Program on Technological Progress and Productivity Measurement

March 20, 2009
Ernst Berndt and Christopher Knittel, Organizers

Jacques Mairesse, INSEE and NBER, Fabio Montobbio, Universita Bocconi, and Michele Pwzzoni, University of Bergamo
Determinants of Promotion and Scientific Productivity: A Study on Italiam and French Academic Physicists (Joint with Francesco Lissoni)

Fiona Murray, MIT, Philippe Aghion, Harvard University and NBER, Julian Kolev, Harvard University, and Scott Stern, Northwestern University and NBER
Of Mice and Academics: Examining the Effects of Openness on Innovation (Joint with Mathias Dewatripont

Scientific freedom and openness are hallmarks of academia: relative to their counterparts in industry, academics maintain discretion over their research agenda and allow others to build on their discoveries. Aghion, Kolev, Dewatripont, Murray, and Stern examine the relationship between openness and freedom, building on recent models emphasizing that, from an economic perspective, freedom is the granting of control rights to researchers. Within this framework, openness of upstream research does not simply encourage higher levels of downstream exploitation. It also raises the incentives for additional upstream research by encouraging the establishment of entirely new research directions. In other words, within academia, restrictions on scientific openness (such as those created by formal intellectual property, or IP) may limit the diversity and experimentation of basic research itself. The authors test this hypothesis by examining a “natural experiment" in openness within the academic community: NIH agreements during the late 1990s that circumscribed IP restrictions for academics regarding certain genetically engineered mice. Using a sample of engineered mice that are linked to specific scientific papers (some affected by the NIH agreements and some not), they implement a differences-in-differences estimator to evaluate how the level and type of follow-on research using these mice changes after the NIH-induced increase in openness. They find a significant increase in the level of follow-on research. Moreover, this increase is driven by a substantial increase in the rate of exploration of more diverse research paths. Overall, their findings highlight a neglected cost of IP: reductions in the diversity of experimentation that follows from a single idea.

Ashish Arora, Duke University, and Lee Branstetter, Carnegie Mellon University and NBER
The Great Realignment: How the Changing Technology of Technological Change in Information Technology Affected the US and Japanese IT Industries, 1983-1999 (Joint with Matej Drev)

Arora, Branstetter, and Drev empirically show that innovation in Information Technology (IT) has become increasingly dependent on and intertwined with innovation in software. This change in the nature of IT innovation has had differential effects on the performance of the United States and Japan, two of the largest producers of IT globally. The authors document this linkage between software’s contribution in IT innovation and the differential innovation performance of U.S. and Japanese electronics, semiconductors, and hardware firms. They collect patent data from USPTO in the period 1980-2002 and use a citation function approach to formally show the trend of increasing software dependence of IT innovation. Then, using a broad unbalanced panel of the largest U.S. and Japanese publicly listed IT firms in the period 1983-99, they show that Japanese IT innovation relies less on software advances than U.S. IT innovation; the innovation performance of Japanese IT firms is increasingly lagging behind that of their U.S. counterparts, particularly on IT sectors that are more software intensive; and that U.S. IT firms are increasingly outperforming their Japanese counterparts, particularly in more software intensive sectors. The findings of this paper could provide a fresh explanation for the relative decline of the Japanese IT industry in the 1990s.

Alexander Field, Santa Clara University
Should Capital Input Data Receive a Utilization Adjustment

A common procedure in productivity research is to use estimates of the stocks of physical capital as proxies for service flows. A number of authors propose cyclical adjustments for capital input which, if large enough, will completely eliminate findings of procyclicality in the behavior of TFP. Field argues that for the preponderance of assets in the fixed capital stock, fluctuations in utilization have little effect on user costs. In the aggregate, any adjustments to capital input data for utilization should consequently be small, much smaller, for example, than those suggested by Solow (1957), Griliches and Jorgenson (1966), Tatom (1980), or Shapiro (1993).

Leonardo Iacovone, The World Bank, Beata Javorcik, University of Oxford,Wolfgang Keller, University of Colorado and NBER, and James Tybout, Pennsylvania State University and NBER
Supplier Responses Wal-Mart’s Invasion of Mexico

Iacovone, Javorcik, Keller, and Tybout analyze the effects of Wal-Mart’s entry into Mexico on Mexican manufacturers of consumer goods. More precisely, they develop a dynamic model of an upstream consumer-goods industry in which heterogeneous firms decide whether to sell their products through Walmex or through traditional retailers. They then use this model to characterize the changes in firms’ market shares, pricing, R and D/advertising expenditures, and exit probabilities that Walmex might have induced. Finally, using establishment-level panel data, they generate evidence that these predicted changes in producer behavior actually took place in Mexico.

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