Market Concentration and Innovation in Transnational Corporations: Evidence from Foreign Affiliates in Central and Eastern Europe
Liviu Voinea, Johannes Stephan
Research on Knowledge, Innovation and Internationalization (Progress in International Business Research, Volume 4),
2009
Abstract
Purpose – The main research question of this contribution is whether local market concentration influences R&D and innovation activities of foreign affiliates of transnational companies.
Methodology/approach – We focus on transition economies and use discriminant function analysis to investigate differences in the innovation activity of foreign affiliates operating in concentrated markets, compared to firms operating in nonconcentrated markets. The database consists of the results of a questionnaire administered to a representative sample of foreign affiliates in a selection of five transition economies.
Findings – We find that foreign affiliates in more concentrated markets, when compared to foreign affiliates in less concentrated markets, export more to their own foreign investor's network, do more basic and applied research, use more of the existing technology already incorporated in the products of their own foreign investor's network, do less process innovation, and acquire less knowledge from abroad.
Research limitations/implications – The results may be specific to transition economies only.
Practical implications – The main implications of these results are that host country market concentration stimulates intranetwork knowledge diffusion (with a risk of transfer pricing), while more intense competition stimulates knowledge creation (at least as far as process innovation is concerned) and knowledge absorption from outside the affiliates' own network. Policy makers should focus their support policies on companies in more competitive sectors, as they are more likely to transfer new technologies.
Originality/value – It contributes to the literature on the relationship between market concentration and innovation, based on a unique survey database of foreign affiliates of transnational corporations operating in Eastern Europe.
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Industry Concentration and Regional Innovative Performance – Empirical Evidence for Eastern Germany
Christoph Hornych, Michael Schwartz
Post-Communist Economies,
2009
Abstract
Regarding technological innovativeness, the transformed economy of the former German Democratic Republic (GDR) clearly lags behind the western part of the country. To face this weakness a broad mixture of policy measures was carried out in recent years. Particular attention is drawn to the development of industry concentrations and economic ‘clusters’. However, little is known about the effectiveness of these policy measures regarding how industry concentrations in fact promote innovative performance in Eastern Germany. The present study tries to fill this gap by analysing the relationship between industry concentration in Eastern Germany and regional innovative performance. Our empirical analysis is based upon the number of patent applications of 22 manufacturing industries in 22 Eastern German planning regions. The estimated regression models indicate an inverted-U relationship between the degree of industry concentration and innovative performance. An exceedingly high degree of industry concentration in one region hampers regional innovative output. We discuss policy implications of our findings and give recommendations for future refinement of ‘cluster’-supporting policy schemes in Eastern Germany.
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Foreign Investors and Domestic Suppliers: What Feeds Positive External Effects?
Jutta Günther, Björn Jindra, Daniel Sischka
Wirtschaft im Wandel,
No. 9,
2009
Abstract
The empirical study analyses the potential for positive external effects from foreign investors in favor of domestic firms using the IWH-FDI micro database and taking into account firm-specific characteristics of foreign investors in selected Central and East European countries as well as in Eastern Germany. The analysis shows that only half of the foreign investors believe that they are important for technological activities in domestic supplier firms. Thereby, the potential for external positive effects is higher in Central and Eastern Europe than in Eastern Germany. A reason for this might be that supplier firms in Eastern Germany already operate on a clearly higher technological level than their counterparts in Central and Eastern Europe. Taking into account the share of domestic supplies of foreign investors, it shows that the potential for positive external effects increases only to a certain point from which on the spillover potential stagnates or even declines. Furthermore, there is clear evidence for the following characteristics of foreign investors to increase the potential for positive external effects: innovativeness of the foreign investor, internal and external technological cooperation of foreign investors, independence from the headquarters in research and development issues and market entry through acquisition (instead of greenfield investment). The share of foreign participation as well as the duration of presence in the host economy does not show any statistically significant effect on the potential for external effects. Policy makers should therefore not only aim at the settlement of employment intensive foreign investors, but also and particularly support investors that are characterized by technological activity and regional integration.
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European Commission, Leibniz Association and IWH Discuss Innovation Related Policy in Transitions Regions
Björn Jindra, Katja Wilde
Wirtschaft im Wandel,
No. 7,
2009
Abstract
On February 17, 2009, the Halle Institute for Economic Research (IWH) and the Leibniz Association (WGL) held the final conference of the EU-project “Understanding the Relationship between Knowledge and Competitiveness in the Enlarging European Union” (U-know) in Brussels. The research dealt with systemic aspects of innovation and knowledge transfer as well as the development of R&D (research and development) and innovation related policy. Thereby, a particular emphasis was put on the challenges facing the new EU member states and East Germany. The research project proved to be very productive with 54 research papers in refereed journals as well as 33 articles in edited volumes.
The aim of the conference was to present and discuss the main results of the U-know project with experts from the industry as well as the political and scientific community. Within four parallel sessions (Enterprises and markets, Public science and industry links, Systems and governance, Role of institutions), research output was presented. Representatives of the EU Commission commented directly on the presentations with a view on policy implications. In a final panel, all participants underlined the increasing importance of education, R&D, and innovation related policy to support the competitiveness of the EU-15 countries as well as the catching-up process of the new EU member states. The conference has raised significant interest both within the scientific community and the EU Commission.
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Ende der 'Gemischtwarenläden': Spezialisierung von Technologie- und Gründerzentren als Option kommunaler Wirtschaftsförderung
Michael Schwartz, Christoph Hornych
List Forum für Wirtschafts- und Finanzpolitik,
2009
Abstract
In the context of policy measures that focus on the promotion of entrepreneurship and innovative start-ups on the level of cities and municipalities, since the beginning of the 21st century, there is an explicit tendency to establish a new type of business incubators and technology centers. These support facilities focus their support infrastructure and processes on firms from one specific sector and its particular needs. In Germany, since 1999, nearly one-third of all new business incubators opened with a sector-specific focus. Despite the continuously increasing importance of such specialized business incubators in local and regional development strategies, there is no analysis of these support facilities. On the basis of the key principles of business incubation functionality, supplemented by recent findings of incubator/ incubation research, this article investigates the evolution of this incubator concept in Germany, its regional distribution and describes the benefits to firms of being part of a specialized incubator. Moreover, this article details what are the general conditions and requirements for the long-term success of specialized business incubation initiatives.
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Lending Technology, Bank Organization and Competition
Hans Degryse, Steven Ongena, Günseli Tümer-Alkan
Journal of Financial Transformation,
2009
Abstract
This paper reviews recent theoretical and empirical studies investigating how both bank technology and organization shape bank-borrower interactions. We refer to two related concepts for bank technology. First, the technologies banks employ in loan granting decisions and second, the advances in information technology linked to the bank's lending technology. We also summarize and interpret the theoretical and empirical work on bank organization and its influence on lending technologies. We show that the choice of lending technology and bank organization depend heavily on the availability of information, the technological progress in the collection of information, as well as the banking market structure and the legal environment. We draw important policy conclusions from the literature. Competition authorities and supervisors have to remain alert to the consequences of the introduction of any new technology because: (1) advances in technology do not necessarily lead to more intense banking competition, and (2) the impact of technological and financial innovation on financial efficiency and stability depends on the incentives of the entire „loan production chain.‟
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Industry Concentration and Regional Innovative Performance – Empirical Evidence for Eastern Germany
Christoph Hornych, Michael Schwartz
IWH Discussion Papers,
No. 8,
2009
Abstract
Regarding technological innovativeness, the transformed economy of the former German Democratic Republic (GDR) clearly lags behind the Western part of the country. To face this weakness, a broad mixture of policy measures was carried out in recent years. Particular attention is drawn to the development of industry concentrations and economic ‘clusters’. However, little is known about the effectiveness of these policy measures regarding how industry concentrations in fact promote innovative performance in Eastern Germany. The present study tries to fill this gap by analyzing the relationship between industry concentration in Eastern Germany and regional innovative performance. Our empirical analysis is based upon the number of patent applications of 22 manufacturing industries in 22 Eastern German planning regions. The estimated regression models indicate an inverted U-shaped relationship between the degree of industry concentration and innovative performance. An exceedingly high degree of industry concentration in one region hampers regional innovative output. We discuss policy implications of our findings and give recommendations for future refinement of ‘cluster’-supporting policy schemes in Eastern Germany.
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Competition between Financial Markets in Europe: What can be Expected from MiFID?
Hans Degryse
Financial Markets and Portfolio Management,
No. 1,
2009
Abstract
The Markets in Financial Instruments Directive (MiFID) could be the foundation of new trading platforms in Europe. This contribution employs insights from the theoretical and empirical literature to highlight some of the possible implications of MiFID. In particular, we argue that more competition will lead to more liquid markets, reflected in lower bid–ask spreads and greater depth. It will also lead to innovation in incumbent markets and stimulate the design of new trading platforms. MiFID has already introduced more competition, as evidenced by the startup of Instinet Chi-X, the announcement of new initiatives, including Project Turquoise and BATS, and the reactions of incumbent exchanges.
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Globalisierung von Forschung und Entwicklung – der Technologiestandort Deutschland
Jutta Günther, Björn Jindra, Johannes Stephan
Wirtschaft im Wandel,
No. 2,
2009
Abstract
Am 11. November 2008 fand am Institut für Wirtschaftsforschung Halle (IWH) zum zweiten Mal ein innovationspolitischer Workshop statt, diesmal zum Thema „Globalisierung von Forschung und Entwicklung – der Technologiestandort Deutschland“. Die Veranstaltung bildete zugleich einen Bestandteil des vom IWH koordinierten EU-Projekts U-Know („Understanding the Relationship between Knowledge and Competitiveness in the Enlarging EU“), das sich mit einer Reihe innovationsökonomischer Forschungsthemen beschäftigt. Der Workshop hatte zum Ziel, das Thema Globalisierung von Forschung und Entwicklung aus wissenschaftlicher, unternehmerischer und innovationspolitischer Perspektive zu beleuchten und die Position Deutschlands im internationalen Technologiewettbewerb zu diskutieren.
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The Role of the Intellectual Property Rights Regime for Foreign Investors in Post-Socialist Economies
Benedikt Schnellbächer, Johannes Stephan
IWH Discussion Papers,
No. 4,
2009
Abstract
We integrate international business theory on foreign direct investment (FDI) with institutional theory on intellectual property rights (IPR) to explain characteristics and behaviour of foreign investment subsidiaries in Central East Europe, a region with an IPR regime-gap vis-à-vis West European countries. We start from the premise that FDI may play a crucial role for technological catch-up development in Central East Europe via technology and knowledge transfer. By use of a unique dataset generated at the IWH in collaboration with a European consortium in the framework of an EU-project, we assess the role played by the IPR regimes in a selection of CEE countries as a factor for corporate governance and control of foreign invested subsidiaries, for their own technological activity, their trade relationships, and networking partners for technological activity. As a specific novelty to the literature, we assess the in influence of the strength of IPR regimes on corporate control of subsidiaries and conclude that IPR-sensitive foreign investments tend to have lower functional autonomy, tend to cooperate more intensively within their transnational network and yet are still technologically more active than less IPR-sensitive subsidiaries. In terms of economic policy, this leads to the conclusion that the FDI will have a larger developmental impact if the IPR regime in the host economy is sufficiently strict.
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