Essays in innovation and productivity

Alakbarov, Rasif (2024) Essays in innovation and productivity. PhD thesis, London School of Economics and Political Science.

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Abstract

This thesis aims to understand the interplay between innovation, productivity, and market dynamics. Comprising three distinct chapters, the thesis analyzes various aspects of innovation behaviour, productivity and its implications. This first chapter attempts to understand the relationship between worker productivity and firm markups. Using the German-matched employee-employer dataset for 1993 − 2017, I analyze this relationship empirically and find that the average German firm charges a price that is 50% higher than the marginal cost, there is positive labour market sorting, and workforce productivity and markups follow an inverted-U relationship. To explain the latter, I develop a theoretical model. The model suggests that firms’ incentives to enter the market and asymmetric information on the consumers’ side can explain such an empirical relationship. The second chapter analyzes the relationship between firms’ access to export markets and innovations. In the chapter, I argue that corruption levels in firms’ countries of origin matter for understanding how export demand shocks impact firms’ investments in R&D. I develop a theoretical model which predicts that the export demand shocks should benefit the R&D investments of firms from non-corrupt states more than the innovations of firms from corrupt countries. I test this prediction empirically and find that the export demand shock is positively associated with R&D investments of firms originating from non-corrupt states. I do not find a statistically significant association between the export shocks and R&D investments of firms from corrupt countries. Finally, using a theoretical model, the third chapter investigates the impact of competition on innovations in vertically related markets. In the model, I consider sectors composed of innovating upstream firms supplying their products to non-innovating downstream ones. The model predicts that the firms’ innovation incentives change non-monotonically with the corruption levels in both upstream and downstream markets.

Item Type:	Thesis (PhD)
Additional Information:	© 2024 Rasif Alakbarov
Library of Congress subject classification:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor
Sets:	Departments > Economics
Supervisor:	Aghion, Philippe and Jaravel, Xavier
URI:	http://etheses.lse.ac.uk/id/eprint/4691

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