INNOVATION, FIRM DYNAMICS AND GROWTH: what do we learn from French firm-level data?

Project Information

IFDG

Grant agreement ID: 786587

DOI

10.3030/786587

Project closed

EC signature date 5 June 2018

Start date 1 September 2018

End date 31 August 2023

Funded under

• EXCELLENT SCIENCE - European Research Council (ERC)

Total cost

€ 1 968 588,00

EU contribution

€ 1 968 588,00

Coordinated by

COLLEGE DE FRANCE
France

Periodic Reporting for period 4 - IFDG (INNOVATION, FIRM DYNAMICS AND GROWTH: what do we learn from French firm-level data?)

Reporting period: 2023-03-01 to 2023-08-31

Summary of the context and overall objectives of the project

This ERC grant has enabled our Innovation Centre at College de France to build and explore new micro data sets to analyze the determinants and impacts of innovation, firm dynamics, and income mobility.
A first issue we have explored, is that of growth measurement and the secular stagnation enigma. See (1) and (2). A second issue we investigated is that of the interplay between trade and innovation. A first study explored the effects of exports on innovation. [3] A second study looks at the effects of import shocks on French firms’ innovation incentives. [4]A third study combines French firm-level accounting data, patent data and customs data, to confirm the existence of knowledge spillovers induced by trade linkages. [5] Finally, a fourth study looks at the extent to which US firms react more to increased competition from China by lobbying more.
A third issue which we explored in the context of this ERC grant, is the issue of social mobility. We used newly accessible administrative data for research purposes to document the income social mobility in France over the last decades. [6]
A fourth issue is that of innovation diffusion worldwide. Thus, in a new exciting project developed in our Centre, Bergeaud and Verluise (2021), use modern Natural Language Processing to extract key patentees’ data (location, occupation, citizenship) from German (including East German), French, British and US patents since the late 19th century. While such data were inexistent (except for the US) before 1980, the authors were able to create a precise understanding of the dynamics of the diffusion of innovation since the 19th century in these four technology leaders. In an ongoing work, Verluise and Bergeaud also focus on the diffusion of breakthrough innovation in the recent period. [7]

References :
[1] See Aghion, P., Bergeaud, A., Boppart, T., Klenow, P. J., & Li, H. (2019). Missing growth from creative destruction. American Economic Review, 109(8), 2795-2822 and Aghion, P., Bergeaud, A., Boppart, T., & Bunel, S. (2018). Firm dynamics and growth measurement in France. Journal of the European Economic Association, 16(4), 933-956.
[2] See Aghion, P., Bergeaud, A., Boppart, T., Klenow, P. J., & Li, H. (2019). A theory of falling growth and rising rents (No. w26448). National Bureau of Economic Research.
[3] See Aghion, P., Bergeaud, A., Lequien, M., & Melitz, M. J. (2018). The impact of exports on innovation: Theory and evidence (p. 678). Cambridge, MA: National Bureau of Economic Research.
[4] See Aghion, P., Bergeaud, A., Lequien, M., Melitz, M. J & Zuber, T. (2021) The Vertical and Horizontal Components of the China Shock: Firm-Level Evidence from France
[5] See Aghion, P., Bergeaud, A., Gigout, T. Lequien, M. & Melitz, M. J (2020) Exporting ideas: Knowledge Flows from Expanding Trade in Goods
[6] See Aghion, P., Ciornohuz, V., Gravoueille, M., & Stantcheva, S. (2019). Reforms and Dynamics of Income Evidence Using New Panel Data.
[7] See Bergeaud, A., Verluise, C. (2021). One Century of Innovation in Europe and the US: New Data and Facts, Working Paper.

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

The work on the creative destruction and social mobility project consisted of: 1/ Collecting data from the French Fiscal and Custom organisations and from the European Patent Office. The collected was then processed and cleaned so that they could be matched and analysed jointly. 2/ Designing and implementing an empirical identification strategy to establish the causal effect of trade on technological spillovers. 3/ Interpreting the results and writing them in a draft for a peer reviewed publication. This step also involved multiple presentations at seminars and conferences. Feedback from the scientific community was then used to revise the previous steps.
The project on the impact of foreign competition on firms lobbying behavior has first consisted in collecting the datasets on lobbying expenditures, firms' financial information, patents and trade flows from different sources. We have then cleaned and matched the different datasets. An important amount of time is being used to simulate numerically this model. Regarding our Innovation Diffusion research programme, we started by an in-depth review of existing approaches to extract and organize unstructured text data. State-of-the art models from Natural Language Processing were then implemented in the specific context of patent data to create novel datasets. Results have been shared publicly and disseminated through conferences and workshops. The data have since been continuously improved through open-source collaboration. Major insights and findings from these novel data have been compiled in two working papers (Verluise et al, 2020; Bergeaud and Verluise, 2021), shedding new lights on the empirical measurement of knowledge flows and on the long run dynamics of innovation in Europe.

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

The Creative destruction and social mobility research program will consist in further descriptive statistics of income mobility in France, consistent with the recent advances in the literature. As part of our study of the relationships between trade and innovation, we are the first to establish a causal effect of trade linkage on technological spillover. Additionally, we establish that this trade induced increase in knowledge spillovers operates mostly through the extensive margin: it increases the number of effective knowledge linkages rather than their intensity. Finally, we are also the first to show that trade induced knowledge spillovers are of higher quality than spillovers in the absence of trade. We are also the first to focus on the indirect effect a shock in foreign competition can trigger in firms' lobbying expenses and link this response to the price of innovation. The Innovation Diffusion research programme has made progress on two fronts: knowledge flows measurement and the long term dynamics of innovation in Europe. In Verluise et al (2020), we show that patent citations reported in the text of the patents offer a better way to proxy the very concept of knowledge flows. We provide a novel dataset of in-text patent citations covering more than 10 million patens. In Bergeaud and Verluise (2021), we find that innovation patterns of European countries in the 20th century contrast with the well known US patterns in many respects (geographic concentration, internationalisation, the role of immigrants inter alia). In the coming year, we expect to learn more on the worldwide diffusion of breakthrough innovation in recent times.

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