Industry Learning Environments and the Heterogeneity of Firm Performance
December 2006
Working Paper Number:
CES-06-29
Abstract
This paper characterizes inter-industry heterogeneity in rates of learning-by-doing and examines how industry learning rates are connected with firm performance. Using data from the Census Bureau and Compustat, we measure the industry learning rate as the coefficient on cumulative output in a production function. We find that learning rates vary considerably among industries and are higher in industries with greater R&D, advertising, and capital intensity. More importantly, we find that higher rates of learning are associated with wider dispersion of Tobin's q and profitability among firms in the industry. Together, these findings suggest that learning intensity represents an important characteristic of the industry environment.
Document Tags and Keywords
Keywords
Keywords are automatically generated using KeyBERT, a powerful and innovative
keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant
keywords.
By analyzing the content of working papers, KeyBERT identifies terms and phrases that capture the essence of the
text, highlighting the most significant topics and trends. This approach not only enhances searchability but
provides connections that go beyond potentially domain-specific author-defined keywords.
:
profitability,
investment,
production,
econometric,
manufacturing,
sale,
company,
growth,
earnings,
gain,
acquisition,
industry productivity,
efficiency,
sector,
specialization,
innovation,
profit,
revenue,
competitor,
industry heterogeneity
Tags
Tags are automatically generated using a pretrained language model from spaCy, which excels at
several tasks, including entity tagging.
The model is able to label words and phrases by part-of-speech,
including "organizations." By filtering for frequent words and phrases labeled as "organizations", papers are
identified to contain references to specific institutions, datasets, and other organizations.
:
Annual Survey of Manufactures,
Standard Industrial Classification,
Longitudinal Research Database,
Ordinary Least Squares,
Total Factor Productivity,
National Bureau of Economic Research,
Cobb-Douglas,
Census of Manufacturing Firms,
Generalized Method of Moments,
Research Data Center,
Value Added
Similar Working Papers
Similarity between working papers are determined by an unsupervised neural
network model
know as Doc2Vec.
Doc2Vec is a model that represents entire documents as fixed-length vectors, allowing for the
capture of semantic meaning in a way that relates to the context of words within the document. The model learns to
associate a unique vector with each document while simultaneously learning word vectors, enabling tasks such as
document classification, clustering, and similarity detection by preserving the order and structure of words. The
document vectors are compared using cosine similarity/distance to determine the most similar working papers.
Papers identified with 🔥 are in the top 20% of similarity.
The 10 most similar working papers to the working paper 'Industry Learning Environments and the Heterogeneity of Firm Performance' are listed below in order of similarity.
-
Working PaperSpinout Formation: Do Opportunities and Constraints Benefit High Capital Founders?
June 2015
Working Paper Number:
CES-15-07
We examine the role of human capital in employees' decisions to leave their parent firms andform spinouts. Using a large sample of individuals who formed spinouts in manufacturing industries between 1992 and 2005, and their co-workers who did not, we find that after controlling for age, education level, gender and alien status, individuals with higher human capital (measured as their earnings or experience) are more likely to form spinouts. We then examine the impact of industry opportunities and constraints on the propensity of high human capital individuals to form spinouts. Counterintuitively, we find that both industry constraints (measured as industry capital intensity) and opportunities (industry R&D intensity) reduce the propensity of higher human capital individuals to form spinouts. We interpret these results as being consistent with the argument that high human capital founders are more likely to choose larger, more capital-intensive projects than low human capital individuals, and thus face greater constraints. On the other side, R&D intensive industries appear to present abundant entrepreneurial opportunities, allowing low human capital individuals to identify their own opportunities thus decreasing the relative advantage of high human capital individuals.View Full Paper PDF
-
Working PaperThe Demand for Human Capital: A Microeconomic Approach
December 2001
Working Paper Number:
CES-01-16
We propose a model for explaining the demand for human capital based on a CES production function with human capital as an explicit argument in the function. The resulting factor demand model is tested with data on roughly 6,000 plants from the Census Bureau's Longitudinal Research Database. The results show strong complementarity between physical and human capital. Moreover, the complementarity is greater in high than in low technology industries. The results also show that physical capital of more recent vintage is associated with a higher demand for human capital. While the age of a plant as a reflection of learning-by-doing is positively related to the accumulation of human capital, this relation is more pronounced in low technology industries.View Full Paper PDF
-
Working PaperLearning by Doing and Plant Characteristics
August 1996
Working Paper Number:
CES-96-05
Learning by doing, especially spillover learning, has received much attention lately in models of industry evolution and economic growth. The predictions of these models depend on the distribution of learning abilities and knowledge flows across firms and countries. However, the empirical literature provides little guidance on these issues. In this paper, I use plant level data on a sample of entrants in SIC 38, Instruments, to examine the characteristics associated with both proprietary and spillover learning by doing. The plant level data permit tests for the relative importance of within and between firm spillovers. I include both formal knowledge, obtained through R&D expenditures, and informal knowledge, obtained through learning by doing, in a production function framework. I allow the speed of learning to vary across plants according to characteristics such as R&D intensity, wages, and the skill mix. The results suggest that (a) Ainformal@ knowledge, accumulated through production experience at the plant, is a much more important source of productivity growth for these plants than is Aformal@ knowledge gained via research and development expenditures, (b) interfirm spillovers are stronger than intrafirm spillovers, (c) the slope of the own learning curve is positively related to worker quality, (d) the slope of the spillover learning curve is positively related to the skill mix at plants, (e) neither own nor spillover learning curve slopes are related to R&D intensities. These results imply that learning by doing may be, to some extent, an endogenous phenomenon at these plants. Thus, models of industry evolution that incorporate learning by doing may need to be revised. The results are also broadly consistent with the recent growth models.View Full Paper PDF
-
Working PaperThe Survival of Industrial Plants
October 2002
Working Paper Number:
CES-02-25
The study seeks to explain the attrition rate of new manufacturing plants in the United States in terms of three vectors of variables. The first explains how survival of the fittest proceeds through learning by firms (plants) about their own relative efficiency. The second explains how efficiency systematically changes over time and what augments or diminishes it. The third captures the opportunity cost of resources employed in a plant. The model is tested using maximum-likelihood probit analysis with very large samples for successive census years in the 1967-97 period. One sample consists of an unbalanced panel of about three-fourths of a million plants of single and multi-unit firms, or alternatively of about 300,000 plants if only the most reliable data are considered. The second is restricted to the plants of multi-unit firms in the same time span and consists of an unbalanced panel of more than 100,000 plants. The empirical analysis strongly confirms the predictions of the model.View Full Paper PDF
-
Working PaperIncidence and Performance of Spinouts and Incumbent New Ventures: Role of Selection and Redeployability within Parent Firms
September 2021
Working Paper Number:
CES-21-27
Using matched employer-employee data from 30 U.S. states, we compare spinouts with new ventures formed by incumbents (INCs). We propose a selection-based framework comprising idea selection by parents to internally implement ideas as INCs, entrepreneurial selection by founders to form spinouts, and managerial selection to close ventures. Consistent with parents choosing better ideas in the idea selection stage, we find that INCs perform relatively better than spinouts, and more so with larger parents. Regarding the entrepreneurial selection stage, we find evidence consistent with resource requirements being a greater entry barrier to spinouts and greater information asymmetry promoting spinout formation. Parents' resource redeployment opportunities are associated with lower relative survival of INCs, consistent with their being subject to greater selection pressures in the managerial selection stage.View Full Paper PDF
-
Working PaperThe Impact of Vintage and Survival on Productivity: Evidence from Cohorts of U.S. Manufacturing Plants
May 2000
Working Paper Number:
CES-00-06
This paper examines the evolution of productivity in U.S. manufacturing plants from 1963 to 1992. We define a 'vintage effect' as the change in productivity of recent cohorts of new plants relative to earlier cohorts of new plants, and a 'survival effect' as the change in productivity of a particular cohort of surviving plants as it ages. The data show that both factors contribute to industry productivity growth, but play offsetting roles in determining a cohort's relative position in the productivity distribution. Recent cohorts enter with significantly higher productivity than earlier entrants did, while surviving cohorts show significant increases in productivity as they age. These two effects roughly offset each other, however, so there is a rough convergence in productivity across cohorts in 1992 and 1987. (JEL Code: D24, L6)View Full Paper PDF
-
Working PaperFirm Performance And Evolution Empirical Regularities In The U.S. Microdata
October 1996
Working Paper Number:
CES-96-10
This paper presents a view of firm performance, industry evolution, and economic growth that contrasts with the traditional representative firm model. The paper reviews recent empirical work, primarily studies using the Longitudinal Research Database (LRD), that explicitly focuses on individual business units. The major empirical regularity in the studies is that heterogeneity is pervasive -- it is found across and within all sectors and across all plant characteristics. Further, firms are not only different in the cross-section. They enter at different times, make different choices, and react differently to economic shocks. Thus, to understand economic performance and competition, one must move beyond representative firm models. Competition must be understood as a process in which some firms choose correctly and grow while other firms choose poorly and die; the growth of the successful firms at the expense of less successful rivals drives economic growth.View Full Paper PDF
-
Working PaperManagerial Efficiency, Organizational Capital and Productivity
March 2003
Working Paper Number:
CES-03-08
The paper focuses on the impact of managerial efficiency on output. Three sources of managerial efficiency are identified: (a) superior initial managerial endowments, (b) the accumulation of managerial knowledge and skills through learning and (c) the impact of an effective market for managerial resources internal to the firm. All three are explicitly measured by appropriate variables and their impact is examined in the context of variously specified production functions. The empirical analysis is carried out with data for approximately 5,000 new manufacturing plants in the United States over the 1973-92 period. It is found that variation in managerial endowments is an important explanatory variable for output with all other relevant inputs controlled. It is further found that the survival of plants with superior managerial efficiency, and the death of those with inferior efficiency, explains a substantial fraction of total factor productivity change in the manufacturing sector of the U.S. economy. There is also clear evidence of the significance for efficiency of internal markets as well as evidence of learning as plants age. Learning and superior managerial resources of old plants largely offset the benefits of capital goods of later vintage of new plants.View Full Paper PDF
-
Working PaperR&D or R vs. D? Firm Innovation Strategy and Equity Ownership
April 2020
Working Paper Number:
CES-20-14
We analyze a unique dataset that separately reports research and development expenditures for a large panel of public and private firms. Definitions of 'research' and 'development' in this dataset, respectively, correspond to definitions of knowledge 'exploration' and 'exploitation' in the innovation theory literature. We can thus test theories of how equity ownership status relates to innovation strategy. We find that public firms have greater research intensity than private firms, inconsistent with theories asserting private ownership is more conducive to exploration. We also find public firms invest more intensely in innovation of all sorts. These results suggest relaxed financing constraints enjoyed by public firms, as well as their diversified shareholder bases, make them more conducive to investing in all types of innovation. Reconciling several seemingly conflicting results in prior research, we find private-equity-owned firms, though not less innovative overall than other private firms, skew their innovation strategies toward development and away from research.View Full Paper PDF
-
Working PaperHuman Capital of Spinouts
January 2015
Working Paper Number:
CES-15-06
This study examines how the human capital of spinout founders and the performance of parent firms affect the success of spinouts by using a matched employer-employee dataset of new ventures covering 7 SIC 1-digit sectors in the United States. Our data cover 29,100 spinouts and 379,800 new ventures formed by lone entrepreneurs in 23 states between 1992 and 2005. We evaluate several components of human capital: outcomes of human capital investments vs. human capital investments, task-related human capital vs. non-task-related human capital, and individual human capital vs. group capital, and examine whether these types of human capital affect spinout performance differently. We find that spinout founder's earnings (an outcome of human capital investment) and industry experience (task-related human capital) prior to spinout formation have strong positive correlations with spinout performance, as measured by size, wage and growth rate. We also find that group experience of spinout founders prior to spinout formation has a positive correlation with spinout performance, though this effect is slightly weaker and smaller than those of spinout founder's earnings and industry experience. The effects of these three measures of human capital are mostly present after controlling for parent firm establishment fixed effects. We find some evidence that the size of parent firm establishments has a positive correlation with spinout performance, but this effect does not hold after controlling for parent firm fixed effects. Finally, we find that founder's earnings, industry experience, group experience and parent firm size are more important during the early stage of spinout formation.View Full Paper PDF
