Industrial organisation

Ramy El-Dardiry, Bastiaan Overvest, Michiel Bijlsma, 24 May 2019

Digitalisation is transforming human life – from the way we interact with each other to the way we work, relax, and create. R&D within companies is no exception. This column lays out pathways for policymakers to successfully adapt R&D policies to these changes based on three guiding principles: direct policies towards spillovers, make policies technology-neutral, and do not favour superstars over challengers.

Liu Yang, Bin Ni, 21 May 2019

Concerns have been raised that outward foreign direct investment may reduce domestic employment and lead to the ‘hollowing-out’ of the manufacturing industries at home. This column uses a unique dataset of Japanese firms’ overseas activities to show that going abroad does not necessarily lead to a reduction of domestic employment. Investment by Japanese firms into other Asian countries has a positive impact on domestic job creation and a negative impact on job destruction, whereas the impact of investment into European and North American countries is negative for both job creation and destruction in Japan.

Leonardo Baccini, Giammario Impullitti, Edmund Malesky, 17 May 2019

The recent success of China and Vietnam over the past three decades has triggered a debate over ‘state capitalism’ as a viable growth and development model. This column studies the effect of the 2007 WTO accession on the productivity, profitability, and survival rates of state-owned and private Vietnamese firms. The findings reveal that state-owned enterprises have hampered the efficiency gains brought about by globalisation. An analysis suggests that productivity gains from trade five years after WTO entry might have been 66% higher in the absence of state-owned firms.

Alessandra Bonfiglioli, Rosario Crinò, Gino Gancia, 08 May 2019

Recent studies documenting the increase of industrial concentration have raised concerns about an era of monopolies, growing profit shares, and low economic dynamism. Using US data, this column investigates the concentration of import sales by country of origin. The results show that among foreign firms selling to the US, the concentration of sales has remained stable by origin country, but it has fallen when pooling firms from all origins. This suggests that intensified competition in international markets coexists with growing concentration among national producers.

Richard Freeman, Wei Huang, Teng Li, 07 May 2019

Incentive systems that pay workers bonuses based on performance targets are widely used to increase productivity, but they can incur costs to firms from workers gaming the system. This column studies the introduction of one such non-linear incentive system by a major Chinese insurance firm. It finds that the system increased productivity and lowered turnover rates sufficiently to outweigh the gaming costs, and appears to have benefitted both workers and the firm.

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