Young innovative firms and R&D strategies: is the Spanish case different?

This paper analyzes the profile of Spanish young innovative companies (YICs) and the determinants of innovation and imitation strategies. The results for an extensive sample of 2,221 Spanish firms studied during the period 2004–2010 show that YICs are found in all sectors, although they are more concentrated in high-tech sectors and, in particular, in knowledge-intensive services (KIS). Three of every four YICs are involved in KIS. Our results highlight that financial and knowledge barriers have much impact on the capacity of young, small firms to innovate and to become YICs, whereas market barriers are not obstacles to becoming a YIC. Public funding, in particular from the European Union, makes it easier for a new firm to become a YIC. In addition, YICs are more likely to innovate than mature firms, although they are more susceptible to sectoral and territorial factors. YICs make more dynamic use of innovation and imitation strategies when they operate in high-tech industries and are based in science parks located close to universities. Keywords: innovation strategies, public innovation policies, barriers to innovation, multinomial probit model. JEL Codes: D01, D22 , L60, L80, O31

Why not all young firms invest in R&D

This article aims to analyze the different impact that some factors may exert on the probability that a small young firm invests intensively in R&D. Recently, an increasing amount of the literature makes reference to the vital role played by a small number of young firms in generating jobs and increasing efficiency levels. However, not all new firms invest in R&D. Departing from the definition of YICs (firms younger than 6 years old, fewer than 250 employees and with more than 15% of their revenues invested in R&D activities), and with an extensive sample of the Spanish Community Innovation Survey between 2004- 2010, we try to determine: i) those factors that cause firms to become YICs (innovative young small firms) or YNICs (moderately innovative young small firms); ii) what is the difference in the impact of those factors between YICs and YNICs. Our results show that factors such as initial innovation capacity and cooperation in R&D projects enhance the probability of becoming a YIC. Nevertheless, factors such as export potential and market uncertainty may influence the decision to invest moderately and become a YNIC. Keywords: Innovation, Policy, YICs. JEL Classifications: O31, D21

European Integration: Partisan Motives or Economic Benefits?

In this paper we examine the influence of economic factors to explain partisan support for European integration over the last three decades. We find that partisan support is larger in `poorer' countries with direct economic bene fits from EU membership. On the contrary, parties in countries aff ected by the Maastricht criteria are more Euro-sceptical. Moreover, we find weak evidence for larger partisan support in countries with more developed welfare states, and that the support for European integration fluctuates in parallel with the business cycle. Finally, our results indicate that the importance of economic factors in determining partisan support for European integration has grown in recent periods. JEL classi fication: F15, F42, F53, F55, H60. Key words: European Integration; Partisan Ideology; Maastricht Criteria; European Budget; Benefi ts from Trade.

Disentangling water usage in the European Union: A decomposition analysis

The Water Framework Directive (WFD) defines common objectives for water resources throughout the European Union (EU). Given this general approach to water preservation and water policy, the objective of this paper is to analyse whether common patterns of water consumption exist within Europe. In particular, our study uses two methods to reveal the reasons behind sectoral water use in all EU countries. The first method is based on an accounting indicator that calculates the water intensity of an economy as the sum of sectoral water intensities. The second method is a subsystem input‐output model that divides total water use into different income channels within the production system. The application uses data for the years 2005 and 2009 on water consumption in the production system of the 27 countries of the EU. From our analysis it emerges that EU countries are characterized by very different patterns of water consumption. In particular water consumption by the agriculture sector is extremely high in Central/Eastern Europe, relative to the rest of Europe. In most countries, the water used by the fuel, power and water sector is consumed to satisfy domestic final demand. However, our analysis shows that for some countries exports from this sector are an important driver of water consumption. Focusing on the agricultural sector, the decomposition analysis suggests that water usage in Mediterranean countries is mainly driven by final demand for, and exports of, agricultural products. In Central/Eastern Europe domestic final demand is the main driver of water consumption, but in this region the proportion of water use driven by demand for exports is increasing over time. Given these heterogeneous water consumption patterns, our analysis suggests that Mediterranean and Central/Eastern European countries should adopt specific water policies in order to achieve efficient levels of water consumption in the European Union. JEL codes: N5; C67 Keywords: Water use, Subsystem input–output model; Water intensity, European Union.

The Determinants of Exit in Argentina: Core and Peripheral Regions

This paper analyses the regional determinants of exit in Argentina. We find evidence of a dynamic revolving door by which past entrants increase current exits, particularly in the peripheral regions. In the central regions, current and past incumbents cause an analogous displacement effect. Also, exit shows a U-shaped relationship with respect to the informal economy, although the positive effect is weaker in the central regions. These findings point to the existence of a core-periphery structure in the spatial distribution of exits. Key words: firm exit, count data models, Argentina JEL: R12; R30; C33

High-growth firms and innovation: an empirical analysis for Spanish firms

This paper analyses the effect of R&D investment on firm growth. We use an extensive sample of Spanish manufacturing and service firms. The database comprises diverse waves of Spanish Community Innovation Survey and covers the period 2004–2008. First, a probit model corrected for sample selection analyses the role of innovation on the probability of being a high-growth firm (HGF). Second, a quantile regression technique is applied to explore the determinants of firm growth. Our database shows that a small number of firms experience fast growth rates in terms of sales or employees. Our results reveal that R&D investments positively affect the probability of becoming a HGF. However, differences appear between manufacturing and service firms. Finally, when we study the impact of R&D investment on firm growth, quantile estimations show that internal R&D presents a significant positive impact for the upper quantiles, while external R&D shows a significant positive impact up to the median. Keywords : High-growth firms, Firm growth, Innovation activity. JEL Classifications : L11, L25, L26, O30

On reduced games and the lexmax solution

For a family of reduced games satisfying a monotonicity property, we introduced the reduced equal split-off set, an extension of the equal split-off set (Branzei et. al, 2006), and study its relation with the core. Regardless of the reduction operation we consider, the intersection between both sets is either empty or a singleton containing the lexmax solution (Arin et al., 2008). We also provide a procedure for computing the lexmax solution for a class of games that includes games with large core (Sharkey, 1982). [JEL Classification: C71]

Moral Hazard in Repeated Procurement of Services

This paper analyzes repeated procurement of services as a four-stage game divided into two periods. In each period there is (1) a contest stage à la Tullock in which the principal selects an agent and (2) a service stage in which the selected agent provides a service. Since this service effort is non-verifiable, the principal faces a moral hazard problem at the service stages. This work considers how the principal should design the period-two contest to mitigate the moral hazard problem in the period-one service stage and to maximize total service and contest efforts. It is shown that the principal must take account of the agent's past service effort in the period-two contest success function. The results indicate that the optimal way to introduce this `bias' is to choose a certain degree of complementarity between past service and current contest efforts. This result shows that contests with `additive bias' (`multiplicative bias') are optimal in incentive problems when effort cost is low (high). Furthermore, it is shown that the severity of the moral hazard problem increases with the cost of service effort (compared to the cost of contest effort) and the number of agents. Finally, the results are extended to more general contest success functions. JEL classification: C72; D82 Key words: Biased contests; Moral Hazard; Repeated Game; Incentives.

A Theory of Representative Behavior in the Dictator Game

In this paper we present a model of representative behavior in the dictator game. Individuals have simultaneous and non-contradictory preferences over monetary payoffs, altruistic actions and equity concerns. We require that these behaviors must be aggregated and founded in principles of representativeness and empathy. The model results match closely the observed mean split and replicate other empirical regularities (for instance, higher stakes reduce the willingness to give). In addition, we connect representative behavior with an allocation rule built on psychological and behavioral arguments. An approach consistently neglected in this literature. Key words: Dictator Game, Behavioral Allocation Rules, Altruism, Equity Concerns, Empathy, Self-interest JEL classification: C91, D03, D63, D74.

A Sequential Allocation Problem: The Asymptotic Distribution of Resources

In this paper we consider a sequential allocation problem with n individuals. The first individual can consume any amount of some endowment leaving the remaining for the second individual, and so on. Motivated by the limitations associated with the cooperative or non-cooperative solutions we propose a new approach. We establish some axioms that should be satisfied, representativeness, impartiality, etc. The result is a unique asymptotic allocation rule. It is shown for n = 2; 3; 4; and a claim is made for general n. We show that it satisfies a set of desirable properties. Key words: Sequential allocation rule, River sharing problem, Cooperative and non-cooperative games, Dictator and ultimatum games. JEL classification: C79, D63, D74.

The global carbon budget:a conflicting claims problem

Despite global environmental governance has traditionally couched global warming in terms of annual CO2 emissions (a flow), global mean temperature is actually determined by cumulative CO2 emissions in the atmosphere (a stock). Thanks to advances of scientific community, nowadays it is possible to quantify the \global carbon budget", that is, the amount of available cumulative CO2 emissions before crossing the 2oC threshold (Meinshausen et al., 2009). The current approach proposes to analyze the allocation of such global carbon budget among countries as a classical conflicting claims problem (O'Neill, 1982). Based on some appealing principles, it is proposed an efficient and sustainable allocation of the available carbon budget from 2000 to 2050 taking into account different environmental risk scenarios. Keywords: Carbon budget, Conflicting claims problem, Distribution, Climate change. JEL classification: C79, D71, D74, H41, H87, Q50, Q54, Q58.

Regional determinants of firm entry in a developing country

We analyse the determinants of firm entry in developing countries using Argentina as an illustrative case. Our main finding is that although most of the regional determinants used in previous studies analysing developed countries are also relevant here, there is a need for additional explanatory variables that proxy for the specificities of developing economies (e.g., poverty, informal economy and idle capacity).We also find evidence of a core-periphery pattern in the spatial structure of entry that seems to be mostly driven by differences in agglomeration economies. Since regional policies aiming to attract new firms are largely based on evidence from developed countries, our results raise doubts about the usefulness of such policies when applied to developing economies. JEL classification: R12, R30, C33. Key words: Firm entry, Argentina, count data models.

Conflicting claims problem associated with cost sharing of a network

A minimum cost spanning tree (mcst) problem analyzes the way to efficiently connect individuals to a source when they are located at different places. Once the efficient tree is obtained, the question on how allocating the total cost among the involved agents defines, in a natural way, a confliicting claims situation. For instance, we may consider the endowment as the total cost of the network, whereas for each individual her claim is the maximum amount she will be allocated, that is, her connection cost to the source. Obviously, we have a confliicting claims problem, so we can apply claims rules in order to obtain an allocation of the total cost. Nevertheless, the allocation obtained by using claims rules might not satisfy some appealing properties (in particular, it does not belong to the core of the associated cooperative game). We will define other natural claims problems that appear if we analyze the maximum and minimum amount that an individual should pay in order to support the minimum cost tree. Keywords: Minimum cost spanning tree problem, Claims problem, Core JEL classification: C71, D63, D71.

Innovation and horizontal mergers in a vertically related industry

This paper analyzes the effects of horizontal mergers on innovation and consumer welfare in a vertically related industry context, in which downstream firms compete for customers with a differentiated final good and can undertake R&D activities to reduce their unit costs. Upstream and downstream horizontal mergers can take place. The results suggest that competition authorities aiming to promote innovation and consumer welfare should treat upstream and downstream mergers differently, since horizontal mergers between upstream firms are detrimental to innovation and consumer welfare. By contrast, policy makers should evaluate the market characteristics under downstream integration. We show that downstream horizontal mergers can be both innovation and consumer welfare enhancing in the short run, when the markets are sufficiently small. Keywords: Horizontal Mergers. Innovation. Vertical Relations. JEL Classification Numbers: L22, L41, O32

A territorial approach to R&D subsidies: Empirical evidence for Catalonian firms

Using a database of 2,263 responses to R&D public calls in Catalonia, during the period 2007–2010, this paper proceeds to analyse the potential interaction of the territorial and policy dimensions with the propensity to apply for, and be awarded, a public R&D subsidy. Controlling for characteristics at the firm and project level, we estimate models using a two-step procedure. In the first step, our results suggest that large firms which export and which belong to high-tech manufactures are more likely to participate in a public R&D call. Furthermore, both urban location and past experience of such calls have a positive effect. Our territorial proxy of information spillovers shows a positive sign, but this is only significant at intra-industry level. Membership of one of the sectors prioritized by the Catalan government, perhaps surprisingly, does not have a significant impact. In the second step, our results show that cooperative projects, SMEs or old firms shows a positive effect on the probability of obtaining a public subsidy. Finally, the cluster policy does not show a clear relationship with the public R&D call, suggesting that cluster policies and R&D subsidies follow different goals. Our results are in line with previous results in the literature, but they highlight the unequal territorial distribution of the firms which apply and the fact that policymakers should interlink the decision criteria for their public call with other policies. Keywords: Evaluation, R&D policies, territorial approach, clusters JEL Classifications: L53, L25, O38