Georg Licht

Innovation and Information Technology in Services

The missing effect of investments of firms in information and communication technologies on productivity is studied by various recent papers. Several explanations are given for this missing link. Our paper deals with two of them, using two newly available data sets for the German service sector. Using data from a survey of innovative activities in services we show that investment in information technology (IT) has a stronger effect on the quality of services than on the productivity of the IT-using firm. IT investment seems to be especially effective when innovations enhance the delivery speed and the spatial or temporal availability of service. Moreover, data of the German IT survey point towards the need to differentiate between types of IT investment. It is shown that especially the most recent generation of IT as indicated by the number of PCs used is the source of productivity growth whereas traditional IT like mainframes exhibit only minor productivity effects. We conclude from our results that mismeasurement of the quality of new products and processes is one important reason for our inability to uncover the productivity effect of IT. Moreover, dividing IT-investment by the type of IT clarifies that the kind of IT a firm uses is more important for productivity growth what than its quantity. In any case we expect that the bulk of the IT-related productivity growth is still to come. In order to realize the benefits from IT investment entirely, firms have to undergo a large restructuring of business functions.

New Technology-Based Firms in Germany: A Survey of the Recent Evidence

The Importance and Contribution of new technology-based Firms (NTBFs) to long term economic development is at the center of a controversial debate. This paper provides an overview of the current status of research on various issues concerning NTBFs in Germany. The issues covered include the incidence of start-ups firms in Germany?s technology-intensive sectors and their regional clustering. The review also shows that NTBFs play an important role with regard to the transfer, adoption and diffusion of technology. The public support and policy initiatives for new technology-based firms in Germany are also discussed.

Firm Foundations and the Role of Financial Constraints

Improving the economic conditions for small and medium sized firms as well as start-ups is high on the agenda of policy makers. In this paper we discuss some policy options for fostering the creation of new enterprises. The discussion focuses on measures which aim at helping start-ups to overcome liquidity constraints. In order to provide the background for this discussion the paper provides some new empirical results on the determinants of firm foundations as well as some stylised facts on the occurence of liquidity constraints in West-Germany. We analyse the regional distribution of start-up intensity and offer several hypotheses to explain this distribution. To a large extent, the regional distribution of start-ups can be explained by the existing industry structure, regional human capital as well as the regional public traffic infrastructure. Moreover, we show that liquidity constraints occur more often in small and young firms.

The Impact of Public Infrastructure Capital on Regional Manufacturing Production Cost

SEITZ H. and LICHT G. (1995) The impact of public infrastructure capital on regional manufacturing production cost, Reg. Studies 29, 231–240. The paper presents an analysis of the impact of public infrastructure capital on manufacturing production cost in the 11 (West) German states. We present a simple theoretical model of a cost-minimizing firm in which the stock of public capital is included as a proxy for public services provided to firms as a fixed unpaid factor of production. Duality theory is used to recover the productivity effects of public infrastructures by calculating the cost-saving effects that are associated with public services. Using a translog cost function we present panel estimates for the manufacturing industry in the 11 states of (West) Germany with labour, buildings and machinery as private factors of production. The results strongly indicate significant cost reducing effects of public infrastructure services and suggest that public capital formation encourages private investment. S...

Patents and R&D, An Econometric Investigation Using Applications for German, European and US Patents by German Companies

Based on the data of the first wave of the Mannheim Innovation panel, this paper explores the link between R&D expenditures and patents. Our data allow a detailed analysis of the firm size distribution of R&D and patent applications at different patent offices. It is shown that the share of R&D performing firms is strictly increasing with firm size. The share of firms applying for patents shows an even steeper increase with firm size. Moreover, large firms more likely apply for patents in more than one country. The home patent office seems to be especially important for small firms. Using various count data models, the paper explores the relationship between R&D and patents at the firm level. We carefully test several distributional assumptions for count data models. A negbin hurdle model seems to be the most appropriate count data model for our data as the decision to patent inventions and the productivity of R&D are ruled by different mechanisms. Our estimates point towards significant returns to scale of R&D. Furthermore, the empirical results can be interpreted towards minor and insignificant spillover effects. Even after controlling for a variety of firm characteristics, firm size exhibits a large effect on the propensity to patent.

Assimilation, labour market experience, and earnings profiles of temporary and permanent immigrant workers in germany

We test the assimilation hypothesis as initially proposed by Chiswick (1978) by making. use of a rich panel dataset for Germany which allows us to control for unobserved population heterogeneity and potential selectivity bias arising from an individuals re-migration decision and employment behaviour. To take into account the institutional aspects of the German guest-worker system we use information on an immigrants expected duration of stay in Germany to distinguish between temporary and permanent migrants and to test for differences in earnings/experience profiles with respect to a foreigners expected duration of stay. We find that years of schooling in Germany have a strong positive effect on earnings, that earnings/experience profiles of guest-workers differ by expected duration of stay, and that the renumeration of labour market experience in Germany is higher for natives than for most foreigners. The assimilation hypothesis is therefore not supported by the evidence for Germany.

Factors Determining R&D and Innovation Expenditure in German Manufacturing Industries

In the mid-1980s, Kamien and Schwarz (1985) concluded in their famous survey on innovation and market structure that the bulk of the empirical literature exhibits a U-shaped relationship between innovation activity on one side and market structure as well as firm size on the other. Later Cohen, Levin and Mowery (1987) argued that these correlations vanish if one controls for inter-industry differences in technological opportunity and appropriability. As it is obvious from the papers by Acs and Audretsch (1987) and Pavitt, Robson and Townsend (1987), small firms contribute — at least in some sectors of the manufacturing sector — more than bigger firms to the commercialization of new products than is indicated by their share in national R&D expenditure records in traditional R&D statistics. Based on the Dutch innovation survey in 1984, Kleinknecht (1989) found the largest R&D intensities in small firms. Moreover, standard R&D statistics are affected by a severe undercounting of R&D in small firms (see, for example, Kleinknecht, Poot and Reijnen, 1991).

Young firm internationalization and survival: Empirical tests on a panel of ‘adolescent’ new technology-based firms in Germany and the UK

This paper uses a unique, longitudinal data set of UK and German new technology-based firms (NTBFs) to investigate the determinants of internationalization and firm survival. Specifically, it tests the influence of absorptive capacity, inter-firm specific relationships and international exposure on survival. Its key findings are that high absorptive capacity increases survival probabilities; specific customer–supplier relationships enhance survival; and the greater the firm’s exposure to internationalization activity, the higher its subsequent chance of survival. Thus, the paper provides evidence that young firms are more likely to survive when they pursue an internationalization strategy based on resource consolidation.

The Internationalisation of Young High-Tech Firms

Established theories in international business come to different conclusions when specifically applied to the analysis of the international activities of start-up companies in high-technology industries. Using a new dataset of 495 British and German start-ups operating in high-technology industries, we analyse the differences between those companies that have built up international activities and those which only compete in their home country. Our findings suggest that the key discriminatory variables are: age, the extent to which the product requires customisation, regularity of R&D activities, and the international professional experience of the founders. These findings suggest that internationalisation of New Technology Based Firms is best explained by adopting elements from a number of different theoretical frameworks.

Internationalisation of High-Tech Start-Ups and Fast Growth - Evidence for UK and Germany

For firms acting in technological niches the expansion into foreign markets can be a way to increase sales and to thus to recover initial sunk costs over a shorter time frame. Our research, based on survey data for nearly 600 British and German high-tech start-ups, examines whether internationalisation leads to faster growth among high-tech start-ups. Results show that firms with international sales have higher sales growth than firms that sell only domestically. We find that technological sophistication of products and the experience of entrepreneurs has a positive impact on growth. In addition, intense competition and shorter windows of opportunity increase the pressure to grow rapidly to appropriate the returns from innovation. The findings suggest that high tech firm founders should be more determinedly international in their vision and strategies from the very start of their business to increase the economic success of their efforts.