EspañolDescription of the project |
| Project abstractThe economies of Southern Europe face
special difficulties in restructuring their industries to face Europe-wide
competition. Despite the important EC effort to channel technology and funds to
local manufacturing firms, the progress in convergence achieved during the 1980s is
slowing down in the 1990s as only relatively few such firms have become competitive and
able to continue both the innovative process and corporate expansion. Public intervention
has mainly involved the funding of 'horizontal' technology provision, while this project
will focus on the nature of the private investment decision required to incorporate such
technology and the special needs of Southern European manufacturing firms in the
'transition' to sustained and competitive corporate growth in the Single European Market.
From this analytical approach, well-grounded proposals for policies to overcome market
failure can be derived. The project output will take two main forms: on the one hand a
book containing a methodology of evaluating bank loans by providing benchmarks for
effective investment decisions and recommendations for enhanced policy initiatives in the
future; on the other, a series of published studies of technological innovation and
corporate finance in Southern Europe.
Top This project intends to develop further the empirical analysis of corporate finance and technological development of manufacturing firms in the 'industrial followers' of Southern Europe by focusing on the process of investment decisions, where considerations of corporate finance and production technology are closely integrated. The local firm, its technology suppliers, and financial intermediaries, can be considered as a key `decision-making triangle'. Top Contribution to The United Nations University programmes This proposal is founded on the accumulated experience of the Institute for New Technologies, United nations University (UNU/INTECH) in policy research on technology issues in relation to industrialisation. At the same time it is a considerable development of the approaches which have been taken up till now, and represents, in our view, an effective way of furthering policy oriented research. The following points will elucidate the basis for this view. First, the proposal is based on the analysis of the behavior of firms operating in their national institutional contexts. This is an especially important consideration, since nearly all the advances in matters of industrial technology policy have come from an improved understanding of how firms operating in market economies deal with issues of technological change. It is proposed to build on this proven foundation of empirical understanding. In addition, at UNU/INTECH we have come to recognize that studies which focus on firm behavior too exclusively, without exploring their relationships to the institutional context for science and technology at national level, can miss important points. Therefore, we shall assess the behavior of firms in a broader context of relevant institutions. Second, we consider the proposed study a major advance in another and critical aspect. This is that it will focus on the investment behavior of firms, and will attempt to explain their approaches to incorporation of new technology in production, in the context of their basic investment decisions. The collaboration with Finance and Trade Policy Research Centre (FTPRC) in the University of Oxford is essential to this part of the undertaking, since it brings in important professional understanding of the nature of corporate investment decisions. Although it is clear that incorporation of new technologies into production systems almost invariably involves investment decisions - and sometimes very risky and major ones - there has been singularly little empirical study of the approaches that firms actually take to these questions. This is an important matter from a policy point of view. Third, these questions are least well understood in the smaller and technologically weaker economies than in the larger ones. There has been far more empirical research on issues of technological innovation/imitation in the larger, more industrialised economies than elsewhere. The focus on the Southern European economies is therefore particularly important. The three countries selected are (in alphabetical order) Greece, Portugal and Spain. These countries face particular problems regarding the incorporation of technologies in investments by private firms. An important special problem is that the terms of incorporation of technologies into industrial investments in these countries are importantly affected by the fact that much of the technology has to be imported from other countries - a point which will need particular attention. Top Relationship to the work of other organizations Empirical research on the role of corporate finance in the process of economic development and technological change is currently conducted at the OECD, the World Bank and the Asian Development bank. Policy oriented research groups in European Universities are looking at the role of national systems financing innovations in industrialised countries.Top Small and medium firms make up the bulk of manufacturing capacity in Southern Europe, generating an important part of output and the majority of industrial jobs. However, they are generally characterized by backward technology (in terms of both physical plant and human resources) and inadequate access to capital finance from commercial banks and equity markets. This problem is also faced by large firms in traditional industries with mature technologies. In consequence, levels of private manufacturing investment have traditionally been low in both quantity and quality. Family-based management in manufacturing firms has been unable to adsorb new process technologies or innovate products, while banks have been unwilling to lend in the face of insufficient collateral or excessive risk. Technology analysts tend to see this problem in terms of `conservative bankers', while financial analysts see it in terms of `lack of profitable projects', the relationship between technology investment and capital finance is clearly characterized by systemic market failure. There is increasing evidence (at the empirical level from the practice of regional development and theoretically in the fields of asymmetric information and endogenous growth) that firms in southern Europe have special difficulties in achieving socially desirable levels of investment. The effectiveness of policy instruments such as tax incentives, skills training and infrastructure provision is limited by the lack of understanding of how firms actually make investment decisions. Investment decisions involve a combination of financial, technological and human resources; of which finance and technology is scarce in poorer regions and must be accessed through Europe-wide markets. This investment problem has severe consequences at a number of levels. First, these firms are responsible for the greater part of manufacturing employment and productive skills. If they cannot survive and develop, then the workforce becomes rapidly de-skilled and migrates. Second, a thriving regional economy requires a strong network of innovative manufacturing firms which will stimulate further investment in suppliers, services, transport etc. Third, national industrial strategies in Southern Europe are necessarily based on the reconversion of inefficient large-scale corporations (often in public ownership) in traditional industrial sectors and the promotion of dynamic and innovative firms in new sectors. To a great extent, such modernisation necessarily involves the transfer of technologies from advanced industrial centres, but its adsorption requires considerable managerial and financial resources, while subsequent corporate growth will require endogenous innovation. This project offers a new approach to the problem, which will focus on the nature of investment decisions by firms, as conditioned by their 'triangular' relationship between manufacturing firms, financial intermediaries and suppliers of technology. Competitive innovation clearly requires long-term funding, but any investment in new technology exposes the firm itself to uncertainty; so larger firms who control markets and can generate internal funds for R & D are preferred by foreign firms as partners and by banks as borrowers. The project will establish the extent to which manufacturing firms in less developed Southern European regions are consequently at a scale disadvantage in both the innovation and acquisition of new process and product technologies. Top The project output will take two main forms: on the one hand, the final report which eventually will be published as a book containing an evaluation of existing programmes in this area and recommendations for enhanced policy initiatives in the future; on the other, a series of published country case studies of manufacturing firms technological innovation and corporate finance in Southern Europe. An additional benefit from the project will be institutional capacity building in the three chosen countries, which could subsequently be applied for more detailed research work at the firm level. Additionally, the project will lead to a methodology of evaluating bank loans by providing benchmarks for effective investment decisions. This contribution will be published in a separate volume. Dissemination target The research output will serve to integrate three goals: to provide banks, local firms and policy makers in the public administration with a deeper understanding of the financial and technological aspects of decisions linked to investment decisions in Southern Europe; to strengthen institutional capacity for the evaluation of investment in new technologies through the development of local research teams and with the dissemination of research findings on methodology and country case studies, a well grounded conceptual framework can help as a basis for formulating policy recommendations, especially in less developed Southern European regions where the socio-institutional context has been less favourable and there are still problems of implementation and assimilation of investment in new technologies at the firm level. Top Potential contribution to the work of The United Nations University system This project will be primarily intended to inform policy making in the Southern European economies, but will also have a wider relevance. It will produce results which might be of considerable significance in developing countries - perhaps especially, but not exclusively, in Latin America and Eastern Europe. UNU/INTECH as a Research and Training Centre of the United Nations University is well placed to provide a bridge between the project and those concerned with issues of technology policy in the developing countries - and so of course is the FTPRC which is part of the International Development Centre in Queen Elizabeth House in Oxford. Top Arrow, K.J.(1962) "The Economic Implication of Learning by Doing" , Review of Economic Studies 29, 3:295--305. Freeman,C.and Soete, L., "The Economic of Industrial Innovation" Partes 2,3y 4. Pinter, London. Vence Deza, X. (1995) " Economía de la Innovación y del Cambio Tecnológico". Barro, R.J. and Sala-i-Martín, X. (1992) "Public Finance in Models of Economic Growth", Review of Economic Studies 59, 4: 645--661. Dixit, A. and Stiglitz, J.E. (1997) "Monopolistic Competition and Optimum Product Diversity", American Econmic Review 67, 3: 297--308. Lucas, R.E. Jr. (1988) "On the Mechanics of Economic Development", Journal of Monetary Economics 22, 1: 3--42. Romer, P.M. (1986) "Increasing Retuns and Long -run Growth, Journal of Political Economy 98, 5 (part2):71--102. Buesa, M. (1994) "La Política Tecnológica en España: Una evaluación en la perspectiva del sistema productivo" ICE 726, February: 161--82. Molero, J. (1997) " Innovación Tecnológica y Competitividad de la Economía Española" in J. Nieto (de). Lundvall, B.A. "National Innovation Systems: Towards a Theory of Innovation and Interactive Learning", Pinter, London, 1992. Freeman, C. "The National System of Innovation" en Cambrigde Journal of Economics. (1995). Cooper, C. et al., "Technology and Innovationin the Internacional Economy" Edward Elgar y UN Press, 1994 Nelson, R., "National Innovation Systems. A comparative analysis". New york/ Oxford, Oxford University Press, 1993. Government Venture Capital for Technology-based Firms/ OCDE/GD (97) 201/ Organisation for Economic Co-operation and Development. París / 59917. Venture Capital and Innovation//OCDE/GD (96)168/ Organisation for Economic Co-operation and Development. París 45312. OCDE (1992) Technology and the Economy: The Key Relationships, Paris:OCDE. ---- (1993) Small and Medium Enterprises: Technoloy and Competitiviness, Paris: OCDE. ---- (1995) Impact of National Tecnology Programes, París: OCDE. ---- (1996a) SME´s Employment, Innovation and Growth: The Washinton Workshop, Paris. ---- (1996b) Technology and Industrial Performance, Paris:OCDE. ---- (1997a) Science, Technology and Industry: Scoreboard of Indicators, Paris: OCDE. ---- (1997b) Conference on Implementation of OCDE Methodologies for Statistis in Central and Eastern Europe, Paris:OCDE. |
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