Ghosal, Vivek and Nair-Reichert, Usha (2007): Investments in Modernization, Innovation and Gains in Productivity: Evidence from Firms in the Global Paper Industry.
Download (281kB) | Preview
This paper examines the impact of investments in modernization and innovation on productivity in a sample of firms in the global pulp and paper industry. This industry is important because it has traditionally accounted for significant amounts of employment and capital investment in North America and Europe. In contrast to much of the existing literature which focuses on the impact of R&D and patents on firms’ performance and productivity, we examine data on actual investment transactions in four main areas of operations: (i) mechanical, (ii) chemicals, (iii) monitoring devices and (iv) information technology. We find that firms which made decisions to implement a greater number of investment transactions in modernization achieved higher productivity, and these estimated quantitative effects are greater than the impact of standard innovation variables such as patents and R&D. Investment transactions in the information technology and digital monitoring devices imparted a particularly noticeable boost to productivity. These results are obtained after controlling for other firm-specific variables such as capital-intensity and mergers and acquisitions. Two broad messages emerge from our study. First, firms’ decisions to undertake investments in modernization and various forms of incremental innovations appear to be critical for achieving gains in productivity. While these may typically generate small gains on a year-to-year basis, they can compound to form meaningful differences in performance, productivity and competitive position across firms in the longer-run. Second, for some of the traditional industries like pulp and paper, R&D and patents seem to be particularly poor indicators of innovation and, more generally, how firms go about achieving gains in productivity. While this paper focuses on the pulp and paper industry, our broad framework and methodology is general and can be applied to understanding firms’ strategies related to enhancing performance and productivity in a variety of industries.
|Item Type:||MPRA Paper|
|Institution:||Georgia Institute of Technology|
|Original Title:||Investments in Modernization, Innovation and Gains in Productivity: Evidence from Firms in the Global Paper Industry|
|Keywords:||Pulp and paper industry; investment; modernization; innovation; productivity; organizational behavior|
|Subjects:||M - Business Administration and Business Economics; Marketing; Accounting > M1 - Business Administration > M10 - General
D - Microeconomics > D2 - Production and Organizations > D20 - General
L - Industrial Organization > L6 - Industry Studies: Manufacturing > L60 - General
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L20 - General
|Depositing User:||Vivek Ghosal|
|Date Deposited:||27. Oct 2007|
|Last Modified:||11. Feb 2013 20:03|
Audretsch, David. Innovation and Industry Evolution. Cambridge: MIT Press, 1995.
Bjorkman, Amy, Dorothy Paun, Chavanda Jacobs-Young. “Financial Performance, Capital Expenditures, and International Activities of the North American Pulp and Paper Industry at Mid-Decade,” The TAPPI Journal 80, 1997, 71-84.
Cohen, Wesley and Richard Levin. “Empirical Studies of Innovation and Market Structure” in Schmalensee, Richard and Robert Willig, ed., Handbook of Industrial Organization, Amsterdam: North Holland, 1989.
Douglas, Clement. “Pulp Friction,” Federal Reserve Bank of Minneapolis, 2001.
Engel, Cynthia. “Taking Note of the Paper Industry,” Monthly Labor Review 120, 1997.
Ghosal, Vivek. “Is there a Productivity Gap Between U.S. and European Pulp and Paper Producers?” Report Submitted to the Center for Paper Business and Industry Studies (CPBIS), 2003, p.1-24.
Ghosal, Vivek, and Usha Nair-Reichert. “Innovation and Productivity Growth in the Pulp and Paper Industry: Firm-Level Empirical Evidence.” Report Submitted to the Center for Paper Business and Industry Studies (CPBIS), 2007, p.1-52.
Gort, Michael and Steven Klepper. “Time Paths in the Diffusion of Product Innovations,” Economic Journal 92, 1982, 630-653.
Griliches, Zvi (ed). R&D, Patents and Productivity. Chicago: University of Chicago Press, 1984.
Ince, Peter J. “Global Cycle Changes the Rules for U.S. Pulp and Paper,” Industry Review, 1999.
Kates, William. “Mills Fold, Jobs Disappear,” Associated Press, 2002.
McNutt, James. “The Paper Industry,” Presentation at the Sloan Workshop on Globalization, (December) 2002.
Nilsson L.J., Larson, E.D., Gilbreath K., and Gupta A. “Energy Efficiency and the Paper and Pulp Industry”, Report No. IE962, American Council for an Energy Efficient Economy, 1996.
Norberg-Bohm, Vicki, Mark Rossi. “The Power of Incrementalism: Environmental Regulation and Technological Change in Pulp and Paper Beaching in the U.S.” Technology Analysis and Strategic Management 10, 1998, 225-245.
Ohanian, N.K., 1993, “The American pulp and paper industry, 1900-1940: Mill survival, Firm Structure, and Industry Relocation,” Contributions in Economics and Economic History, No. 140. Westport, Conn. and London: Greenwood Press.
Ohanian, N.K. (1994) “Vertical Integration in the U.S. Pulp and Paper Industry, 1900-1940”, Review of Economics and Statistics, 202-207.
Pesendorfer, M., 2000, “Horizontal Mergers in the Paper Industry,” RAND Journal of Economics, 2003, 495-515.
Pulp and Paper, North American Factbook, Paperloop Publications, 1996-2003.
Suhonen, Timo. “Last of the Big Spenders?” PaperLoop, 2001.
Sutton, John. Technology and Market Structure. Cambridge: MIT Press, 1997.
Winter, Sidney. “Schumpeterian Competition in Alternative Technological Regimes.” Journal of Economic Behavior and Organization 5, 1984, 287-320.