Abstract
The analysis of the characteristics of firms helps to understand the causes and consequences of the direction of technological change. Firms differ substantially with respect to the type of technological knowledge they can generate and exploit through technological innovations. This in turn has major effects on the direction of technological change they are able to introduce. Large firms able to command the recombinant generation of codified knowledge with a strong scientific base are more likely to introduce neutral technological changes that consist in a shift effect of production functions. Small firms that rely more on tacit and external knowledge are more likely to rely on technologies directed toward the most intensive use of locally abundant production factors. The effects of this difference in terms of the resulting total factor productivity growth are important and can be grasped only when the changes in output elasticity of production factors in growth accounting are properly appreciated. The empirical evidence for a sample of 6,600 Italian firms observed between 1996 and 2005 confirms that large firms introduced mainly neutral technological changes while small firms with lower levels of profitability introduced biased technological changes.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
We have computed a set of financial ratios and yearly growth rates of assets and employees. We have then manually screened the top and bottom centile of the related distributions. The manual procedure led to the exclusion of 35 firms.
The coefficient is computed at sector-year level by the Italian statistical agency and is based on the survey data from a representative sample of Italian firms.
Note that consistently with our approach the standard procedure to measure TFP at the firm level that relies upon sectoral estimates of the relevant output elasticities seems inappropriate because of our emphasis upon the intra-industrial variance stemming from the localized introduction of idiosyncratic and biased innovations.
The GMM models have been run using the xtabond2 routine for STATA 12 (see Roodman, 2006). One-step models. All available lags are used as instruments for the transformed equation, and the contemporaneous first differences are used as instruments in the levels equation. Model run using the “small” options that allows the use of F statistics of overall model fit.
The selected sectors include food and beverages, textiles, garments and leather products, furniture, construction of metal products (except machinery).
Note that for this model specification the autocorrelation test AR2 turns to be weak (p value = 0.07).
Such evidence is in line with a vast literature on financial constraints and innovation investments (Hall and Lerner 2009).
References
Acemoglu, D. (1998). Why do new technologies complement skills? Directed technical change and wage inequality. Quarterly Journal of Economics, 113, 1055–1089.
Acemoglu, D. K. (2002). Directed technical change. Review of Economic Studies, 69, 781–809.
Acemoglu, D. (2003). Labor- and capital-augmenting technical change. Journal of European Economic Association, 1, 1–37.
Acemoglu, D. K. (2010). When does labor scarcity encourage innovation? Journal of Political Economy, 118, 1037–1078.
Acs, Z. J., & Audretsch, D. B. (1988). Innovation in large and small firms: An empirical analysis. American Economic Review, 78, 678–690.
Acs, Z. J., & Audretsch, D. B. (1990). Innovation and small firms. Cambridge, MA: MIT Press.
Antonelli, C. (2002). Innovation and structural change. Economie Appliquèe, 55, 85–120.
Antonelli, C. (2003). The economics of innovation new technologies and structural change. London: Routledge.
Antonelli, C. (2006). Localized technological change and factor markets: Constraints and inducements to innovation. Structural Change and Economic Dynamics, 17, 224–247.
Antonelli, C. (2012). Technological congruence and productivity growth. In M. Andersson, B. Johansson, C. Karlsson, & H. Lööf (Eds.), Innovation and growth—From innovating firms to economy-wide technological change. Oxford: Oxford University Press.
Antonelli, C., & Quatraro, F. (2010). The effects of biased technological change on total factor productivity, Empirical evidence from a sample of OECD countries. Journal of Technology Transfer, 35, 361–383.
Arvanitis, S. (1997). The impact of firm size on innovative activity. An empirical analysis based on Swiss firm data. Small Business Economics, 9, 473–490.
Bailey, A., Irz, X., & Balcombe, K. (2004). Measuring productivity growth when technological change is biased. A new index and an application to UK agriculture. Agricultural Economics, 31, 285–295.
Basu, S. (1996). Procyclical productivity: Increasing returns or cyclical utilization? Quarterly Journal of Economics, 111, 719–751.
Beaudry, C., & Swann, G. M. P. (2009). Firm growth in industrial clusters of the United Kingdom. Small Business Economics, 32, 409–424.
Burnside, C., Eichenbaum, M., & Rebelo, S. (1995). Capital utilization and returns to scale. National Bureau of Economic Research Macroeconomics Annual, 67–119.
Caselli, F., & Coleman, W. J, I. I. (2006). The world technology frontier. American Economic Review, 96(3), 499–522.
Castellani, D., & Zanfei, A. (2006). Multinationals, innovation and productivity. Cheltenham: Edward Elgar.
Castellani, D., & Zanfei, A. (2007). Internationalisation, innovation and productivity: How do firms differ in Italy? The World Economy, 30, 156–176.
Diliberto, A., Pigliaru, F., & Mura, R. (2008). How to measure the unobservable: A panel technique for the analysis of TFP convergence. Oxford Economic Papers, 60, 343–368.
Hall, R. E., & Jones, C. I. (1999). Why do some countries produce so much more output per worker than others? Quarterly Journal of Economics, 114, 83–116.
Hall, B., & Lerner, J. (2009). The financing of R&D and innovation. NBER Working Paper 15325.
Jaumandreu, J., & Doraszelski, U. (2010). Measuring the bias of technological change. Meeting papers 9, Society for Economic Dynamics.
Jerzmanowski, M. (2007). Total factor productivity differences: Appropriate technology vs. efficiency. European Economic Review, 51, 2080–2110.
Jorgenson, D., & Griliches, Z. (1967). The explanation of productivity change. Review of Economic Studies, 34, 249–283.
Magri, S. (2009). The financing of small innovative firms: The italian case. Economics of Innovation and New Technology, 18(2), 181–206.
March, J. C. (1991). Exploration and exploitation in organizational learning. Organization Science, 2, 71–87.
Olley, S., & Pakes, A. (1996). The dynamics of productivity in the telecommunications equipment industry. Econometrica, 64, 1263–1297.
Piva, M., Santarelli, E., & Vivarelli, M. (2005). The skill bias effect of technological and organisational change: Evidence and policy implications. Research Policy, 34, 141–157.
Piva, M., Santarelli, E., & Vivarelli, M. (2006). Technological and organizational changes as determinants of the skill bias: Evidence from the Italian machinery industry. Managerial and Decision Economics, 27, 63–73.
Rogers, M. (2004). Networks, firm size and innovation. Small Business Economics, 22, 141–153.
Roodman, D. (2006). How to do xtabond2: An introduction to difference and system GMM in Stata. Working paper, Center for Global Development.
Rothwell, R., & Dodgson, M. (1994). Innovation and size of firm. In M. Dodgson & R. Rothwell (Eds.), The handbook of industrial innovation. Cheltenham, UK: Edward Elgar.
Ruttan, V. W. (2001). Technology growth and development. An induced innovation perspective. Oxford: Oxford University Press.
Scellato, G. (2007). Patents, firm size and financial constraints: An empirical analysis for a sample of Italian manufacturing firms. Cambridge Journal of Economics, 31, 55–76.
Scherer, F. M. (1984). Innovation and growth: Schumpeterian perspectives. Cambridge, Mass: MIT Press.
Shapiro, M. (1996). Macroeconomic implications of variation in the workweek of capital. Brookings Papers on Economic Activity, 2, 79–133.
Solow, R. M. (1957). Technical change and the aggregate production function. Review of Economics and Statistics, 39, 312–320.
Stoneman, P. L. (2010). Soft Innovation: Economics, product aesthetics and the creative industries. Oxford: Oxford University Press.
Ughetto, E. (2008). Does finance matter for R&D investment? New evidence from a panel of Italian firms. Cambridge Journal of Economics, 32, 907–925.
Van Biesebroeck, J. (2007). Robustness of productivity estimates. Journal of Industrial Economics, 60, 529–569.
Vaona, A., & Pianta, M. (2008). Firm size and innovation in European manufacturing. Small Business Economics, 31, 283–299.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Antonelli, C., Scellato, G. Firms size and directed technological change. Small Bus Econ 44, 207–218 (2015). https://doi.org/10.1007/s11187-014-9593-1
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11187-014-9593-1