Skip to main content

Advertisement

SpringerLink
Log in

R&D, International Trade and Creative Destruction—Empirical Findings from Finnish Manufacturing Industries*

  • Original Article
  • Published:
Journal of Industry, Competition and Trade Aims and scope Submit manuscript

Abstract

The determinants of productivity-enhancing micro-level restructuring are examined empirically with a panel of the twelve Finnish manufacturing industries. It is hypothesized that R&D leads to productivity diversity among plants, which in turn leads to the gradual reshuffling of input shares in the presence of dynamic competitive pressure. The effect of the “creative destruction” on industry productivity growth is measured with the between-component of productivity decomposition. Econometric results indicate with reasonable robustness that R&D generates creative destruction with a lag of several years. Some evidence is found that imports stimulate productivity-enhancing restructuring, especially when domestic R&D is low.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Abranovic, W.A., Statistical Thinking and Data Analysis Methods for Managers. Addison-Wesley, 1997.

  • Acemoglu, D. and Shimer R., “Productivity gains from unemployment insurance,” European Economic Review, vol. 44 no. 7, pp. 1195–1224, 2000.

    Google Scholar 

  • Acemoglu, D., Aghion, P., and Zilibotti, F., Distance to frontier, selection, and economic growth, National Bureau of Economic Research, Inc, NBER Working Papers, No. 9066, 2002.

  • Arellano, M. and Bond, S., “Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations,” Review of Economic Studies, vol. 58 no. 2, pp. 277–297, 1991.

    Google Scholar 

  • Arellano, M. and Bover, O., “Another look at the instrumental variable estimation of error-components models,” Journal of Econometrics, vol. 68 no. 1, pp. 29–51, 1995.

    Google Scholar 

  • Arrow, K.J., “Uncertainty and the welfare economics of medical care,” American Economic Review, American Economic Association, vol. 53, pp. 941–973, 1963.

    Google Scholar 

  • Baily, M.N., Hulten, C., and Campbell, D., “Productivity dynamics in manufacturing plants’,” Brookings Papers on Economic Activity. Microeconomics, pp. 187–267, 1992.

  • Baldwin, J.R., The Dynamics of Industrial Competition. A North American perspective. Cambridge University Press, 1993.

  • Baldwin, J.R., Beckstead, D., and Girard, A., The importance of entry to canadian manufacturing with an appendix on measurement issues, Statistics Canada, Research Paper No. 189, 2002.

  • Baumol, W.J., “Four sources of innovation and stimulation of growth in the dutch economy,” De Economist, vol. 152 no. 3, pp. 321–351, 2004.

    Google Scholar 

  • Benhabib, J. and Spiegel, M.M., “The role of human capital in economic development—evidence from aggregate cross-country data,” Journal of Monetary Economics, vol. 34, pp. 143–173, 1994.

    Google Scholar 

  • Bernard, A.B. and Jensen, J.B., “Exceptional exporter performance: cause, effect, or both?” Journal of International Economics, vol. 47 no. 1, pp. 1–25, 1999.

    Google Scholar 

  • Bertola, G. and Rogerson, R., “Institutions and labor reallocation,” European Economic Review, vol. 41 no. 6, pp. 1147–1171, 1997.

    Google Scholar 

  • Blundell, R. and Bond, S., “Initial conditions and moment restrictions in dynamic panel data models,” Journal of Econometrics, vol. 87 no. 1, pp. 115–143, 1998.

    Google Scholar 

  • Bond, S.R., “Dynamic panel data models: a guide to micro data methods and practice,” Portuguese Economic Journal, vol. 1 no. 2, p. 141, 2002.

    Google Scholar 

  • Bond, S., Hoeffler, A., and Temple, J., GMM estimation of empirical growth models, University of Bristol, Discussion Papers No. 01/525, 2001.

  • Boone, J., Competition, CEPR Discussion Paper, No. 2636, 2000a.

  • Boone, J., “Competitive pressure: the effects on investments in product and process innovation,” RAND Journal of Economics, vol. 31, p. 549, 2000b.

    Google Scholar 

  • Bureau of Economic Analysis, Survey of current business, U.S. Department of Commerce. Economics and Statistics Administration, July 1995.

  • Bureau of Labor Statistics, Multifactor productivity trends in manufacturing, 2001. Washington D.C., United States Department of Labor, News (available at http://stats.bls.gov/news.release/pdf/prod5.pdf), 2004.

  • Davis, S.J., Haltiwanger, J.C., and Schuh, S., Job Creation and Destruction. MIT Press: Cambridge, MA and London, 1996.

    Google Scholar 

  • Disney, R., Haskel, J., and Heden, Y., “Restructuring and productivity growth in UK manufacturing,” Economic Journal, vol. 113 no. 489, pp. 666–694, 2003.

    Google Scholar 

  • Dwyer, D.W., “Technology locks, creative destruction, and nonconvergence in productivity levels,” Review of Economic Dynamics, vol. 1 no. 2, pp. 430–473, 1998.

    Google Scholar 

  • Esposti, R. and Pierani, P., “Building the knowledge stock: lags, depreciation, and uncertainty in R&D investment and link with productivity growth,” Journal of Productivity Analysis, vol. 19 no. 1, pp. 33–58, 2003.

    Google Scholar 

  • Foster, L., Haltiwanger, J., and Krizan, C.J., in Aggregate Productivity Growth: Lessons from Microeconomic Evidence. New developments in Productivity Analysis. University of Chicago Press: Chicago and London, pp. 303–363, 2001.

    Google Scholar 

  • Guellec, D. and Van Pottelsberghe De La Potterie, B., “From R&D to productivity growth: do the institutional settings and the source of funds of R&D matter?” Oxford Bulletin of Economics & Statistics, vol. 66 no. 3, pp. 353–378, 2004.

    Google Scholar 

  • Häikiö, M., Nokia: The Inside Story. Prentice Hall, 2002.

  • Hall, B.H. and Mairesse, J., “Exploring the relationship between R&D and productivity in french manufacturing firms,” Journal of Econometrics, vol. 65 no. 1, pp. 263–293, 1995.

    Google Scholar 

  • Hopenhayn, H.A., “Entry, exit, and firm dynamics in long run equilibrium,” Econometrica, vol. 60 no. 5, pp. 1127–1150, 1992.

    Google Scholar 

  • Huggett, M. and Ospina, S., “Does productivity growth fall after the adoption of new technology?” Journal of Monetary Economics, vol. 48 no. 1, pp. 173–195, 2001.

    Google Scholar 

  • Ilmakunnas, P. and Maliranta, M., “The turnover of jobs and workers in a deep recession: evidence from the finnish business sector,” International Journal of Manpower, Emerald, vol. 24, pp. 216–246, 2003.

    Google Scholar 

  • Jones, C.I. and Williams, J.C., “Measuring the social return to R&D,” Quarterly Journal of Economics, vol. 113 no. 4, pp. 1119–1135, 1998.

    Google Scholar 

  • Jorgenson, D.W., Ho, M.S., and Stiroh, K.J., “Growth of US industries and investments in information technology and higher education,” Economic Systems Research, vol. 15 no. 3, pp. 279, 2003.

    Google Scholar 

  • Jovanovic, B., “Selection and the evolution of industry,” Econometrica, vol. 50 no. 3, pp. 649–670, 1982.

    Google Scholar 

  • Jungmittag, A., Innovations, technological specialisation and economic growth in the EU, European Commission, Economic Papers No. 199, 2004.

  • King, G., Tomz, M., and Wittenberg, J., “Making the most of statistical analyses: improving interpretation and presentation,” American Journal of Political Science, vol. 44 no. 2, pp. 347–361, 2000.

    Google Scholar 

  • Krueger, A.B. and Lindahl, M., “Education for growth: why and for whom?” Journal of Economic Literature, American Economic Association, vol. 39, p. 1101, 2001.

    Google Scholar 

  • Lederman, D. and Maloney, W.F., R&D and development, The World Bank, Policy Research Working Paper Series 3024, 2003.

  • Lee, J.-W., “Capital goods imports and long-run growth,” Journal of Development Economics, vol. 48 no. 1, pp. 91–110, 1995.

    Google Scholar 

  • Llerena, P. and Oltra, V., “Diversity of innovative strategy as a source of technological performance,” Structural Change and Economic Dynamics, vol. 13 no. 2, pp. 179–201, 2002.

    Google Scholar 

  • Mairesse, J. and Kremp, E., “A look at productivity at the firm level in eight french service industries,” Journal of Productivity Analysis, vol. 4 no. 1–2, pp. 211–234, 1993.

    Google Scholar 

  • Maliranta, M., “Privately and publicly financed R&D as determinants of productivity—evidence from finnish enterprises,” in Asplund, R. (ed.) Public R&D Funding, Technological Competitiveness, Productivity, and Job Creation. The Research Institute of the Finnish Economy (ETLA): Helsinki, pp. 49–85, 2000.

    Google Scholar 

  • Maliranta, M., Productivity growth and micro-level restructuring. Finnish experiences during the turbulent decades, The Research Institute of the Finnish Economy ETLA, Discussion Papers No. 757, 2001.

  • Maliranta, M., Micro Level Dynamics of Productivity Growth. An Empirical Analysis of the Great Leap in Finnish Manufacturing Productivity in 1975–2000, The Research Institute of the Finnish Economy (Etla), A 38 Series (available at http://www.etla.fi/files/1075_micro_level_dynamics.pdf), 2003.

  • Maliranta, M. and Rouvinen, P., ICT and Business Productivity: Finnish Micro-Level Evidence. The Economic Impact of ICT; Measurement, Evidence and Implications. OECD: Paris, pp. 213–240, 2004.

    Google Scholar 

  • Mankinen, R., Rouvinen, P., and Ylä-Anttila, P., Palveluiden tuottavuus—kilpailu ja teknologia muuttavat rakenteita (Productivity in Service—Structural Changes Induced by Increasing Competition and Technology Advance, with an abstact in Enlish), The Research Institute of the Finnish Economy, Discussion Papers No. 829, 2002.

  • Mansfield, E., “Rates of return from industrial research and development,” American Economic Review, vol. 55, pp. 310–322, 1965.

    Google Scholar 

  • Mansfield, E., Intrafirm Rates of Diffusion of an Innovation. Innovation, Technology and the Economy: Selected Essays of Edwin Mansfield. Volume 2. Aldershot, U.K., Elgar; distributed in the U.S. by Ashgate, Brookfield, Vt.: 51–62, 1995.

  • Melitz, M.J., “The impact of trade on intra-industry reallocations and aggregate industry productivity,” Econometrica, vol. 71 no. 6, pp. 1695–1725, 2003.

    Google Scholar 

  • Myllyntaus, T., “Technology transfer and the contextual filter in the finnish setting. tranfer channels and mechanism in a historical perspective,” in Vuori, S. and Ylä-Anttila, P. (eds.) Mastering Technology Diffusion—The Finnish Experience. The Research Institute of The Finnish Economy (ETLA), Sarja B 82 Series: Helsinki, pp. 195–251, 1992.

    Google Scholar 

  • Nickell, S.J., “Biases in dynamic models with fixed effects,” Econometrica vol. 49 no. 6, pp. 1417–1426, 1981.

    Google Scholar 

  • Nickell, S.J., “Competition and corporate performance,” Journal of Political Economy, vol. 104 no. 4, pp. 724–746, 1996.

    Google Scholar 

  • Nicoletti, G. and Scarpetta, S., “Regulation, productivity and growth: OECD evidence,” Economic Policy, vol. 18 no. 36, pp. 9–72, 2003.

    Google Scholar 

  • OECD, Science, Technology and Industry Outlook 2000. Organisation for Economic Co-Operation and Development: Paris, 2000.

  • OECD, Regulatory Reform in Finland: Enhancing Market Openness through Regulatory Reform. OECD: Paris, 2003.

  • Pakes, A. and Ericson, R., “Empirical implications of alternative models of firm dynamics,” Journal of Economic Theory, vol. 79 no. 1, pp. 1–45, 1998.

    Google Scholar 

  • Parente, S.L., “Technology adoption, learning-by-doing, and economic growth,” Journal of Economic Theory, vol. 63 no. 2, pp. 346–369, 1994.

    Google Scholar 

  • Pesaran, M.H. and Smith, R., “Estimating long-run relationships from dynamic heterogeneous panels,” Journal of Econometrics, vol. 68 no. 1, pp. 79–113, 1995.

    Google Scholar 

  • Pryor, F.L., “Quantitative notes on the extent of governmental regulations in various OECD nations,” International Journal of Industrial Organization, vol. 20 no. 5, pp. 693–714, 2002.

    Google Scholar 

  • Ramey, V.A. and Shapiro, M.D., “Displaced capital: a study of aerospace plant closings,” Journal of Political Economy, University of Chicago Press, vol. 109, p. 958, 2001.

    Google Scholar 

  • Rouvinen, P., “R&D-productivity dynamics: causality, lags, and ‘dry holes’. Journal of Applied Economics, Universidad del CEMA, vol. 5, p. 123, 2002.

    Google Scholar 

  • Scarpetta, S., Hemmings, P., Tressel, T., and Woo, J., The role of policy and institutions for productivity and firm dynamics: evidence from micro and industry data. Paris: OECD Economics Department Working Papers, No. 329, 2002.

  • Schumpeter, J., Capitalism, Socialism and Democracy. Harper Torchbooks: New York, 1942.

    Google Scholar 

  • Statistics Finland, Tuottavuuskatsaus 2003 (Review of Productivity 2003). Multiprint Oy: Helsinki, 2004.

  • Tomz, M., Wittenberg, J., and King, G., CLARIFY: Software for Interpreting and Presenting Statistical Results. Version 2.1, Stanford University, University of Wisconsin, and Harvard University. January 5. Available at http://gking.harvard.edu/, 2003.

  • van Ark, B., Inklaar, R., and McGuckin, R. “Changing Gear”. Productivity, ICT and Services: Europe and the United States, University of Groningen, Research Memorandum GD-60 (available at http://www.ggdc.net/pub/online/gd60(online).pdf), 2002.

  • Whelan, K., “A guide to U.S. chain aggregated nipa data,” Review of Income & Wealth, Blackwell Publishing Limited, vol. 48, p. 217, 2002.

    Google Scholar 

  • Zellner, A., “On the aggregation problem: a new approach to a troublesome problem. in Fox, K.A., Sengupta, J.K., and Narasimham, G.V.L. (eds.), Economic Models, Estimation, and Risk Programming: Essays in Honor of Gerhard Tintner. Springer-Verlag: New York, pp. 335–362, 1969.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. The Research Institute of the Finnish Economy (ETLA), Lönnrotinkatu 4 B, 00120, Helsinki, Finland

    Mika Maliranta

Authors
  1. Mika Maliranta
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Mika Maliranta.

Additional information

JEL classification: O12, 014, 019, O31, O47

*This paper is based on the chapter 8 of my PhD thesis which has been accepted by the Helsinki School of Economics (2003). The research has received financial support from Tekes (the National Technology Agency), and from the Yrjö Jahnsson Foundation. This paper has benefited from comments by Petri Böckerman, Pekka Ilmakunnas, Kabor Kezdi, and Petri Rouvinen, to whom I am grateful. I am also thankful to the referees for helpful comments. Lisa Roponen has checked my English. An earlier version of this paper has been presented at the EARIE 2002 conference in Madrid and at the “Summer at CEU” Workshop in Budapest in 2003. Data work and computations have been carried out at Statistics Finland, in accordance with the terms and conditions of confidentiality. I also wish to thank many individuals at Statistics Finland for their guidance regarding the properties of the data. Please contact the Research Laboratory of the Business Structures Unit, Statistics Finland, FIN-00022, Finland, for access to these data. The usual disclaimer applies.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Maliranta, M. R&D, International Trade and Creative Destruction—Empirical Findings from Finnish Manufacturing Industries*. J Ind Compet Trade 5, 27–58 (2005). https://doi.org/10.1007/s10842-005-0989-0

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10842-005-0989-0

Keywords

Search

Navigation