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Purpose – This chapter aims at exploring the effects of globalization on technological change by focusing on the determinants of the direction of technological change at the firm level of analysis by following the induced technological change approach implemented by the localized technological change hypothesis.

Methodology/approach – In the empirical analysis, we proxy the direction of technological change by means of the changes in the output elasticity of capital and analyze how it is affected by the changes in factor market costs and firms' attributes for a panel of 1,113 companies listed on UK and the main continental Europe financial markets for the period 1995–2003.

Findings – We find that small firms are more likely to introduce capital-intensive technological changes while large firms will introduce skill-intensive technological changes.

Research limitations/implications – Our model provides a clear analytical framework that interprets the growing skill intensity of the advanced economies as the result of the introduction of new technologies induced by the growing globalization and biased by the characteristics and the types of innovation strategies of the firms.

Originality/value of paper – In so doing, the chapter adds to the existing literature in that it first explores the effects of globalization upon factor markets and, second, it investigates the effects of the direction of technological change within a microeconomic perspective.

Purpose – This chapter analyzes the effects that the international integration of product markets induced by globalization exerts on the direction of technological change at the industry level.

Methodology/approach – In order to do so it elaborates an interpretative framework that complements the classical inducement hypotheses with the Schumpeterian literature and the localized technological change approach, putting forward the hypothesis that technological change is biased by the dynamics of both factor and product markets. We argue and show that not only the changing levels of input costs but also the changing prevalence of product and process innovations affect the direction of technological change: specifically when product innovations prevail technological change is skill-biased, while when process innovations play a major role innovation is capital intensive.

Findings – Following this perspective we analyze the interindustrial variance of the output elasticities of labor of the main advanced economies in recent years and claim that such heterogeneity can be understood as the result of differentiated innovative reactions of firms to changes induced by the globalization of the markets: fast-growing sectors innovate mainly through (skilled) labor-augmenting technological change, while mature industries rely more on capital-enhancing innovations. The empirical evidence supports our hypotheses and shows that the variance of the output elasticity of labor in a panel data estimate across 17 manufacturing sectors in 16 OECD countries from 1995 to 2006, is significantly and positively associated with the rates of growth of employment, wage levels and their rates of increase, and R&D intensity.

Originality/value of paper – By investigating the variance of output elasticities at the industry level the chapter provides new insights within the literature focused on the bias of technological change.

Scholars have examined, in various ways, the complexity of knowledge in innovation. Recently, research has begun to focus on the role of a continuous process of knowledge recombination in our understanding of a changing structure of knowledge complexity and knowledge accumulation. Furthermore, we also claim that this process may reflect changes in the underlying innovation paradigm, or in other words the arrival of the information age. Yet, little is known about how knowledge complexity is increasing in the broader context of globalization, in which the influence of a rising diversity of locational sources may feature more prominently. We consider how knowledge recombination that relies upon the global spread of innovation activities will affect our theory of the relationship through which earlier contributions to knowledge become inputs to subsequent knowledge building that generates more (or less) complex knowledge artifacts. We propose that knowledge complexity rises when recombined elements are sourced across two dimensions of distance simultaneously, namely when sources which are derived from (i) disparate knowledge fields and (ii) distinct geographic locations are combined. We thereby develop an international business perspective on knowledge complexity through recombination by better appreciating the processes that may be necessary when knowledge is combined along global value chains. We also suggest some implications for changing organizational forms by highlighting the value of connecting previously unconnected geographically distant elements, which suggests a greater potential for more informal and indirectly diffused knowledge-based connections.

The purpose of this paper is to investigate the determinants of R&D investment at the level of the firm.

A balanced panel of 215 Italian manufacturing firms over the 1995‐2000 period has been used to test the technology‐push, the demand‐pull and the endogenous skill‐bias hypotheses. Econometrically, both the GMM‐SYS estimator and the Least Squares Dummy Variable Corrected (LSDVC) estimator (a recently‐proposed panel data technique particularly suitable for small samples) have been used.

Results support the well‐established technology‐push and demand‐pull hypotheses and, furthermore, supply evidence for the role of skill endowment in increasing a firm's R&D investments.

A limitation of the study concerns the measure of skills which is here, as in previous economic literature, simply the ratio between productive (blue‐collar) and non‐productive (white‐collar) workers. Another limitation of this contribution concerns its limited generalisability: data come from relatively large Italian manufacturing firms, i.e. the service sector and SMEs are not considered.

Consistently with the related managerial and economic literature, the basic result is that current skill endowment may significantly and positively influence a firm's current R&D decision; therefore, adequate education and training policies may indirectly induce an increase in corporate R&D investment. In terms of managerial implications, this means that HRM may be seen as an indirect strategy for improving a firm's R&D effort and ultimately for improving its performance through innovation.

While there is a well‐established literature investigating the so‐called Skill Biased Technological Change, few microeconomic empirical studies have been devoted to test the reverse relationship. The paper aims to fill this gap, testing whether higher skills may induce higher R&D expenditures.

The purpose of this paper is to begin to develop a theoretical position for understanding the role of services in innovation in post‐industrial societies.

This study develops an evolutionary and institutional approach to understanding the role of certain specialist services in innovation and illustrate how significant they are for the economies of large metropolitan areas in England and Germany.

The paper argues that the role of knowledge intensive business services (KIBS) in innovation may be understood theoretically in terms of evolutionary and institutional economics. From this perspective is is argued that urban economies are path dependent interactive learning systems that develop individually through time. They are increasingly characterized by networked production systems in which KIBS play a key role in the transfer of bespoke knowledge between actors both within and from outside individual cities. As a result the authors argue that KIBS make a significant and place specific contribution to innovation in the cities where they are located.

The paper suggests a systematic theoretical approach to understanding the currently under‐theorized role of services in general and KIBS in particular in innovation. It also points to the importance of the geography of specialized services.

Makes the case that the classical theory of production, as developed primarily by Adam Smith, should be seen as a precursor of the modern capabilities view of the firm (Penrose, Richardson, Nelson and Winter, Teece, Langlois and others). Furthermore, based on an empiricist epistemology, Smith developed ideas that are close to modern notions such as routines and bounded rationality. Shows that his emphasis on knowledge, specialization and learning is characteristic of the capabilities view, but not of the contractual view. Discusses the intellectual link from Smith to other classicals, such as Babbage and Marx, to Marshall and such post‐Marshallians as McGregor, Andrews, Downie, Penrose, and Richardson. Argues that the classical‐capabilities view of the firm can be seen as a theory of firm boundaries. States that the make‐or‐buy decision may in fact hinge on production‐cost considerations, contrary to the spirit of standard transaction‐cost economics.

The purpose of this paper is to seek to develop a rigorous analysis of social capabilities (SC) and measuring them in a special industrial cluster, considering the key role of knowledge and SC in innovation.

The paper sets off from the definition of SC and the elements that characterize them in an industrial cluster. The focus also examines how it is possible to measure SC within a specific area, using the scoreboard approach. The empirical aspect remains based upon the original results of surveys conducted on a sample of entrepreneurs specializing in a special industrial cluster utilizing a multi-method approach and the paper presents the empirical analysis estimating an innovation equation.

The results of the case study show that the relationship between SC and innovation does not only involve large enterprises but small- and medium-sized businesses as well.

Measuring SC is very complex since not all the highlighted determinants can be subject to empirical verification and given that they are intangible elements, residual and often incorporated into tacit knowledge and a literature that can help us in defining and measuring them accurately is not always available for all the indicators. In this research the author proposes a measure of SC using a composite indicator and investigates the effective role of these inputs in stimulating innovative activity in an industrial cluster performance.

This study deals with the processes of innovation in the medium technology industrial sectors. First, it illustrates the differences between the linear model of innovation and the systemic and cognitive model of knowledge creation. Then, it focuses on the concepts of connectivity, creativity, and speed of change, which characterize the processes of interactive learning in the industrial clusters. Finally, it illustrates a typology of regions, where problems and policy fields are different, and it indicates the guidelines of a governance of interregional knowledge and innovation networks.

The purpose of this paper is to analyze how path dependence in the evolution of major theories of foreign direct investment (FDI) locked in a theoretical perspective of the multinational enterprise that focused on asset-exploitation. This perspective is challenged by recent contradicting observations of multinationals from China and other emerging economies. A decisive re-orientation of FDI theory is proposed as a way forward to resolve this tension.

Placing FDI theories into the context of FDI patterns prevailing at the time they were developed, Thomas Kuhn’s framework on the evolution of scientific knowledge is employed to track how the mainstream FDI theory emerged, went through a period of normal science and then approached a crisis of science in this field.

The evolution of FDI theory is strongly path-dependent, which made it difficult for theory to effectively incorporate new conceptual discoveries and empirical findings about the nature of FDI activity.

FDI theory would benefit from a full re-orientation to a demand-oriented perspective which places the pursuit of advantages, assets, resources, etc., at the core of the theory. Such a change is implicit in many recent theoretical advances and would assure theory is generalizable to all types of FDI.

This paper empirically investigates the processes by which manufacturing firms create radical innovations in their core production process, referred to as radical manufacturing technology innovations (RMTI). The purpose of this paper is to improve the understanding of the processes and practices manufacturing firms use to create RMTI.

Creation processes for 23 RMTI projects from diverse industry and technology contexts are explored. Data were collected via semi-structured interviews, and an inductive analysis was carried out to identify similarities and differences in RMTI types and creation processes.

Three types of RMTI and three alternative RMTI creation processes are revealed and characterized. An integrated view is developed of the activities of the equipment supplier and the manufacturing firm, highlighting their different roles and interaction across the three RMTI creation process types.

The exploratory design limits the depth of the analysis per RMTI project, and the focus is on manufacturing technology innovations in one country. The results extend previous case and context-specific findings on RMTI creation processes and provide novel frameworks for cross-case comparisons.

The manufacturing firms’ proactive role in RMTI creation is defined. A framework is proposed for using different RMTI creation processes for different types of RMTI.

This study addresses recent calls for empirical research on understanding the ways in which process innovations unfold in manufacturing firms. The findings emphasize the role of manufacturing firms as creators of RMTI in addition to their role as innovation adopters and implementers and reveal the suitability of different RMTI creation processes for different RMTI types.