The 29 reference contexts in paper Christopher F Baum, Hans Lööf, Pardis Nabavi (2015) “Innovation Strategies, External Knowledge and Productivity Growth” / RePEc:boc:bocoec:885

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    Empirical studies mainly find that internal knowledge generation through innovation and external knowledge acquisitions are complements, and emphasize the importance of in-house capacity for absorbing external knowledge, consistent with seminal papers by
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    Cohen and Levinthal (1989, 1990) and Rosenberg (1990).
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    There is also a substantial amount of evidence that knowledge transactions and spillovers that influence firm performance can be linked to knowledge sources in the local and regional environment. However, research is less clear about mechanisms for the interplay of knowledge within the company and its geographical environment.
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    2558
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    A large number of studies confirm that there are systematic differences between firms with regard to their level of commitment in innovation efforts, as well as their sustained recurrence of the engagement in renewal activities. Such differences remain persistent over time
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    (Cefis and Orsenigo, 2001; Klette and Kortum, 2004; Peters, 2009; Peters et al., 2013; Duguet and Monjon, 2002).
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    The picture that emerges is that a large share of firms is not engaged in innovation activities, some firms are innovative only occasionally, whereas other firms remain persistently innovative over several years.
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    One strand of the literature stems from evolutionary theory and emphasizes the importance of technological trajectories. Along the technological 2 trajectory, firms learn by innovating and developing organisational competencies
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    (Raymond et al., 2010).
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    Other explanations include the relationships between innovation and market power or financial constraints as selection mechanisms (Brown and Petersen, 2009). The novelty in our research is that we propose an approach that captures both the intensity of firm knowledge and the availability of external knowledge in the local milieu.
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    Along the technological 2 trajectory, firms learn by innovating and developing organisational competencies (Raymond et al., 2010). Other explanations include the relationships between innovation and market power or financial constraints as selection mechanisms
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    (Brown and Petersen, 2009).
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    The novelty in our research is that we propose an approach that captures both the intensity of firm knowledge and the availability of external knowledge in the local milieu. To measure the closeness to external knowledge, we rely upon a model for knowledge accessibility suggested by Weibull (1976), which includes a time-sensitive parameter which can be applied for measuring a firm’s accessibility
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    The novelty in our research is that we propose an approach that captures both the intensity of firm knowledge and the availability of external knowledge in the local milieu. To measure the closeness to external knowledge, we rely upon a model for knowledge accessibility suggested by
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    Weibull (1976),
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    which includes a time-sensitive parameter which can be applied for measuring a firm’s accessibility to external knowledge. For each firm in a local economy (municipality) we calculate this firm’s accessibility to external knowledge: (i) inside the own municipality, (ii) outside the municipality but inside its own functional region, and (iii) outside its functional region.
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    The disadvantage is that most innovative activities do not result in any patent or patent application. The second approach is to apply information from the Community Innovation Surveys (CIS), in which data from the EU member states are collected on a regular basis with harmonized information
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    OECD (2015).
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    The attractiveness of the CIS data is that it includes information on the sustainability of the intramural R&D, as well as extramural R&D such as purchase of machinery and equipment and consultancy services.
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    Section 5 reports results and interprets the main findings, and Section 6 concludes. 2 A BRIEF BACKGROUND FROM THE LITERATURE The importance of innovation for sustained growth is well established in the academic literature by
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    Aghion et al. (1998).
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    An early recognition of innovation and technology as engines of growth is the contribution of Schumpeter (1934), arguing that without innovations the market economy would settle in a stationary Walrasian equilibrium.
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    Section 5 reports results and interprets the main findings, and Section 6 concludes. 2 A BRIEF BACKGROUND FROM THE LITERATURE The importance of innovation for sustained growth is well established in the academic literature by Aghion et al. (1998). An early recognition of innovation and technology as engines of growth is the contribution of
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    Schumpeter (1934),
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    arguing that without innovations the market economy would settle in a stationary Walrasian equilibrium. The Schumpeterian view also considers the opportunity of other firms to imitate those firms that have reached a higher productivity level.
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    Adoption processes of this kind could work against heterogeneity. The idea that other firms respond to ideas developed by competitors is a fundamental aspect of the neoclassical theory resembling various versions of Darwinian adjustments
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    (Vega-Redondo (2003)).
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    Empirical research in the Schumpeterian tradition has established several stylized and commonly accepted facts questioning the neoclassical prediction on convergence. These facts include persistent performance heterogeneity and path dependency.
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    These facts include persistent performance heterogeneity and path dependency. Some firms are clearly above 6 average, whereas others are inferior, and that this patterns remains over fairly long time periods. For a review of this literature, see
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    Dosi and Nelson (2010).
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    Recent studies on firm heterogeneity distinguish between capabilities and technical solutions. The former refer to a firm’s capacity to build up renewal capabilities and maintain a resource that includes renewal skills of employees, routines for organization of R&D and efforts to access external knowledge.
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    Firm capabilities also include links to other actors for knowledge accession and collaboration. Technical solutions relate product attributes, production processes and routines, and interaction approaches vis-à-vis input suppliers and customers. For a discussion, see
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    Foss (1996); Antonelli (2006).
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    A major message from this literature is that firms’ capabilities differentiate firms. Capabilities take time to develop, require recurrent maintenance, and they are difficult and costly to imitate (Teece (2010)).
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    For a discussion, see Foss (1996); Antonelli (2006). A major message from this literature is that firms’ capabilities differentiate firms. Capabilities take time to develop, require recurrent maintenance, and they are difficult and costly to imitate
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    (Teece (2010)).
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    Moreover, capabilities partly develop as a side effect of a firm’s renewal activities, including phenomena like learning by doing (Nelson and Winter (1982); Cohen and Levinthal (1990); Phene and Almeida (2008)).
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    Capabilities take time to develop, require recurrent maintenance, and they are difficult and costly to imitate (Teece (2010)). Moreover, capabilities partly develop as a side effect of a firm’s renewal activities, including phenomena like learning by doing
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    (Nelson and Winter (1982); Cohen and Levinthal (1990); Phene and Almeida (2008)).
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    The outcome of the renewal activities is expanded capabilities and enlargement of the firm’s technical solutions. Thus, differences in firms’ capabilities and internal knowledge resources help explain heterogeneity among firms regarding innovation and imitation/adoption (within firms and across firms) as well as productivity growth.
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    Thus, differences in firms’ capabilities and internal knowledge resources help explain heterogeneity among firms regarding innovation and imitation/adoption (within firms and across firms) as well as productivity growth. What about technical solutions?
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    Johansson and Lööf (2014)
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    suggest that firm capabilities determine more than the firm’s capacity and its likelihood to succeed in its innovation efforts. They also sharpen adaptability about technical solutions, irrespective of whether they are related to internal or external knowledge about product design, customer preferences, and adjustments of deliveries and the like.
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    literature also considers knowledge flows through long-distance links of international networks such as imports from input suppliers or export to customers abroad and transnational links for R&D collaboration with firms abroad. However, recent research in the geography of innovation has established several stylized facts including that knowledge spillovers are typically geographically localized
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    (Feldman (2003)) and
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    fade with distance. This literature is further enriched by studies on technology and market relatedness in the local knowledge milieu (Cassiman and Veugelers (2006)). Several studies on spillovers suggest a growing productivity potential from local supply of business service due to knowledge spillovers.
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    However, recent research in the geography of innovation has established several stylized facts including that knowledge spillovers are typically geographically localized (Feldman (2003)) and fade with distance. This literature is further enriched by studies on technology and market relatedness in the local knowledge milieu
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    (Cassiman and Veugelers (2006)).
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    Several studies on spillovers suggest a growing productivity potential from local supply of business service due to knowledge spillovers. However, the business service industry consists of a wide variety of firms with different role in the economy.
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    Several studies on spillovers suggest a growing productivity potential from local supply of business service due to knowledge spillovers. However, the business service industry consists of a wide variety of firms with different role in the economy.
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    Duranton and Puga (2005)
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    distinguish between three broad categories of business services: standard business (e.g. banking or equipment leasing), sophisticated business services (e.g. research and development) and routinized business services (e.g. call centres).
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    This implies that they are indirectly transmitting novel concepts and solutions from one customer to another. There are several papers in different strands of the literature that are close to our study.
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    Lychagin et al. (2016)
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    use U.S. firm level panel data to assess how geographical, technological and product market spillovers contributes to productivity, and find that geography is important for productivity. A number of prior papers have also studied the complementarities between internal knowledge and external knowledge acquisitions.
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    This research supports the assumption that all firms in a local milieu such as a cluster or an agglomeration may not benefit from access to a high concentration of specialized, supplemented or varied knowledge diffused through voluntary (mostly pecuniary) and involuntary mechanisms. Contributors to this literature include
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    Feldman (2003), Conte and Vivarelli (2005), Cassiman and Veugelers (2006), Love and Roper (2009), Antonelli et al. (2013), Lööf and Johansson (2014), and Antonelli and David (2015).
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    For an additional contribution and a survey of the field of research, see Antonelli and Colombelli (2015). Studying complementary between absorptive capacity and external knowledge, a main message from the literature is that firms near the knowledge frontier will benefit more from external advances in knowledge than other firms.
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    Contributors to this literature include Feldman (2003), Conte and Vivarelli (2005), Cassiman and Veugelers (2006), Love and Roper (2009), Antonelli et al. (2013), Lööf and Johansson (2014), and Antonelli and David (2015). For an additional contribution and a survey of the field of research, see
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    Antonelli and Colombelli (2015).
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    Studying complementary between absorptive capacity and external knowledge, a main message from the literature is that firms near the knowledge frontier will benefit more from external advances in knowledge than other firms.
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    capacity, firms might not be able to learn anything from even a rich external knowledge milieu and the “multiplier effect” of potential spillovers is nil. 9 Recent studies provide evidence for the thesis that the importance of access to external knowledge tends to increase in a knowledge-based innovation-driven economy. In their survey of literature on knowledge spillovers and local innovation,
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    Breschi and Lissoni (2001)
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    argue that when firms are constantly innovating, there is a need to be close to a constellation of allied firms and specialised suppliers to smooth input-output linkages. Building on the literature reviewed briefly above, the next section formulates the hypotheses we will test empirically using two different sets of Swedish firm level data. 3 EMPIRICAL STRATEGY The general approach of this paper
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    To quantify the relationship between productivity and the input components of interest, we apply an approach aimed at capturing the effect of a particular category of combined knowledge sources on TFP growth, conditioned on the growth in the previous period and the TFP level in the previous period. Total factor productivity growth is estimated in two steps. Following
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    Levinsohn and Petrin (2003),
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    we first compute TFP as the residual of the Cobb--Douglas production function, where the value added of the firm is the dependent variable and labor inputs (divided into highly educated and unskilled labor), material and physical capital are used as the determinants.
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    Second, theK-classification is based on the knowledge intensity of the firm’s location, which is close to 100% identical between year t and yeart+ 1according to the transition matrix reported in Table 3. Based on a procedure proposed by
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    Papke and Wooldridge (2005),
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    we also compute the coefficients and standard errors for long-run effects. The long-run effect is a nonlinear function of the coefficients of the explanatory variables and the lagged dependent variable in Equation (1).
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    The long-run effect is a nonlinear function of the coefficients of the explanatory variables and the lagged dependent variable in Equation (1). This is an alternative method to obtain a standard error for the long-run effect in a dynamic panel data model. To estimate Equation (1), we use the two-step system GMM estimator developed by
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    Arellano and Bover (1995) and Blundell and Bond (1998).
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    This approach combines equations in differences of the variables with equations in levels of the variables. The validity of the instruments in the model is evaluated with the Sargan–Hansen test of overidentifying restrictions whereas the Arellano--Bond AR(2) test is used for identifying possible second-order serial correlation. 13 An advantage with the system GMM estimator is that it requires fewe
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    the instruments in the model is evaluated with the Sargan–Hansen test of overidentifying restrictions whereas the Arellano--Bond AR(2) test is used for identifying possible second-order serial correlation. 13 An advantage with the system GMM estimator is that it requires fewer assumptions about the underlying data-generating process and uses more complex techniques to isolate useful information
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    (Roodman, 2009).
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    The estimator allows for a dynamic process, with current realizations of the TFP variable influenced by past TFP, and some regressors may be endogenous. Moreover, the system GMM estimator also accounts for individual specific patterns of heteroskedasticity and serial correlation of the idiosyncratic part of the disturbances.
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    Moreover, the system GMM estimator also accounts for individual specific patterns of heteroskedasticity and serial correlation of the idiosyncratic part of the disturbances. To measure the intensity of external knowledge, we apply a model for knowledge accessibility suggested by
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    Weibull (1976), and
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    developed by Johansson and Klaesson (2011). The model identifies locationsiandj, and the time distance (commuting time) between each pair of locations (municipalities). For each location, the associated measure of total knowledge K (total R&D, number of universities, educated workers, etc.) is computed.
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    Moreover, the system GMM estimator also accounts for individual specific patterns of heteroskedasticity and serial correlation of the idiosyncratic part of the disturbances. To measure the intensity of external knowledge, we apply a model for knowledge accessibility suggested by Weibull (1976), and developed by
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    Johansson and Klaesson (2011).
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    The model identifies locationsiandj, and the time distance (commuting time) between each pair of locations (municipalities). For each location, the associated measure of total knowledge K (total R&D, number of universities, educated workers, etc.) is computed.
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    Hence, the improvement in the performance yesterday reduces the incentives for firms to invest their efforts in better performance (growth) today. Instead they decide to enjoy the fruits of their earlier activities. For a discussion on similar findings, see
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    Hashi and Stojčić (2013).
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    Turning to other controls, the table report positive coefficient estimates for firms, but significant different from zero only in the CIS-sample. As could be expected, multinational firms have a higher growth rate than other firms,ceteris paribus.
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    First, the issue of knowledge flows across firms that are not related to links within the nearby milieu of the firms is not explicitly addressed in this paper, except for the effect associated with multinational company groups. Recently
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    Cantwell and Piscitello (2015)
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    have used openness of the regional industry and the regional economy to capture global knowledge diffusion, while other papers apply methods such as trade statistics, patent citations and strategic alliances.
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