This monthly selection of articles has been carried out by Philippe Gugler and Damiano Lepori, the Center for Competitiveness, University of Fribourg. The entire selection, carried out since 2013, can be consulted on the academic articles page of our web.

Entrepreneurship and Industrial Clusters: Evidence from China Industrial Census

By: X. Zhu, Y. Liu, M. He, D. Luo, Y. Wu. RIEI, Xi’an Jiaotong - Liverpool University, Working Paper No. 2017-05, 2017.

Abstract: “This article studies the synergy effect of entrepreneurship on China’s industrial clusters. We propose an extension to Duranton and Overman’s (2005) method which enables us to delimit industrial clusters in space. The empirical model is identified with historical measures of local entrepreneur potential in the spirit of Chinitz (1961). We find that measures of entrepreneurship contribute significantly to cluster formation, cluster size, and cluster strength. Access to sea ports stimulates industrial concentration but agricultural legacy has the opposite effect. Light industries have more clusters which are also larger and stronger. Clusters also benefit from historical measures of market potential, localization/urbanization economies, and urban population density. Most of the results are robust to alternative instrumental strategies. Finally, we find evidence that the synergy effect is stronger where the local conditions are favorable to clusters.“ [ABSTRACT FROM AUTHORS]

Smart Specialization policy in the EU: Relatedness, Knowledge Complexity and Regional Diversification

By: P.-A. Balland, R. Boschma, J. Crespo, D. L. Rigby. Utrecht University, Paper in Evolutionary Economic Geography No. 17.17, 2017.

Abstract: “Smart specialization has become a hallmark of the EU’s Cohesion Policy. Envisaged as a bottom-up initiative identifying local knowledge cores and associated competitive advantages, the operationalization of smart specialization has been rather limited, as a coherent set of analytical tools to guide the policy directives remains elusive. To tackle the weak underpinning of smart specialization policy, we propose a policy framework around the concepts of relatedness and knowledge complexity. We use EPO patent data to provide evidence on how EU regions develop new technologies in the period 1990-2009. We find that diversifying into more complex technologies is highly attractive but difficult for EU regions to accomplish. Regions can overcome this diversification dilemma by developing new complex technologies that build on local related capabilities. We use these findings to construct a policy framework for smart specialization that highlights the potential risks and rewards for regions of adopting competing diversification strategies. We show how potential costs of alternative strategies in regions may be assessed by making use of the relatedness concept, and how potential benefits of various smart specialization strategies can be derived from estimates of the complexity of technologies. A series of case-studies of different types of regions illustrate the utility of this policy framework.“ [ABSTRACT FROM AUTHORS]

Economic Institutions and the Location Strategies of European Multinationals in their Geographic Neighborhood

By: A. Ascani, R. Crescenzi, S. Iammarino. London School of Economics and Political Sciences, DOI: http://dx.doi.org/10.1080/00130095.2016.1179570, 2016.

Abstract: “This article investigates how the location behavior of Multinational Enterprises (MNEs) is shaped by the economic institutions of the host countries. The analysis covers a wide set of geographically proximate economies with different degrees of integration with the ‘Old’ 15 European Union (EU) members: New Member States, Accession and Candidate Countries, as well as European Neighborhood Policy (ENP) countries and the Russian Federation. The article aims to shed new light on the heterogeneity of MNE preferences for the host countries’ regulatory settings (including labor market and business regulation), legal aspects (i.e. protection of property rights and contract enforcement) and the weight of the government in the economy. By employing data on 6,888 greenfield investment projects, the random-coefficient Mixed Logit analysis shows that, while the quality of the national institutional framework is generally beneficial for the attraction of foreign investment, MNEs preferences over economic institutions are highly heterogeneous across sectors and business functions.” [ABSTRACT FROM AUTHORS]

A Spatial Analysis of Innovation in Europe

By: A. Tonnerre. MPRA Paper No. 80116, 2017.

Abstract: “The purpose of this paper is two-fold. Firstly, it surveys different works related to the analysis of Innovation and the way it spreads locally. We will see that theoretical predictions and empirical facts are rather contradictory. This will lead us, secondly, to shedding light towards the concentration of innovative activities in the European Union, at a more precise level of analysis: the NUTS2 nomenclature. We contradict the usually accepted empirical fact that innovative activities tend to be less and less concentrated, thus supporting the theory of knowledge spillovers, which is probably due to the important changes the European Union went through in terms of trade structure. This claim relies on a rather simple but well-founded analysis. Patent applications to the European Patent Office will be used as a proxy for the level of Innovation. These patent applications have a geographical component that will be exploited to determine whether spatial autocorrelation of innovative activities is present. After showing the importance of considering spatial autocorrelation in an analysis of Innovation, we will propose an empirical methodology to assess how it spreads. Regarding this, no results are presented, as it goes beyond the scope of the paper.” [ABSTRACT FROM AUTHOR]

Technological Coherence and the Adaptive Resilience of Regional Economies

By: S. Rochetta, A. Mina. Università degli Studi di Torino, University of Cambridge, Paper in Evolutionary Economic Geography No. 17.13, 2017.

Abstract: “This paper explores the effect of different regional technological profiles on the resilience of regional economies to exogenous shocks. We conduct an empirical examination of the determinants of resilience through panel analyses of UK NUTS III level data for the 2004-2012 period. The results indicate that regions endowed with technologically coherent – and not simply diversified – knowledge bases are better prepared to face an unforeseen downturn and display resilience. Moreover, local economies tend to be more adaptable if they innovate in sectors with the strongest growth opportunities, even though firms’ net entry does not appear to contribute significantly towards resilience.” [ABSTRACT FROM AUTHORS]

Co-operation in Production, the Organization of Industry & Productive Systems: A Critical Survey of the 'District' Form of Industrial Organisation & Development

By: S. Konzelmann, F. Wilkinson. Centre for Business Research, University of Cambridge Working Paper No. 481, 2016.

Abstract: “Liberal economics has traditionally put strong emphasis on individualisation and specialisation – and has struggled with the notion of co-operation. Thus, Alfred Marshall's pioneering work on the English industrial districts of his day posed a significant challenge to the conventional wisdom, which embraced laissez-faire markets and Adam Smith's claim that improvements in efficiency depend upon the increased division of labour within firms competing in them. Marshall found that an important determinant of the competitive success of industrial districts was effective co-operation within and between firms, supported by a dense network of institutions, and markets regulated by agreed rules, norms and standards. He theorised that these generate external economies of scale and scope that enable the district and its constituent small firms to successfully compete with large, vertically integrated firms. From the mid- 1920s, however, with the emergence and growth of very large, highly successful firms, the conventional wisdom shifted to suppose that the historical tendency in capitalist development was towards large firm dominance; and the small firm sector was progressively reduced to a residuum. However, the rediscovery of the industrial district by Italian scholars during the 1960s revived interest in Marshall’s notion of localised productive systems and attracted considerable attention to this form of industrial organisation. This paper traces themes within this literature, from the earliest theorising by the Classical Political Economists to the present, focusing on the role of co-operation in production, the relationship between the organisation of production and markets, and the nature and functioning of productive systems.” [ABSTRACT FROM AUTHORS]

Regional variation of innovation activity in Poland. The positive role of location in metropolitan areas affirmed

By: T. Brodzicki, A. Golejewska. KEIE UG, Paper No. 1/2017(028), 2017.

Abstract: “Poland’s innovation performance is unsatisfactory. In the context of the required shift of the present mostly-extensive growth paradigm to more knowledge and innovation-intensive one has to take into account the regional variation in innovative and economic activity in this middle-sized open economy in order to fine-tune its regional development and innovation policies. Using the firm-level data for manufacturing sector aggregated to NUTS3 regions as well as firm-level data from a unique qualitative survey carried out by the Institute for Development we try to identify the determinants of variation in innovative activity of firms within Poland in order to account for regional differences in particular between metropolitan and non- metropolitan regions. The analysis at aggregated NUTS3 level does not bring satisfactory results. The difference between metropolitan and non-metropolitan regions is statistically insignificant and the overall results are mixed. In the second step, we apply more sophisticated econometric methods controlling for firm-specific, sector-specific and region-specific features as suggested in the literature of the subject identifying the positive effect of location within metropolitan regions on the innovative performance of companies. Furthermore, the results point to the significance of firm-specific, internal, as well as region-specific – factors external to a firm, nonetheless, supporting the notion of regional innovation systems in which firms are embedded.” [ABSTRACT FROM AUTHORS]

Smart Specialisation in EU and Chile, Challenges and Opportunities

By: J. Gómez Prieto, P. dos Santos. Publications Office of the European Union, EUR 28635 EN, doi:10.2760/884462, 2017.

Abstract: “The Smart Specialisation approach is being an inspiratory driver of regional innovation not only within the European Union but beyond. This paper elaborates on the Policy Learning Dialogue: Smart Specialisation in EU and Chile which took place at the Joint Research Centre, Seville (21st November 2016). The article showcases policy reflections and outcomes derived from a fruitful discussion between practitioners of regional innovation strategies in EU and Chile, smart specialisation platform staff and experts. This policy dialogue was part of the activities carried out by the smart specialisation platform aiming at providing evidence-based support to policy makers and stakeholders of smart specialisation through common reflections focused on cooperation dynamics and joint learning.” [ABSTRACT FROM AUTHORS]

Agglomeration Economies in the Formal and Informal Sectors: A Bayesian Spatial Approach

By: K. Tanaka, Y. Hashiguchi. IDE Discussion Paper No. 666, 2017.

Abstract: “This paper examines whether localized clusters of similar industries produce agglomeration economies in the formal and informal sectors. We develop a Bayesian method to estimate a spatial autoregressive model with an endogenous independent variable. We use establishment-level census data that cover both formal registered and informal unregistered establishments in Cambodia. We find that the density of local employment has a significantly positive effect on productivity in the informal sector, but little effect in the formal sector. For manufacturing, a doubling of employment density increases productivity in the informal sector by 9% through local linkages and by 17% through spatial multiplier linkages, leading to a 26% increase in total. A spatial network magnifies the local impact of agglomeration economies in the informal sector.” [ABSTRACT FROM AUTHORS]

R&D Policy Regimes in France: new evidence from a spatio-temporal analysis

By: B. Montmartin, M. Herrera, N. Massard. GREDEG Working Paper No. 2017-22, 2017.

Abstract: “Using a unique database containing information on the amount of R&D tax credits and regional, national and European subsidies received by firms in French NUTS3 regions over the period 2001-2011, we provide new evidence on the efficiency of R&D policies taking into account spatial dependency across regions. By estimating a spatial Durbin model with regimes and fixed effects, we show that in a context of yardstick competition between regions, national subsidies are the only instrument that displays total leverage effect. For other instruments internal and external effects balance each other resulting in insignificant total effects. Structural breaks corresponding to tax credit reforms are also revealed.” [ABSTRACT FROM AUTHORS]