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The issue of whether firm productivity is affected by agglomeration externalities is a longstanding area of research. However, the appropriate geographical level to\ud better detect the effects of agglomeration economies is still unclear, and at which level these externalities work. Using detailed firm-level longitudinal data of\ud manufacturing firms over the period 2008-2016 in the United Kingdom, we investigate how the micro-geography of external agglomeration economies associates with firm productivity, comparing different geographical levels: citywide and narrowly defined neighborhoods around a firm. Results from a multilevel (mixed-effects) model show that urbanization externalities play a role at\ud a higher level of geographical aggregation, such as the city, whereas localization externalities operate at a finer level, within the city and in a closer neighborhood\ud to the firm. Failing to control for more granular level of geography results in confounding the two types of externalities. We also provide novel evidence that these externalities vary across firms (such as age, size and productivity) and location (such as population density) characteristics.

The internationalization of highly knowledge-intensive activities of multinational enterprises (MNEs) has triggered competition at multiple, interrelated geographical levels. Not merely countries, but urban areas within countries, and regional integration blocs compete to attract activities such as research, development, design or testing. This study assesses the role of local, national and supranational factors influencing MNEs’ decisions about where to locate knowledge-intensive foreign direct investments. In order to better understand the complex nature of competition, we compiled socio-economic information for 277 comparable urban areas – cities and their agglomeration, with a population of at least half a million – located in 28 countries across the world. Estimating nested logit models with different nesting structures, we show that supranational integration blocs’ borders do matter when firms decide the location of their knowledge-intensive activities. Both supranational and national borders play an important role in Europe, while national borders seem more relevant in North America. The findings support the role of EU policy instruments, such as the European Research Area (ERA), aimed at creating an integrated research and innovation area in Europe., JRC.I.1-Monitoring, Indicators & Impact Evaluation

Using data on the US and EU top R&D spenders from 2004 until 2012, this paper investigates the sources of the US/EU productivity gap. We find robust evidence that US firms have a higher capacity to translate R&D into productivity gains (especially in the high-tech industries), and this contributes to explaining the higher productivity of US firms. Conversely, EU firms are more likely to achieve productivity gains through capital-embodied technological change at least in medium and low-tech sectors. Our results also show that the US/EU productivity gap has worsened during the crisis period, as the EU companies have been more affected by the economic crisis in their capacity to translate R&D investments into productivity. Based on these findings, we make a case for a learning-based and selective R&D funding, which - instead of purely aiming at stimulating higher R&D expenditures - works on improving the firms' capabilities to transform R&D into productivity gains.

Multinational enterprises (MNEs) need to efficiently orchestrate a geographically fragmented network of cross-national operations. Among the different spatial features determining MNEs location cho...

The report aims at understanding the changes in the global geography of innovation and to discuss the challenges and opportunities that emerge from the changing global innovation landscape. In particular China and India are studied as they are the two new and leading innovation powerhouses. Sweden is particularly sensitive to changes in the global geography of innovation due to its high degree of internationalization. Sweden is ranked at No.1 in outward R&D investments of European firms. Furthermore, Sweden is the European country with the highest percentage of innovative firms that collaborate with China and India for innovation.

Using data on the US and EU top R&D spenders from 2004 until 2012, this paper investigates the sources of the US/EU productivity gap. We find robust evidence that US firms have a higher capacity to translate R&D into productivity gains (especially in the high-tech industries), and this contributes to explaining the higher productivity of US firms. Conversely, EU firms are more likely to achieve productivity gains through capital-embodied technological change at least in medium and low-tech sectors. Our results also show that the US/EU productivity gap has worsened during the crisis period, as the EU companies have been more affected by the economic crisis in their capacity to translate R&D investments into productivity. Based on these findings, we make a case for a learning-based and selective R&D funding, which – instead of purely aiming at stimulating higher R&D expenditures – works on improving the firms' capabilities to transform R&D into productivity gains.

Better performances of multinational firms and exporters with respect to domestic firms have been widely documented in the literature, but the sources of these premia have largely remained a black box. Using an original dataset on Italian firms, we find that the higher use of knowledge workers (such as R&D workers, as well as workers in managerial and clerical occupations) explain some of the TFP premium of exporters and multinational firms. However, our results suggest that is not only a matter of which inputs are used, but also how they are used. In fact, allowing for different returns to inputs (i.e. a different shape of the production function) between domestic and international firms, we explain all of the productivity premium and beyond. This is the result of the fact that international firms exhibit higher returns to production workers, and, among them, multinationals firms use capital and managers better than domestic firms. This is consistent with the idea that international firms have superior organizational capabilities and managerial practices.

This paper carries out a review of the recent literature on the internationalisation of production, with a special focus on the characteristics of Italian firms investing abroad and the effects of international production on the Italian economy. First, it is argued that that firms investing abroad are different than non-internationalized firms. Second, the mechanisms through which international production affects the size and "quality" of the home activities of firms investing abroad are explored. Finally, the analysis focuses on the effects in terms of crowding out, externality and structural change induced by international production on home countries. The paper draws implications for policies towards Italian firms investing abroad.

Europe needs improved competitiveness to escape the current economic malaise, so it might seem surprising that there is no common European definition of competitiveness, and no consensus on how to consistently measure it. To help address this situation, this Blueprint provides an inventory and an assessment of the data related to the measurement of competitiveness in Europe. It is intended as a handbook for researchers interested in measuring competiveness, and for policymakers interested in new and better measures of competitiveness. MAPCOMPETE has been designed to provide an assessment of data opportunities and requirements for the comparative analysis of competitiveness in European countries at the macro and the micro level. Visit www.mapcompete.eu to find out more about the project. The project's final conference will take place in May 2015.

This paper examines the impact of foreign presence on productivity in manufacturing industries in Europe, using a balanced panel of firm-level data on the manufacturing industry in France, Italy and Spain over the 1992-97 period. We integrate two different datasets, which allow to control for unobserved heterogeneity and to compare spillovers from multinational enterprises in different countries. We find positive and significant externalities on Italian firms and non-significant effects on Spanish and French firms. A generalisation of the results obtained for individual countries is attempted by introducing structural characteristics of national industries. In particular, the role of differences in technological profiles between foreign and domestic firms are examined. It is shown that high productivity gaps between foreign and domestic firms tend to favour positive effects of FDI, while absorptive capacity, measured by host country firms' average productivity levels, does not leverage productivity spillovers from FDI.

This paper presents the sectoral and geographic distribution of R&D-related activities, in comparison with manufacturing activities, by analysing data (from the fDi Markets database) on the number of cross-border greenfield investment projects. Results show that crossborder R&D investments are concentrated in fewer sectors and countries (of origin and destination) than manufacturing, and they are less sensitive to the obstacles related with the distance between home and host countries. More than the two-thirds of all cross-border investments in R&D-related activities are in ICT/Electronic and Life Sciences/Chemicals sectors, but these sectors differ in their propensity towards R&D and Design, Development and Testing activities. Almost half of the investments is due to multinationals from North America, and over one third from Western Europe, but the two areas show a different sectoral specialization. Considering the areas of destination, Asia is the largest recipient, and specializes in the ICT/Electronics and Industrial Machinery, while Western Europe ranks second and attracts relatively more research investments in Life Sciences/Chemicals, as well as in the Machinery industry

L’offerta di servizi di microcredito da parte di istituzioni di microfinanza contribuisce ad aumentare l’accesso al credito di una clientela rurale ed accrescere l’efficienza dei mercati locali del credito? Questo studio prova a rispondere alla precedente domanda attraverso lo sviluppo di un modello teorico e l’analisi empirica sulla base di dati raccolti in un villaggio dell’Etiopia. In un mercato finanziario duale (formale/informale), il modello teorico indica che, nonostante non tutti i membri dell’ accordo informale ottengano un microcredito dall’intermediario formale, ogni membro dell’istituzione informale ne beneficia. Infatti, i membri che si trovano in condizione di deficit finanziario beneficiano direttamente di maggiori risorse derivanti dal prestito mentre gli altri membri godono di vincoli di partecipazione meno stringenti. Inoltre, quando il tasso di interesse sui prestiti formali si riduce, aumenta sia l’utilità dei prenditori di fondi che quella di tutti gli altri membri dell’istituzione informale. Gli intermediari formali sottraggono mercato alle istituzioni informali in una misura che dipende dall’ammontare del microcredito e dal tasso di interesse. I dati raccolti nel villaggio rurale etiope confermano solo parzialmente le considerazioni teoriche. In primo luogo, a causa di un diverso ammontare e di una diversa scadenza dei prestiti formali rispetto a quelli informali, nel villaggio i due mercati sembrano complementari. In secondo luogo, l’approccio del prestito di gruppo sembra replicare gli stessi processi di monitoraggio e selezione delle istituzioni informali e pertanto le famiglie a basso reddito rimangono vincolate nell’accesso al credito. In conclusione, se le istituzioni di microfinanza volessero operare con successo nelle aree rurali, dovrebbero, per prima cosa, studiare i processi di selezione dei membri all’interno delle istituzioni informali e, per seconda cosa, offrire una più ampia gamma di prodotti finanziari oltre al credito, come ad esempio prodotti di risparmio e prodotti assicurativi., Does the provision of formal microcredit increase access to credit of rural clients and efficiency of credit markets? This study tackles this question through the development of a theoretical model and an empirical analysis in an Ethiopian village. In a dual (formal/informal) financial market, the theoretical model suggests that when some members of the informal arrangement get a formal loan, all members benefit from it. The agents who have a current deficit have greater financial resources whereas the agents who have an expected future deficit enjoy looser participation constraints. Furthermore, when the interest rate charged on formal loans decreases, the utility of not only borrowing members but all members in the arrangement increases. Besides, the formal market crowds out the informal market to some extent as long as the formal loan size increases or the interest rate decreases. Evidence from the rural village in southern Ethiopia only weakly confirms the theoretical results because of two reasons. First, due to different size and maturity of loans, the formal microcredit services and the informal risk sharing arrangements appear to be complements in the local market. Second, the group lending approach seems to replicate the same selection and monitoring processes of the informal arrangements and the low-income households remain constrained in their access to credit. Therefore, MFIs that want to operate successfully in rural areas should, first, make an assessment of self-selection processes in the informal arrangements and, second, provide a wider range of financial products besides credit, such as savings and insurance products.

This paper argues that indices of (business) service and material offshoring built on sectoral input-output data may actually measure something different than what we think they should. Applying shift-share analysis we decompose the variation over time of a commonly used class of such indices into two components: one related to the intensity in the import of intermediate inputs, and the other associated with the use of such inputs in the production of manufacturing goods. Using data from input-output tables of 21 European countries from 1995 to 2006, we show that in the case of service offshoring, in most countries a larger part of the variance is driven by the raising share of (domestically produced) services used in manufacturing production, while the share of imported services contributes to a much smaller extent. When we focus on the subset of business services, evidence shows a relatively larger tendency towards relying on imported rather domestically produced inputs. Instead, in the case of material offshoring there is evidence that foreign suppliers have substituted domestic ones. However, this pattern is strongest in countries, such as Estonia, Hungary and Slovenia, where incoming multinationals, rather than domestic firms offshoring production may be the driving force.

This paper offers a portrait of Italian firms that trade goods. Combining data on firms' structural characteristics and economic performance with data on their exporting and importing activity, we uncover evidence supporting recent theories on firm heterogeneity and international trade, together with some new facts. In particular, we find that importing can be as important as exporting as a source of firm heterogeneity. First, we document that trade is more concentrated than employment and sales, and we show that import is even more concentrated than export both within sectors and along the sector and country extensive margins. Second, while supporting the fact that firms involved in both importing and exporting (two-way traders) are the best performers, we also find that firms involved only in importing activities perform better than those involved only in exporting. We submit that this may have to do with being mainly importers of high-tech capital goods. Third, the performance premia of internationalized firms correlate relatively more with the degree of geographical and sectoral diversification of imports.

International audience; Le transfert des emplois peu qualifiés vers les pays à bas salaires est souvent perçu par l’opinion publique et les décideurs politiques comme une étape vers la désindustrialisation des économies européennes. Plusieurs travaux académiques ont toutefois montré que les effets de ces transferts sur l’activité dans le pays d’origine étaient rarement négatifs et souvent positifs. L’analyse des auteurs basée sur un échantillon d’entreprises françaises et italiennes qui deviennent multinationales au cours de notre période d’étude vise à contribuer à cette littérature en examinant l’effet des investissements effectués dans des pays en développement sur les performances enregistrées par les entreprises dans leur pays d’origine. Pour ce faire, il convient de construire l’anti-monde approprié. Ce dernier, constitué d’entreprises présentes uniquement sur le marché domestique est obtenu par la méthode du matching et fournit le benchmark hypothétique de ce qui serait advenu aux activités domestiques si les entreprises n’avaient pas investi à l’étranger. D’après les résultats obtenus, les investissements dans les pays à bas salaires ne pèsent pas sur l’activité domestique des firmes. En Italie, ils permettent au contraire une amélioration des performances enregistrées par les entreprises et ont un effet positif à long terme sur la production et l’emploi. S’agissant de la France, ils ont un effet positif sur la taille de l’activité domestique.

Transferring low tech manufacturing jobs to cheap labour countries is often seen by part of the general public and policy makers as a step into the de-industrialisation of the European economies. However, several recent contributions have shown that the effects on home economies are rarely negative and often positive. Our paper contributes to this literature by examining how outward investments to cheap labour countries affect home activities of a sample of French and Italian firms that turn multinational in the period analysed. The effects of these investments are also compared to the effects of outward investments to developed economies. The analysis is carried out by using propensity score matching in order to build an appropriate counterfactual of national firms. This provides the hypothetical benchmark of what would have happened to domestic activities if firms had not invested abroad. We find no evidence of a negative effect of outward investments to cheap labour countries. In Italy they enhance the efficiency of home activities, with also positive long term effect on output and employment growth. Also for France we find a positive effect on productivity and the size of domestic activity, although not as robust and significant. Investments to developed economies from both countries have essentially scale effects but which do not trickle down on productivity at home.

During the nineties, Europe became a major recipient of FDIs but Italian regions have been largely excluded from this process. Was it due to their characteristics, or were Italian regions ‘doomed’ by a negative country effect? In this paper we address this issue by estimating the determinants of multinational firms’ location choices in 52 EU regions. We find that Italian regions indeed attracted significantly less than their observable potential, and that this could be explained by the inefficiency of the bureaucratic apparatus and of the legal system. The effect of taxes is instead strongly sensitive to the inclusion of agglomeration variables and is asymmetric across regions. Negli anni novanta l’Europa è diventata una delle principali aree di attrazione di IDE, ma le regioni italiane sono state per buona parte escluse da questa tendenza. Ciò è dipeso dalle loro caratteristiche o da un «effetto paese» negativo? In questo lavoro si tenta di rispondere a questa domanda attraverso l’analisi delle determinanti della scelta localizzativa delle imprese multinazionali in 52 regioni europee. I risultati confermano che le regioni italiane attraggono meno del loro potenziale osservabile e che ciò potrebbe dipendere da problemi di inefficienza della burocrazia e del sistema legale. L’effetto delle tasse è invece molto sensibile all’inclusione di variabili di agglomerazione ed è asimmetrico tra le regioni.

Foreign direct investments in Europe have grown substantially over the last decade, but Italian regions account for a very small portion of such increase. Why does Italian regions attract such a low number of foreign investors? Is it a regional or a country problem? One explanation for this pattern could be that the characteristics of Italian regions are not attractive to foreign multinationals. A different, although not alternative, explanation is that Italian regions may be ‘doomed’ by the fact that they all share common national policies and institutions (such as, tax regimes, efficiency of bureaucracy, degree of labour market regulation and effectiveness of the legal and property right protection system) which discourage foreign firms to locate their plants in Italy. This view follows a tradition of cross-country studies which have addressed the role of institutional and policy characteristics as determinants of inward FDIs. In this paper we will model the potential attractiveness of 52 NUTS1 regions in 5 EU countries in terms of their main observable characteristics and will investigate whether Italian regions attract more or less than their potential. In other words, we will ask whether a EU region with the same characteristics of an Italian region will attract a different amount of FDIs. Second, we will evaluate the impact of some national policy and institutional characteristics on the attractiveness of regions and we will assess the role of such factors in explaining the Italian specificity. Third, we will simulate the relative contribution to FDIs in Italian regions of regional and national variables. This exercise will help us assessing to what extent the low attractiveness of Italian regions is the result of specific regional characteristics or of countrywide factors.

This paper investigates the role of basis risk in decisions to buy derivatives that protect against drought risk. We conducted a discrete choice experiment on a sample of Ethiopian farmers. The results suggest that there is an inverted U-shaped relationship between the contractual frequency of severe drought and the market share of insurance. In other words, when the contractual frequency differs from the average perceived frequency, demand decreases. This relationship is not verified for moderate drought insurance. These findings point to the necessity to design insurance for moderate drought events and for risk aggregators that can diversify the idiosyncratic risk component.

This chapter focuses on institutions as key determinants of economic growth. We explore the effect of institutions in the Caribbean region that tends to be overlooked within mainstream IB research. Using a three-stage model, we test for cross-national variance and the influence of institutions on productivity and output. We found that institutions influence long-run economic performance and that some institutions matter more than others. Our evidence suggests that institutions designed to regulate and legitimise markets and constrain inefficiencies, significantly affect levels of productivity . In turn, institutions designed to stabilise markets could have a growth-maximising effect beyond which increased bureaucracy reduces incentives to increase productivity.

This chapter explores the dyadic relationship between headquarters and in terms of their perceptions of decision-making loci and associated organisational structure. By comparing the responses of parents of Greek Multinational Enterprises (MNEs) and their subsidiaries, we find evidence in favour of a perception gap in terms of decision-making between headquarters and subsidiaries. We argue that future research needs to carefully consider and account for the perception gap and point out the importance of the role of MNE managers in removing such barriers in order to achieve effective decision-making.