Skill composition, firm innovation and economic performance: Three essays

I develop three models of endogenous growth to examine the determinants of firm innovation. In Chapter 2, I incorporate the composition of skills at the firm level into a model of step-by-step innovation with competition. Developing new technology requires heterogeneous skills as complementary inputs. Each firm determines the mix of its workers’ skills to increase the likelihood of realising innovation and improve its performance. A firm that is technologically on par with its competitors invests in high-skilled workers to innovate and escape intensifying competition. In contrast, a firm lagging technologically must invest in talent to catch up to the technology frontier, leading to diminished returns as competition increases. As a result, the effect of competition on the composition of skills is contingent on firms’ technological state relative to its rivals. In Chapter 3, I develop an empirical framework to investigate the testable predictions generated in the theoretical model of skill composition and innovation. Using data on firms and workers in New Zealand’s manufacturing sector, I find that the share of high-skilled workers positively correlates to labour productivity growth at the firm level, and the effect is increasing in the firm’s distance from the technology frontier. Moreover, competition is positively linked to the proportion of high-skilled workers at the firm level. The findings underscore the importance of skill composition as a factor driving innovation and shed new light on how firms respond to the changing competitive environment by adjusting organisational capability. In Chapter 4, I apply a dynamic structural model of research and development (R&D) investment choice to analyse the long-term benefits of R&D and the impact of tax policies on investment decisions among New Zealand firms in manufacturing industries. I identify the productivity improvement channels by decomposing the long-run gains into product or process innovation components and estimating their value. In a counterfactual analysis, I demonstrate an ex-ante evaluation of a proportional R&D subsidy policy and quantify the increase in R&D investment rates and productivity following a reduction in the cost of R&D. These findings apply to innovation-fostering policies concerning skill demand, market competition and R&D incentives.

Name thesis:degree_name

PhD

Level thesis:degree_level

Doctoral

Discipline thesis:degree_discipline

Economics

Grantor dc:publisher

ResearchSpace@Auckland

Year dc:date.issued

2024

Author dc:creator

• Rho, Yeirae

Advisors dc:contributor.advisor

• Fabrizi, Simona
• Lippert, Steffen
• Sharp, Basil

Statement dc:rights

• Items in ResearchSpace are protected by copyright, with all rights reserved, unless otherwise indicated.

Licence dc:rights.uri

• https://researchspace.auckland.ac.nz/docs/uoa-docs/rights.htm

Handle dc:identifier.uri

https://hdl.handle.net/2292/70126

OAI identifier oai:identifier

oai:researchspace.auckland.ac.nz:2292/70126