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.

Competition between Cities and Their Spatial Structure

By: Ago Takanori. Senshu University, RIETI Discussion Paper Series 15-E-110, 2015.

Abstract: “Spatial competition has dealt with a single city over which firms compete. This paper extends it to a model with multiple cities. Specifically, we construct a spatial Cournot model with circular cities where consumers can choose which city to go under the spatial distribution of firms as determined by a location-quantity game. As a result, firms can agglomerate at a point even in the circular cities in equilibrium due to their ability to enhance consumer surplus at their locating city and rob more consumers of the rival city if they agglomerate to commit to the lower price. A welfare analysis shows excess agglomeration.” [ABSTRACT FROM AUTHOR]

Technology and costs in international competitiveness: From countries and sectors to firms

By Giovanni Dosia, Marco Grazzib, and Daniele Moschella. Research Policy, Volume 44, Issue 10, Pages 1795-1814, 2015.

Abstract: “This paper examines the microfoundations of the determinants of international competitiveness. It does so within the broader “technology gap” perspective whereby wide technological and organizational differences ultimately shape the patterns of trade within sectors across countries and their dynamics. First, we take stock of the incumbent evidence on the relation between cost-related and technological competition at country and sectoral level. The overall picture indeed suggests that the countries’ sectoral market shares are mainly shaped by technological factors while cost advantages/disadvantages do not seem to play any significant role. But within any sector, within any country, firms widely differ. Hence the question: does this property apply also at a micro level? Here, we first propose a heuristic model based on a generalized Polya urn process yielding such a property and, then, empirically attempt to identify the underlying dynamics at the firm level using a large panel of Italian firms, over nearly two decades. Results show that also at micro level in most sectors investments and patents correlate positively both with the probability of being an exporter and with the capacity to acquire and to increase exports, whereas labour costs show a negative effect only in some sectors. The result is reinforced when separating the short- and long-run effects, highlighting the predominant impact of technological proxies and basically the irrelevance of wage costs.” [ABSTRACT FROM AUTHORS]

Absorptive capacity and space   

By Mário Alexandre Patrício Martins da Silva. Universidade do Porto, Faculdade de Economia do Porto, Working Papers 564, 2015.

Abstract: “In this paper, we assume that the absorptive capacity of firms located in a given region is positively influenced by territorial-dependent aspects, and analyze the effects of the spatial elements that explain the differences between territories to access and absorb external knowledge on the innovative performance of regions and the possibility of arising local increasing returns.” [ABSTRACT FROM AUTHOR]

Workforce location and equilibrium unemployment in a duocentric economy with matching frictions

By E. Lehmann, P.L. Montero Ledezma, and B. Van der Linden. Institut de Recherches Economiques et Sociales de l’Université catholique de Louvain, 2015.

Abstract: “This article examines unemployment disparities and efficiency in a densely populated economy with two job centers and workers distributed between them. We introduce commuting costs and search-matching frictions to deal with the spatial mismatch between workers and firms. In a decentralized economy job-seekers do not internalize a composition externality they impose on all the unemployed. With symmetric job centers, a change in the distribution of the workforce can lead to asymmetric equilibrium outcomes. We calibrate the model for Los Angeles and Chicago Metropolitan Statistical Areas. Simulations suggest that changes in the workforce distribution have non-negligible effects on unemployment rates, wages, and net output, but cannot be the unique explanation of a substantial mismatch problem.” [ABSTRACT FROM AUTHORS]

Doing evolution in economic ecography

By Andy Pike, Andrew Cumbers, Stuart Dawley, Danny MacKinnon, and Robert McMaster. Centre for Urban and Regional Development Studies (CURDS), Newcastle University; Adam Smith Business School, University of Glasgow, 2015. 

Abstract: “Evolutionary approaches in economic geography face questions about the relationships between their concepts, theories, methods, politics and policy implications. Amidst the growing but unsettled consensus that evolutionary approaches should employ plural methodologies, the aims here are, first, to identify some of the difficult issues confronting those working with different frameworks. The concerns comprise: specifying and connecting research objects, subjects and levels; handling agency and context; engaging and integrating the quantitative and the qualitative; comparing cases; and, considering politics, policy and praxis. Second, the purpose is to articulate a distinctive geographical political economy approach, methods and illustrative examples in addressing these issues. Bringing different views of evolution in economic geography into dialogue and disagreement renders methodological pluralism a means towards improved understanding and explanation rather than an end in itself. Confronting such thorny matters needs to be embedded in our research practices and supported by greater openness, more and better substantiation of our conceptual, theoretical and empirical claims, enhanced critical reflection, and deeper engagement with politics, policy and praxis.” [ABSTRACT FROM AUTHORS]

Firm Dynamics and Regional Inequality of Productivity in China

By: Canfei He, and Yi Zhou. College of Urban and Environmental Sciences Peking University, 2015.

Asbtract: “Industrial change processes are underlying forces that determine the change of regional productivity. In developed market economies, less productive firms are more likely to exit while productive firms have more chance to enter and to survive. As a result, spatial inequality of firm dynamics will directly influence the inequality of regional productivity. This study investigates how firm dynamics would affect regional productivity using firm level data during 1998-2007 in China. We first estimate total factor productivity (TFP) for each firm based on the semi-parametric method proposed by Olley and Pakes (1996). Regional productivity is derived by weighing the firm TFP using gross industrial output. There is considerable spatial inequality of TFP paired with a trend of convergence over the time period of 1999-2007. Decomposition of TFP growth shows that firm entry, exit and survival do contribute to TFP change and their contributions vary across prefectures substantially. The between share holds the largest regional difference, as the most important factor contributing to the spatial inequality of regional TFP. The restructuring of SOEs has critically contributed to the spatial inequality of TFP by raising TFP in the traditional industrial bases and by facilitating the development of productive private and foreign sectors particularly in the coastal region. The finding indicates that resource reallocation across firms with different ownerships is the key mechanism to improve regional productivity.” [ABSTRACT FROM AUTHORS]

Technological Relatedness and Firm Productivity: Do low and high performing firms benefit equally from agglomeration economies in China?

By Anthony J. Howell, Canfei He, Rudai Yang, and Cindy Fan. School of Economics, Peking University, College of Urban and Environmental Sciences, Peking University, School of Economics, Peking University, Geography Department, UCLA, 2015.

Abstract: Building on the evolutionary economic geography literature, we employ the density measure (…) to dynamically track the impact of technological relatedness on firm productivity. We rely on advanced quantile regression techniques to determine whether technological relatedness stimulates productivity and whether the size of the effect varies for low and high performing firms. Lastly, taking China’s economic transition into account, we test whether changes in the local industrial mix brought about by China’s market reforms enable or inhibit performance-enhancing spillovers. We show that a dynamic tradeoff exists between agglomeration costs and benefits that depends, in part, on the firm’s placement along the productivity distribution: the effect of technological relatedness reduces productivity for the least performing firms, but enhances it for better performing firms. As a result, spillovers via technological relatedness lead to improvements in the geographical welfare by intensifying the learning effect for the vast majority of co-located firms, in spite of increasing productivity disparities between the bottom and top performing firms.” [ABSTRACT FROM AUTHORS]

National innovation systems and the intermediary role of industry associations in building institutional capacities for innovation in developing countries: A critical review of the literature

By Andrew Watkins, Theo Papaioannou, Julius Mugwagwa, and Dinar Kale. Research Policy, Volume 44, Issue 8, October 2015, Pages 1407-1418, 2015.

Abstract: “This study explores the spatial pattern of industry dynamics in Japan's motor metropolis of Nagoya. Exploratory spatial data analysis methodologies that reflect aspects of both geographical and technological proximities within regional industries are proposed and applied to the long-term, sustained manufacturing and service sector growth rates. The descriptive results identify the presence of positive multilayered growth clusters, driven mainly by the automobile and associated industries. These growth clusters differ in sectoral composition and geographical scale; the larger specialized growth cluster of transportation equipment encompasses the smaller one composed of diverse manufacturing and service sectors.” [ABSTRACT FROM AUTHORS]

The direction of firm innovation: The contrasting roles of strategic alliances and individual scientific collaborations

By: Jan Hohberger, Paul Almeida, and Pedro Parada. Research Policy, Volume 44, Issue 8, Pages 1473-1487, 2015.

Abstract: “In dynamic and uncertain technological environments, the focus of industry innovative activity changes over time and the position of each firm with respect to the industry’s innovative focus changes as well. Drawing upon insights from evolutionary economics, we derive hypothesis on the role of R&D alliances and individual scientific collaborations in influencing a firm’s innovative direction and its position relative to the industry’s innovation focus. The analyses of patent and alliance data show that biotechnology firms that rely on external individual scientific collaborations are likely to grow closer to the future focus of innovation, while firms that emphasize R&D alliances grow more distant from the future industry focus. Thus, the use of collaborative mechanisms influences the position of firms in innovative space over time. Additionally, the effect of collaborative mechanisms on the direction of innovation is influenced by the technological specialization of the firm.” [ABSTRACT FROM AUTHORS]