. A direct measure of the performance effects of SRI screens is therefore examined. The 29 SRI stock indices are analysed by single‐equation models as well as by multi‐equation systems that exploit the information in the cross‐section. SRI stock indices do not exhibit a different level of risk‐adjusted return than conventional benchmarks. But many SRI indices have a higher risk relative to the benchmarks. The findings are robust to the use of different benchmark indices and apply to all common types of SRI screening.

Abstract We investigate the relationship between corporate and country sustainability on the cost of bank loans. We look into 470 loan agreements signed between 2005 and 2012 with borrowers based in 28 different countries across the world and operating in all major industries. Our principal findings reveal that country sustainability, relating to both social and environmental frameworks, has a statistically and economically impactful effect on direct financing of economic activity. An increase of one unit in a country's sustainability score is associated with an average decrease in the cost of debt by 64 basis points. Our international analysis shows that the environmental dimension of a country's institutional framework is approximately twice as impactful as the social dimension, when it comes to determining the cost of corporate loans. On the other hand, we find no conclusive evidence that firm‐level sustainability influences the interest rates charged to borrowing firms by banks. Our main findings survive a battery of robustness tests and additional analyses concerning subsamples, alternative sustainability metrics and the effects of financial crisis.

Abstract In this paper we extend former meta-analyses on FDI and taxation in three ways. First, we add 16 recent publications. Second, we code additional meta-regressor variables addressing important issues in research on FDI and taxation. Third, we refer to the sophisticated meta-analytical methodology and present a coherent strategy to choose the meta-regression estimator most suitable for the meta-data at hand. As compared to prior surveys, the meta-analysis is thus based on a much broader methodological basis and a considerably richer meta-data set. The median tax semi-elasticity of FDI based on 704 primary estimates is 2.49 in absolute terms. The precision weighted average of the full sample of semi-elasticities is 2.55, again in absolute terms. Moreover, our meta-analysis shows that there is a publication bias in the primary literature. Meta-regressions show that studies based on aggregate data report systematically larger semi-elasticities than firm-level analyses, that integrating bilateral tax regulations into effective tax rates leads to more effective measurement of adverse tax incentives on foreign investment, and that tax effects are not compensated by public spending.