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.

Тhe Effect of High tech Clusters on the  Productivity of Top Inventors

By: E. Moretti. NBER Working Paper No. 26270, JEL No. J01,R11, 2019.

Abstract: “The high-tech sector is increasingly concentrated in a small number of expensive cities, with the top ten cities in “Computer Science”, “Semiconductors” and “Biology and Chemistry”, accounting for 70%, 79% and 59% of inventors, respectively. Why do inventors tend to locate near other inventors in the same field, despite the higher costs? I use longitudinal data on top inventors based on the universe of US patents 1971 - 2007 to quantify the productivity advantages of Silicon-Valley style clusters and their implications for the overall production of patents in the US. I relate the number of patents produced by an inventor in a year to the size of the local cluster, defined as a city × research field × year. I first study the experience of Rochester NY, whose high-tech cluster declined due to the demise of its main employer, Kodak. Due to the growth of digital photography, Kodak employment collapsed after 1996, resulting in a 49.2% decline in the size of the Rochester high-tech cluster. I test whether the change in cluster size affected the productivity of inventors outside Kodak and the photography sector. I find that between 1996 and 2007 the productivity of non-Kodak inventors in Rochester declined by 20.6% relative to inventors in other cities, conditional on inventor fixed effects. In the second part of the paper, I turn to estimates based on all the data in the sample. I find that when an inventor moves to a larger cluster she experiences significant increases in the number of patents produced and the number of citations received. Conditional on inventor, firm, and city × year effects, the elasticity of number of patents produced with respect to cluster size is 0.0662 (0.0138). The productivity increase follows the move and there is no evidence of pre-trends. IV estimates based on the geographical structure of firms with laboratories in multiple cities are statistically similar to OLS estimates. In the final part of the paper, I use the estimated elasticity of productivity with respect to cluster size to quantify the aggregate effects of geographical agglomeration on the overall production of patents in the US. I find macroeconomic benefits of clustering for the US as a whole. In a counterfactual scenario where the quality of U.S. inventors is held constant but their geographical location is changed so that all cities have the same number of inventors in each field, inventor productivity would increase in small clusters and decline in large clusters. On net, the overall number of patents produced in the US in a year would be 11.07% smaller.” [ABSTRACT FROM AUTHOR]

The birth and development of the Italian automotive industry (1894-2015)  and the Turin car cluster

By: A. Enrietti, A. Geuna, C. R. Nava, P. P. Patrucco. Department of Economics and Statistics “Cognetti de Martiis”, LEI&BRICK Working Paper No. 01/2019, 2019.

Abstract: “By discussing the relation between the traditional Marshallian/Jacobian approach and Klepper’s concept of spinoffs and their role, this paper tries to explain the early genesis and later evolution of the Italian automotive industry, based on the formation of the Torino’s car cluster from the late nineteenth century. Historical analysis and econometric models are integrated to identify key factors that enabled the creation and success of the automotive industry in Turin. Specifically, we investigate agglomeration economies, the role of spinoffs and institutional factors such as the level and importance of local education. Based on original archival research, we built a new database of all Italian automobile companies. Replication of Klepper’s (2007) and Boschma and Wenting’s (2007) models shows no particular influence of the Turin cluster and no early entry advantages. Our model, which integrates and extends previous contributions, confirms the existence of a spinoffs effect, and in particular the positive effect of inherited technical skills embedded in pilots. We find support also, for positive agglomeration effects at the regional level and inter industry externalities from aeronautics, a metropolitan cluster effect and the significance of metropolitan education.” [ABSTRACT FROM AUTHORS]

Does Light Touch Cluster Policy Work? Evaluating the Tech City Programme

By: M. Nathan. London School of Economics and Political Science, Centre for Economic Performance, CEP Discussion Paper No, 1648, 2019.

Abstract: “Despite academic scepticism, cluster policies remain popular with policymakers. This paper evaluates the causal impact of a flagship UK technology cluster programme. I build a simple framework and identify effects using difference-in-differences and synthetic controls on rich microdata. I further test for timing, cross-space variation, scaling and churn channels. The policy grew and densified the cluster, but has had more mixed effects on tech firm productivity. I also find most policy ‘effects’ began before rollout, raising questions about the programme’s added value.” [ABSTRACT FROM AUTHOR]

Modular structure in labour networks reveals skill basins

By: N. O’Clery, E. Flaherty, S. Kinsella. University of Oxford, Mathematical Institute; Central Statistics Office; University of Limerick, Kemmy Business School, 2019.

Abstract: “Labour networks, where industries are connected based on worker transitions, have been previously deployed to study the evolution of industrial structure (’related diversification’) across cities and regions. Beyond estimating skill-overlap between industry pairs, such networks characterise the structure of inter-industry labour mobility and knowledge diffusion in an economy. Here we investigate the structure of the network of inter-industry worker flows in the Irish economy, seeking to identify groups of industries exhibiting high internal mobility and skill-overlap. We argue that these industry clusters represent skill basins in which skilled labour circulate and diffuse knowledge, and delineate the size of the skilled labour force available to an industry. Deploying a multi-scale community detection algorithm, we uncover a hierarchical modular structure composed of clusters of industries at different scales. At one end of the scale, we observe a macro division of the economy into services and manufacturing. At the other end of the scale, we detect a fine-grained partition of industries into tightly knit groupings. In particular, we find workers from finance, computing, and the public sector rarely transition into the extended economy. Hence, these industries form isolated clusters which are disconnected from the broader economy, posing a range of risks to both workers and firms. Finally, we develop a methodology based on industry growth patterns to reveal the optimal scale at which labour pooling operates in terms of skill-sharing and skill-seeking within industry clusters.” [ABSTRACT FROM AUTHORS]

Modern industrial policy in Latin America: Lessons from cluster development  policies

By: C. Pietrobelli. Maastricht Economic and social Research Institute on Innovation and Technology UNU-MERIT, UNU-MERIT Working Papers, ISSN 1871-9872, 2019.

Abstract: “Industrial clusters have developed in many regions and countries of Latin America. Active public policies have often supported them at the national (federal) and local levels, sometimes with the financial and technical assistance of international organizations. These experiences have been most remarkable, and share several elements of the ‘modern’ industrial policies that enjoy an increasing consensus in the literature. The vast experience of locally based forms of active policies that have proliferated in Latin America reflects a modern approach to industrial policies, and an example for other developing countries. Such approach has typically included clever interactions of private and government sectors, a process of search and discovery of the necessary public policy inputs, and an interactive design and implementation of these policies.” [ABSTRACT FROM AUTHOR]

Mapping the potential of EU regions to contribute to Industry 4.0

By: P.-A. Balland, R. Boschma. Utrecht University, Department of Human Geography and Planning; MIT Media Lab; University of Stavanger, UiS Business School, 2019.

Abstract: “This paper aims to identify the future Industry 4.0 centers of knowledge production in Europe. We expect Industry 4.0 Technologies (I4Ts) to thrive in regions where they can draw on local resources from related technologies. We use OECD-REGPAT data to identify I4T-related technologies, and find that I4Ts are located at the periphery of the knowledge space. Regions with a high potential in terms of I4T-related technologies were more likely to diversify successfully in new I4Ts in the period 2002-2016. We find big differences across EU regions: some show high but most regions show weak I4T potential.” [ABSTRACT FROM AUTHORS]

Labor market regulation, the diversity of knowledge and skill, and  national innovation performance

By: A. Filippetti, F. Guy. Research Policy, Vol. 49, Iss. 1, https://doi.org/10.1016/j.respol.2019.103867, 2020.

Abstract: “The diversity of knowledge and skill is an important element of a national system of innovation. We propose a theory of how certain labor market institutions affect diversity, and through that route affect levels of innovation. Specifically, unemployment protection (UP) encourages diversity by reducing the risk burden of a broad range of learning, or human capital investment; for that reason, UP fosters innovation. Employment protection (EP) reduces the risk burden of a much narrower range of learning; for this reason, it will not enhance diversity to the extent UP does, and it may actually depress overall diversity and innovation. Our approach differs from previous research on labor market insurance and skill formation, much of which has dealt with a distinction between general and specific skills, and which has treated the effects of UP and EP as similar. Estimating the effects of UP and EP on patenting for 25 OECD countries over 24 years, we find a positive effect from UP, a negative effect from EP, and evidence that the UP effect is mediated by diversity of skill.” [ABSTRACT FROM AUTHORS]

The benefits of membership in policy stimulated clusters in Hungary

By: M. Pecze. European Planning Studies, DOI: 10.1080/09654313.2019.1673322, 2019.

Abstract: “The purpose of this article is to describe the successes and failures of policy-stimulated business clusters based on regional Hungarian experiences. The after-subsidy survival rate, affected industry domains, and the occurrent advantages of such cooperation for cluster members were examined. Primary data were collected at the member level. The research covers all clusters set up before 2015 with deeds of foundation, in two very different regions. Results show that 24% of the clusters were working between 2015-2016, two years after the period of government subsidy ended. The main benefits to cluster members include better personal connections and increased trust and knowledge transfer, although cost reductions, easier access to finance and product specialization were not reported. Based on this knowledge, cluster policies can be fine-tuned, resulting in more sustainable initiatives, while clusters can be made potential partners in regional planning, research and development policy, as well as in smart specialization.” [ABSTRACT FROM AUTHOR]

Local discoveries and technological relatedness: the role of MNEs,  imports and domestic capabilities 

By: A. Lo Turco, D. Maggioni. Journal of Economic Geography, Vol. 19, Iss. 5, pp. 1077–1098, 2019.

Abstract: “We explore the role of intra- and extra-regional product-specific capabilities in the introduction of local discoveries—products new to the firm and to its local market—by Turkish manufacturing firms. We find that product discoveries in a NUTS3 region are favoured by their technological proximity to the product mix of co-located foreign firms. Proximity to co-located domestic firms and local imports does not play any role. The high intensity of local discoveries in novel and exclusive capabilities which foreign affiliates bring into the local economy drives our findings. Finally, we show that the importance of knowledge spilling from foreign affiliates depends on their insidership in the local market, on their product-specific knowledge advantage and on local firms’ absorptive capacity.” [ABSTRACT FROM AUTHORS]