In theory, firms facing a shortage of something are more likely to progress innovation than firms who are faced with an abundance of factors necessary for production. In practice this is hard to prove.
Zhibo Tan, assistant Professor at the School of Economics at Fudan University and Xiabo Zhang, Professor of Economics at Peking University in the paper highlighted this week, for the International Food Policy Research Institute, have had a crack at the theory though using data for female labor scarcity in China.
In 2010 China’s gender imbalance was 118-males per 100-females and the researchers used gender imbalance date available, province by province, to see if firms that typically use more women then men are more innovative?
They are, but only sort of. Using data for patent applications as their yardstick for innovation they found privately owned enterprises respond to the signal and try and do something about it. State owned enterprises (SOEs) though seem not to respond at all and just chug on their merry way.
Two important points emerge from this work. First, the directed technical change theory (scarcity leading to innovation) seems to be supported. Second, SOEs are, as we might have already suspected, dolts when it comes to responding to certain market signals.
The paper in full is available if you care to follow this link Female Labor Scarcity and Innovation
Happy Sunday.