Katz Bernat

7/27/2019 Katz Bernat

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XLV Reunin AnualNoviembre de 2010

ISSN 1852-0022

ISBN 978-987-99570-8-0

MICRO TO MACRO INTERACTIONS IN THE

CONTEXT OF ARGENTINE MANUFACTURING

ACTIVITIES

Katz, Jorge

Bernat, Gonzalo

ANALES | ASOCIACION ARGENTINA DE ECONOMIA POLITICA


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MICRO TO MACRO INTERACTIONS IN THE CONTEXT

OF ARGENTINE MANUFACTURING ACTIVITIES:

Exit and entry of firms, productivity growth, structural

change and innovative behavior in response to changes in the

macroeconomic policy regime

Jorge Katz y Gonzalo Bernat

(Universidad de Chile; Fundacin CREAR y UBA)

Resumen Ejecutivo:

En este trabajo se estudia cmo respondieron las diferentes ramas manufacturaras a la contraccin y

subsecuente expansin econmica resultado del abandono del rgimen de tipo de cambio fijo, sto es, las

respuestas microeconmicas y estructurales a un cambio sustancial en la poltica macroeconmica. Los

principales resultados indican que una combinacin entre una macro menos voltil, un tipo de cambio real

elevado y la expansin del consumo interno determin la concrecin de proyectos de inversin,

parcialmente asociados al nacimiento de firmas ms competitivas, aunque slo al interior de los sectores

low-tech y de escasas actividades de intensidad tecnolgica alta.

Abstract:

In this paper, we study how different industries responded to the contraction and subsequent expansion of

economic activities that resulted from the country abandoning the currency board regime, i.e. the micro

and structural response to a major change in macroeconomic policy regime. The main research results

indicate that a combination of less macroeconomic turbulence, a higher real exchange rate and the

expansion of domestic consumption brought about the concretion of investment projects, partially

associated to the birth of (more competitive) firms, although only within low tech sectors and in a few

(medium) high tech activities.

JEL Classification: O10; O14.


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I Macro-to-micro interactions: a topic in search of a theory:

Received theory is not particularly useful when it comes to the topic of macro-to-micro

interactions in the process of economic growth.This is probably so as a result of the fact that

mainstream neoclassical economics is based upon an equilibrium metaphor of what economic

growth is all about. In such context, the study of growth is based upon the stylized behavior

of a representative firm that maximizes profits in perfectly competitive markets, where nouncertainty or market imperfections ever prevail (Solow, 1988).

There is no room in the neoclassical model for the crucial question framed by R. Nelson in

one of his most valuable contributions to the ongoing debate on the sources of economic

growth, i.e. Why firms differ, and how does it matter?(Nelson, 1991). In the conventional

neoclassical growth story, firms are automats that respond to exogenous forces which they do

not control, i.e. they lack a strategy of their own. Thus, Nelsons question simply does not

arise as an interesting researchable issue worth looking into.

Yet, developing economies are characterized by a high level of macroeconomic volatility and

turbulence, which generate a great deal of uncertainty, negatively affecting investment

behavior and the rate of entry and exit of firms in the economy. The impact of wide andrecurrent variations in the level of economic activity affects in an asymmetrical way the

different sectors of the economy, and the structure of GDP is bound to suffer changes through

time reflecting the inter-industry variance in adjustment behavior.

In other words, the interaction between macroeconomic turbulence, structural change and

microeconomic behavior appears as an interesting topic worth examining. This we do in the

present paper in the context of Argentine manufacturing activities, looking at how different

industries responded to the contraction and subsequent expansion of economic activities that

resulted from the country abandoning the currency board regime in the late 1990s, i.e. the

micro and structural response to a major change in macroeconomic policy regime.

In Section II we present a very brief review of the cycle of contraction and expansion ofeconomic activities Argentina experimented in the late 1990s and early 2000s, as a result of

the country abandoning the currency board regime i.e. the dollarization of the economy it

maintained for a decade long period, after the hyperinflation episode of the late 1980s.

Such change in macroeconomic policy regime brought about a major contraction in GDP,

causing the investment/GDP ratio to fall abruptly and forcing many firms out of the market.

The rate of market exit was quite different across industries and the structure of

manufacturing production suffered a significant transformation as a result of that

macroeconomic process.

Surprisingly so given the magnitude of the overall GDP contraction and the length of the

recessionary episode - the economy experimented a sharp come back, as from 2003 onwards.Many new firms entered the market in 2003-2004, with domestic demand and manufacturing

exports expanding rapidly. Concomitantly with the above, domestic consumption and

employment grew quite strongly, bringing about a major improvement in expectations and

global welfare.

With the benefit of insight, we now know that the recovery process was highly uneven across

sectors of economic activity, with low technology industries such as foodstuffs, leather and

the printing sector and a few medium low technology activities, reacting much better to the


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new phase of economic expansion than high technology industries. In fact, the weakness of

high technology sectors to benefit from the new set of opportunities was quite evident.

In Section III, we discuss some theoretical features of the adjustment process the economy

undergoes in episodes of this sort, in which the rates of entry and exit of firms vary

considerably across sectors of economic activity and the structure of the economy suffers

significant changes as a result.

In Section IV, we turn to the available empirical evidence concerning the above issues. For

such purpose we look at data from the Ministry of Labor, from ECLAC The Economic

Commission for Latin America and the Caribbean and from INDEC, the National Institute

of Statistics of Argentina.

In Section V, we explore the relationship between innovative behavior and the observed

inter-industry differences in response to changes in the cycle of economic activity. For such

purpose we use data from the Argentine Innovation Survey and similar information from the

Brazilian equivalent. The relative Argentine weakness on this front becomes evident. Almost

across the board, Argentine industries spend less than their equivalent in Brazil in R&D

activities, let alone when compared with their similar .in more developed industrial countries.

Finally, in Section VI, we draw the main conclusions of our research showing the

asymmetrical impact changes in macroeconomic policy exert upon structural and micro

features of the economy. We also briefly comment on possible policy interventions

addressing such differential impact.

II - The volatility of the Argentine economy:

Macroeconomic turbulence increased quite considerably in Argentina since the mid-1970s,

as the country proceeded from an inward-oriented State-led policy regime into a more open

and de-regulated regime, basically led by market forces (Graph II.1). In fact, between 1950

and 1974, the probability of a year of negative growth was around 20% in Argentina, an

index well within the range of other developing nations. Contrary to the above, between 1975

and 2001, such probability increased to 52%, which was high vis a vis emerging economies,

and even more so when compared with OCDE countries (Easterly et al, 2000).


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GRAPH II.1.GROSS DOMESTIC PRODUCT. 1950-2009.

Annual growth rate:

-15%

-10%

-5%

0%

5%

10%

15%

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

Source: Based on data from the Ministry of Economy.

When we look at Argentine economic history over the last quarter of the past century, we

notice that major changes in macroeconomic policy regime where implemented, in 1975-

1976; 1980-1981; 1988-1989; 1991; 1999-2001 (Fanelli, 2002). An increasingly worse

growth performance is therefore not highly surprising. Said recurrent changes in policy

regime certainly account for a highly volatile and unstable socio-economic environment,

negatively affecting expectations and entrepreneurial animal spirits.

The literature on investment irreversibility (Pindyck, 1988; Caballero, 1991; Pindyck and

Solimano, 1993) suggests that macroeconomic instability generates uncertainty which

negatively affects long term investment decisions. The argument rests on the hypothesis thatif investment can be postponed, firms will opt for so doing, following a strategy of wait and

see, avoiding commiting themselves to irreversible decisions in an unknown future (Kosacoff

and Ramos, 2006).

From this perspective, waiting becomes a major option when firms evaluate when to proceed

with an investment program involving the installation of new production capacity. Such

option acquires more significance when macroeconomic volatility increases. Stated in

different terms, the planning horizon becomes shorter and the expected rate of return firms

demand to initiate any given investment project increases when the macro turns more unstable

and unpredictable (Caballero and Pindyck, 1996).

It seems clear that major changes in policy regime such as the one Argentina implementedin the late 1990s when it decided to abandon the currency board regime, - bring about

uncertainty concerning the future behavior of the economy. Under such circumstances, we

should a priori expect economic agents to shy away from investment and automatically

become more defensive, postponing investment decisions until the global environment

settles down and the economy becomes more predictable.

Episodes of this sort also increase the rate of company exits, as capital markets operate very

imperfectly and many small and medium size companies find it difficult to access short and


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long term finance. It is not unlikely, also, that the impact of a more turbulent macro is

asymmetrical in different sectors of the economy, as not each and every industry faces the

same set of opportunities and constraints regarding the adjustment process to a new set of

macroeconomic parameters.

By the same token, we probably should expect new firms to enter the market at a subsequent

stage of the macroeconomic adjustment process, when the macro becomes less volatile andthe fundamentals of the economy move closer to equilibrium. Much of the above actually

happened in Argentina in the recent cycle of contraction and expansion resulting from the

country abandoning the currency board regime, as we shall show in further sections of this

monograph.

How long does it take to go from recession to recovery, and what pattern of inter-industry

differentials should we expect in terms of exit and entry of firms, productivity growth and

exports across manufacturing activities? It is interesting to notice that Argentina managed to

proceed very quickly from recession to rapid growth and that low technology sectors and a

handful of medium low technology industries leaded in the expansionary phase of the cycle.

High technology sectors do not appear among those that did well once the economy started

its process of recovery, probably reflecting a long term weakness of the country in thegeneration and utilization of closer-to-the frontier technologies.

Why was this so? First, a high rate of unused capacity facilitated the economy rapidly to

move into recovery, once the new policy regime received support from local economic

agents. Second, a high and stable real exchange rate (Graph II.2) induced a significant

expansion of exports and the substitution of imports. Such effect was not neutral across

industries. Quite on the contrary, it affected asymmetrically different areas of the economy.

Third, as the recovery acquired momentum and the process of employment generation

gathered strength, domestic demand responded rapidly, adding further fuel to the

expansionary process. Again, this source of growth was not neutral across sectors either.


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GRAPH II.2.REAL EXCHANGE RATE. 1988-2009.

Index 1991=100:

Source: Based on data from CEI.

The question then emerges as to what was the inter-industry pattern of variance during the

cyclical adjustment process and how did firms responded in different industries in terms of

entry and exit, innovative activities and productivity growth? These questions we examine

empirically in Section IV. Before coming to that, however, we present a brief analytical

argument indicating the direction of our conceptual framework.

III. The conceptual framework.

III.1. Entry and exit of firms in the process of adjustment to a new macroeconomic policy

regime.

Changes in macroeconomic policy regime can be expected to affect the degree of uncertainty

in the economy and, as a result of that, the investment/GDP ratio, the entry of new firms and

the survival of incumbents. Furthermore, such impact could be expected to be asymmetrical

in different fields of economic activity.

Entry and exit probably take place at different moments of the adjustment process to a new

set of macroeconomic parameters. The change in macroeconomic policy normally occurs inresponse to a high degree of disarray and disequilibrium in the macro fundamentals, i.e. a

high fiscal and external deficit, rampant inflation and a large degree of uncertainty as to the

future behavior of the economy. Under such circumstances, it is highly unlikely that new

investment decisions will be made. Entrepreneurial animal spirits should be expected to be

quite low, with very few firms willing to commit themselves to long term investment

projects.

The high degree of disequilibrium would probably induce the government to implement


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major changes in macroeconomic policy trying to bring the fiscal and external accounts of the

economy into balance. This would involve cutting government expenditure, reducing

domestic absorption and expanding exports, increasing the interest rate, bringing the real

wage rate down, and more. If government policies meet success in the adjustment of the

macro fundamentals, we should expect the degree of macroeconomic turbulence to diminish

and the economy gradually to return to a more manageable situation with lower inflation and

the fiscal and external imbalance brought under control.

In such circumstances, uncertainty is bound to diminish and entrepreneurial animal spirits

gradually to return to normal. The planning horizon in the economy becomes larger and the

investment/GDP ratio and the rate of entry of new firms eventually should go up. We could

think of the evolution of GDP as in Diagram II.1 below.

DIAGRAM III.1.THE ADJUSTMENT CYCLE FOLLOWING A CHANGE IN POLICY REGIME.

Q

Tiempo

A

B

Fase 1 Fase 2 Fase 3

In phase I we can expect a large number of firms to exit the economy. In actual fact, ten

thousand firms did so in Chile in the transition from the inward-oriented Government-led

regime in the 1970s to an open and de-regulated market oriented regime in the early 1980s.

Fifteen thousand firms closed down in Argentina as the country moved to a new more open

and de-regulated policy regime, in the 1980s.

A dynamics of this sort was also obtained in Argentina in the late 90s, when local authorities

decided to abandon the currency board regime. A sharp decline in the level of economic

activity, a higher interest rate and a contracting domestic demand, forced many industrial

firms to exit the market, as they found themselves unable to cope with the new macro

parameters of the economy.

Contrariwise, between 2003 and 2008, with the economy having gone through a drastic

adjustment process, new firms entered the market, induced by the higher and stable real

exchange rate which promoted the expansion of exports - and by a rapidly expanding

domestic demand for goods and services following the increase in employment.,.

In other words, the economy proceeded first into a contracting phase in which thousands of

firms left the market, unemployment increased sharply and production and technological

capabilities were destroyed in different corners of the economy, and much later when the

adjustment process was already well in advance and the fundamentals closer to equilibrium

the I/GDP ratio increased and new firms come into being. During the expansionary phase


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new industries open up and structural change and technological modernization become more

significant and widespread.

Not every sector in the economy should be expected to follow the same pattern of

adjustment. As a result of that we should expect structural change to develop in the economy.

III.2. Entry, exit and average productivity.

The above dynamics should be expected to affect the number of firms in the industry, average

size of plant, economies of scale and labor productivity. We can graphically present the case

as follows:

DIAGRAM III.2.BIRTH AND DEATH OF FIRMS AND AVERAGE PRODUCTIVITY IN A MANUFACTURING BRANCH:

M M 1

M: Productividad sectorial media antes de la apertura comercial.

M1: Productividad sectorial media despus de la apertura comercial

M 1

M

During the contraction phase, many small firms are forced to exit the market as they find

themselves unable to cope with the new macro policy regime. Contrary to that, we expect

new entry to take place during the expansion phase, with larger, more capital intensive and

technologically more modern plants entering the economy once the macroeconomic

turbulence disappears.

Under such circumstances, average productivity in the industry could be said to reflect three

different forces: a) smaller and less productive companies leaving the market in the initial

phase of the cycle, b) productivity growth among the incumbents (mostly as a result of labor

saving technological changes demanding very little in terms of new investment) and, c)

larger, more capital intensive and technologically more modern companies entering theindustry during a later phase of the adjustment process. The re-structuring of the industry is

probably associated with an increase in the degree of economic concentration as fewer and

larger production units take the place of numerous smaller firms leaving the market.

The above dynamics is likely to be different across industries reflecting the extent to which

sectors are more export oriented or cater for local consumers, and also as a result of the extent

to which sector-specific institutions operate supporting the entry of new firms or preserving

market opportunities for incumbents firms.

M: Sectoral Average Productivity efore macroeconomic reforms.

M1: Sectoral Average Productivity after macroeconomic reforms.


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Two different hypothetical trajectories can be imagined. A first one in which macroeconomic

volatility and uncertainty diminish, and firms are lured into new investment projects,

upgrading existing production facilities and opening up new plants. In such case, it is

interesting to ask: which industries take up the lead and expand faster? The process might

also involve changes in the relative participation of industries in manufacturing GDP, in

exports, and so forth.

An alternative hypothesis would be that firms remain defensive under the influence of past

uncertainty and instead of opting for a more dynamic pattern of reaction adopt a wait and

see attitude, postponing investment plans for a longer stretch of time. Under such

circumstances the rate of new entry, and the arrival of larger and technologically more

sophisticated firms and therefore, productivity growth would be less significant.

In such case, incumbents would take advantage of the price-competitiveness gained by the

devaluation of the local currency but the industry as a whole would not exhibit a significant

improvement in productivity as a consequence of very little new entry of more updated

plants. The rate of convergence to the international technological frontier could be expected

to be lower in the second case than in the former.

On the basis of the above ideas we now proceed with the examination of the empirical

evidence.

IV Empirical evidence:

IV.1. Entry and exit of firms:

Between 1999 and 2002, the downfall in economic activity subsequent to the change in

policy regime, resulted in a significant number of firms leaving the market in Argentina. The

negative net rate of firms growth entry minus exit - was generated by a gradual and

notorious decline in the rate of entry especially in 2001 and 2002 on the face of a

relatively stable rate of company exits.

It was only in 2003 that the net entry ratio became strongly positive as a more vigorous

internal demand and a stronger propensity to export (induced by a higher real exchange rate)

promoted an increase in company entries. A high and positive net entry ratio was obtained as

from 2004 (Graph IV.1).


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GRAPH IV.1.BIRTH, DEATH AND NET GROWTH OF FIRMS RATES IN ARGENTINA. 1996-2008.

As percentages of active firms:

1,1%

2,8%

4,6%

5,5%

9,2%

4,6%

-2,8%

-3,0%

-1,4%-2,0%

0,7%

1,7%2,5%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Birth

Death

Net Growth

Source: Based on data from the Ministry of Labor.

Entry remained high between 2005 and 2008, but export opportunities started to diminish

with the gradual appreciation of the exchange rate. Concomitantly with the above, the degree

of uncertainty increased in the economy as a result of the international financial crisis, on the

one hand, and, on the other, of the growing tension that developed in the economy as the

result of the confrontation between rural entrepreneurs and the government on account of

higher export levies being raised on soybean exports, a major item in Argentine exports.

Consequently, the business climate deteriorated and a steady increase in the rate of company

exits was observed between 2005 and 2008. Therefore, the net entry rate diminished,

returning to the 1996-1998 levels.

The impact of the above trends was different among tradable and non-tradable activities. We

notice that net entry in tradable manufacturing and agriculture - deteriorated more than in

non-tradable services and construction as Graph IV.2 shows1.

1The net growth rates are more volatile for construction and services, as the capital requirements are

considerably smaller for SMEs in those sectors than the ones necessary for tradable activities.


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GRAPH IV.2.NET ENTRY IN TRADABLE AND NON TRADABLE ACTIVITIES. 1997-2008.


0,5%

-0,6%

-4,0% -3,8%

-5,6%-4,5%

6,5%

-0,5%

2,1%

4,0%4,5%5,3%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Agriculture, Stockbreeding, Fishing and Mining

Industry

Construction

Services


Consider now the situation within the manufacturing sector. Low tech activities, like Textiles,

Clothing and Furniture, and medium high tech ones, as Transport Equipment and Machinery,

exhibited a high rate of company exits in 2008 (Graph IV.3). Said sectors had in common the

increasing difficulty domestic firms experienced competing with imported substitutes. The

combined effect of currency appreciation, low productivity gains of domestic companies and

the increasing availability of low cost Chinese imports can be identified as the reasons

explaining the difficulty local SMEs had to sustain their market share.

GRAPH IV.3.NET GROWTH OF FIRMS RATE BY INDUSTRIAL BRANCHES. 2003-2008.


-7% -3% 1% 5% 9% 13% 17%

Food and beverage production

Textiles

Leather and leather products

Pulp and paper products

Coke, petroleum refination and nuclear fuel

Rubber and plastic products

Basic metals

Machinery and equip. n.e.c.

Electronic machinery and equip. n.e.c.

Medical and optical equipment

Rest of transport equipment

Manufacturing n.e.c.

Average 2003-2007

2008


In the following section, we analyze how did all of the above affected productivity growth?


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IV.2. Productivity:

In line with the theoretic ideas previously presented, new entry could be expected to involve

larger and more efficient production plants and, therefore, higher productivity vis a vis

preexisting industry standards. Thus, a positive net growth of firms i.e. entry rates higherthat exit rates at the individual industry level could be expected to be positively correlated

with productivity growth.

Between 2003 and 2007, labor productivity accumulated a 13% expansion (Graph IV.4), with

manufacturing industry attaining an above average growth (15%), which doubled the rate of

other tradable activities (8.3%), as shown in Graph IV.5.

GRAPH IV.4.AVERAGE PRODUCT PER HOUR WORKED IN ARGENTINA. 1996-2007.

Measured at constant prices:

0

50.000

100.000

150.000

200.000

250.000

300.000

350.000

400.000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

12,0

12,2

12,4

12,6

12,8

13,0

13,2

13,4

13,6

13,8

14,0

GDP (constant prices)

Hours worked

Average Product

Source: Based on data from the Ministry of Economics.


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GRAPH IV.5.AVERAGE PRODUCT PER HOUR WORKED IN ARGENTINA BY SECTOR. 1997-2007.

Measured at constant prices:

13,513,6

13,8 13,7

13,2

13,614,0

13,5

14,3

15,0

15,5

9

10

11

12

13

14

15

16

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Agriculture, Stockbreeding, Fishing and Mining

Industry

Construction

Services


Looking at the inter-industry pattern of productivity growth, we notice that between 2006 and

2008, low tech industries managed to duplicate their productivity growth rate as compared to

the rates these industries exhibited in 1996-1998 (Graph IV.6). In that respect, the most

successful sectors were Tobacco, Publishing and Printing, Shoes and Leather Goods and

Foodstuff and Beverage. In the first two, the expansion of production was aimed at the

domestic market whereas in the last two industries such expansion went into exports.

GRAPH IV.6.AVERAGE PRODUCT PER HOUR WORKED GROWTHS RATE IN LOW TECH INDUSTRIAL BRANCHES.

1996-2008:

4,3%

-4,5%

4,5%

11,2%

6,7%

1,0%

8,2%

3,8%

-7,3%

2,8%

-1,5%

-2,9%

-7,3%

6,4%

17,9%

12,3%

1,3%

10,1%

5,4%

1,6%

6,4%

1,7%

-5,4%

-1,3%

0,3%0,7%

1,8%

-0,3% -0,3%

2,5%

-10%

-5%

0%

5%

10%

15%

20%

Food and

beverage

production

Tobacco

products

Textiles Clothing

industry

Leather and

leather

products

Wood and

wood products,

excl. ferniture

Publishing and

printing

Non-metallic

mineral

products

Furni ture Average Low

tech

1996-1998

1999-2001

2006-2008

Source: Based on data from INDEC.

Contrariwise, and still within the group of low tech industries, Textiles, Clothing and Wood

and Furniture, exhibited a relatively weak productivity expansion when comparing 2006-2008

with 1996-1998. These are industries in which local firms face major difficulties confronting

Brazilian and Asian imports and not much happened in terms of new and technologically


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more modern plants entering the economy. Incumbents benefited from the devaluation of the

local currency but they did not do much in terms on improving local production facilities.

More so, in 2008, the former showed production levels that were inferior to the ones achieved

in 1996-1998.

On the other hand, medium low tech manufacturing activities had similar productivity growth

rates in the 1996-1998 and in the 2006-2008 periods (Graph IV.7). Those industries werecloser to the international technological frontier to begin with, and their expansion and

modernization allowed them to expand exports and further to catch-up with the prevailing

international state-of-the-art. This was the case of sectors such as Steel, Aluminum, Paper,

Plastic and Petroleum Refineries, that exhibited significant investments.

GRAPH IV.7.AVERAGE PRODUCT PER HOUR WORKED GROWTHS RATE IN MEDIUM LOW TECH INDUSTRIAL

BRANCHES. 1996-2007:

10,2%

7,9%

1,4%

3,3%

-0,8%

2,5%2,0%

-0,2%

1,6%

-9,9%

-1,4%

4,1%

2,6%

3,9%

4,9%

2,4%

5,5%

0,3%

-15%

-10%

-5%

0%

5%

10%

15%

Pulp and paper products Coke, petroleum refination

and nuclear fuel

Rubber and plastic

products

B asi c me tal s M et al p ro duct s, ex cl .

mach. and eq.

Average Medium Low tech

1996-1998

1999-2001

2006-2008


Finally, productivity growth amongst (medium) high tech activities was lower in 2006-2008

than in 1996-1998. These industries benefited from the depreciation of the local currency but

did very little in terms of plant and product modernization efforts (Graph IV.8). With very

few exceptions, these industries continued to lag-behind the rapidly evolving international

productivity frontier.


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GRAPH IV.8.AVERAGE PRODUCT PER HOUR WORKED GROWTHS RATE IN (MEDIUM) HIGH TECH INDUSTRIAL

BRANCHES. 1996-2008:

-0,5%

0,4%

13,3%

2,3%

6,7%

4,3%

-0,1%

0,7%

-2,9%

1,4%

-18,0%

0,3%

4,5%

6,4%

9,2%

3,8%

2,1%

-7,2%

3,9%5,1%

13,5%

-1,2%-1,1%-0,8%

1,0%

0,2%

10,9%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Chemicals and

chemical

products

Machinery and

equip. n.e.c.

Desk machinery

and informatic

equip.

Electronic

machinery and

equip. n.e.c.

Radio, tv and

comunication

equipment

Medical and

optical

equipment

Automotive

industry

Rest of transport

equipment

Average

(Medium) High

tech

1996-1998

1999-2001

2006-2008

Source: Based on data from INDEC

Therefore, in 2008, some of the activities belonging to that segment, like Rest of transport

equipment, Radio, tv and communication equipment and Electronic machinery showed

production levels that were inferior to the ones achieved in 1996-1998 (Table IV.1).

Nevertheless, a handful of the (medium) high tech segments firms, belonging to Medical

instruments, Sowing machinery and Pharmaceuticals activities, reached productivity (and,

hence, non-price-competitiveness) increases that brought them closer to the knowledge

frontier in the last years. As a result, the former have expanded their presence both in local

and in foreign markets, and new competitive actors have consolidated within national

industrys (medium) high technological intensive segment.


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TABLE IV.1.SYNTHESIS: EVOLUTION OF ARGENTINE INDUSTRY IN THE FIRST DECADE OF THE XXI CENTURY.

Manufacturing activity

Higher Productivity

Rate of Growth

than in 1996-1998?

Export or Internal

Market Expansion

Strategy?

Did it manage to

surpass in 2008 the

1996-1998 Average

Production Levels?

Chemicals and chemical products No Export Yes

Automotive industry No Export Yes

Machinery and equip. n.e.c. Yes Export Yes

Rest of transport equipment No Internal No

Radio, tv and comunication equipment No Internal No

Medical and optical equipment Yes Export Yes

Electronic machinery and equip. n.e.c. Yes Internal No

Coke, petroleum refination and nuclear fuel Yes Export Yes

Basic metals No Export Yes

Metal products, excl. mach. and eq. Yes Internal Yes

Pulp and paper products Yes Internal Yes

Plastic and rubber products No Internal Yes

Leather and leather products Yes Export Yes

Furniture No Internal No

Food and beverage production Yes Export Yes

Wood and wood products, excl. ferniture No Export Yes

Non-metallic mineral products Yes Internal Yes

Publishing and printing Yes Internal Yes

Textiles Yes Internal No

Clothing industry Yes Internal No

Tobacco products Yes Internal Yes

(Medium) High tech

Low tech

Medium-Low tech

Source: Base on data from INDEC.

A special comment needs to be made about the automotive sector. The Argentine vehicle

industry managed partially to close the technological gap vis a vis the international state of the

art during the 1990s (Table IV.2). This resulted from the administrated trade liberalization

regime implemented by economic authorities, which demanded vehicle assemblers a balanced

export account, admitting in exchange a higher unit import content per vehicle.

Such quid pro quo induced a certain amount of vertical disintegration of local production

organization, and the reduction in market share from the part of local auto parts

manufacturers. Thus, domestic value added contracted, but foreign vehicle producers

somewhat closed the technological gap vis a vis the frontier by introducing to the local market

more updated versions of the output mix produced by their respective mother companies.


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TABLE IV.2.LEVEL (2006) AND VARIATION (2005-06 VS. 1991/92) OF THE PRODUCTIVITY GAP BETWEEN

ARGENTINAS AND UNITED STATES INDUSTRIES.As a share of Average Product per Worker (1985 prices):

Manufacturing activity Level Variation

Chemicals and chemical products 71,9% 151,6%

Transport equipment 61,0% 83,9%Machinery and equip. n.e.c. 20,5% -43,6%

Radio, tv and comunication equipment 14,3% -19,8%

Medical and optical equipment 9,0% 63,5%

Electronic machinery and equip. n.e.c. 3,8% -72,7%

Coke, petroleum refination and nuclear fuel 187,8% 47,2%

Rest of basic metals 97,4% 191,7%

Metal products, excl. mach. and eq. 41,6% -16,3%

Plastic products 81,9% 226,7%

Iron and steel 80,7% 14,6%

Pulp and paper products 46,3% 41,2%

Rubber products 27,5% -36,3%

Leather and leather products 124,6% 91,6%

Furniture 105,7% 101,0%

Food production 84,5% 45,0%

Wood and wood products, excl. ferniture 81,9% 426,7%

Non-metallic mineral products 45,1% 58,9%

Publishing and printing 31,5% 82,2%

Beverage production 29,9% -1,9%

Textiles 20,7% -68,9%

Clothing industry 17,3% -54,6%

Tobacco products 9,7% -77,7%

Industrial Average 36,9% -13,1%

(Medium) High tech

Medium-Low tech

Low tech

Source: Base on data from PADI, CEPAL.

We are now in the position to close the present section addressing the inter-industry picture

concerning entry and exit of firms, productivity growth and structural change by looking at

the evolution of some specific sectors. The purpose of this analysis is briefly to describe the

recent trajectory of four industries vehicles, medical equipment, garments and transport

equipment (other than automobiles) in order to probe deeper into the understanding of entry,

exit and structural change. Two of these industries stand up as success stories in there are

signs of catching up with the international state of the art. Contrariwise, the other two show

clear signs of falling behind international standards over the past two decades.


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SECTORAL EXPERIENCES

The automotive industry brings together vehicle assembling plants and auto part producers Nearly200 firms (-12%) left the industry between 1998 and 2002, while 250 new companies entered the

industry between 2003 and 2008. Labor productivity remained quasi-stagnant during the current

decade, but attained significant improvement during the course of the 1990s. Virtually all autoassemblers introduced model changes between 2003 and 2008, investing heavily in new product and

process technologies. The regulated trade liberalization regime imposed by the Government favored

the expansion of exports, while domestic demand increasedpari pasu with the rapid growth of GDPobtained as from 2003 onwards.

Company exits were almost entirely among auto part producers, as the 10 car assemblers operating inArgentina withstood quite well the economic cycle. By 2008, this sectors production surpassed by

32% the levels attained in 1996-1998, when 460.000 vehicles had been assembled in Argentina(against 600.000 units manufactured in 2008).

However, Argentine auto part producers operate well below international productivity standards. It ison account of that that the industry exhibits a notorious trade deficit, which is mostly originated inauto parts imports. Trade in ready assembled vehicles is fairly balanced.

Only 3% of the existing medical equipment firms left the market between 1998 and 2002, whereassome 150 new companies (+36%) entered the industry since 2003. The physical volume of production

was 32% higher in 2008 as compared with 1996/1998. Such increase was associated mainly toexports, which grew 267% over the period.

Between 2006 and 2008, this industry attained a 10% growth in labor productivity strongly benefiting

from the exchange rate depreciation which improved competitiveness in foreign markets. It should benoted that several firms in the industry exhibited an important accumulation of technological skills in

the production of high tech products such as incubators, x-ray equipment and dental and medicalprosthesis. Reverse engineering efforts and domestic R&D activities are significant among local

producers.

The garment industry lost 740 firms (-21%) between 1998 and 2002, while 1.500 new companies

(+51%) were created since 2003. However, in 2008, the physical volume of production of the industry

was still 10% below the 1996-1998 level, while imports grew 70% in the same period.

In spite of a (small) increase in labor productivity and of the additional stimulus coming from the

depreciation of the Argentine currency, the garment industry continued to loose market share againstBrazilian and Asian competitors. Smaller plants, labor cost differences and insufficient product designand process engineering efforts account for the low competitiveness the industry currently exhibits. Its

survival is based on tax evasion, lack of payment of social security charges and other similarly

inadequate business practices.

The Transport Equipment industry (excluded the automobile sector) lost 15% of its membercompanies between 1998 and 2002, while 154 new firms (+42%) were created since 2003. In this

sector, the production of 2008 was 12% below the 1996/1998 level, while imports grew by 226%

during this period. Labor productivity experimented a contraction of 7% between 2006 and 2008.

Considering the case of the shipyards industry, we notice a major episode of structural transformation

involving the stagnation and decay of large shipyards, which attained a low level of capacity

utilization and almost no innovative activity, and the inception of a new sector of small firmsspecialized in the building up of design recreation boats, which operates on the basis of domestic

product designs and imported intermediate components.


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19

We are now in a position briefly to summarize the main research results so far presented.

Regarding the initial hypothesis, the evidence indicates that a combination of less

macroeconomic turbulence and instability, a higher real exchange rate and the expansion of

domestic consumption brought about the concretion of investment projects, partially

associated to the birth of (more competitive) firms, mostly within low tech sectors and in a

few (medium) high tech activities.

Those investment activities mostly resulted in higher rates of growth in productivities. In this

case, the gain in price-competitiveness derived from real exchange rates depreciation was

enough to promote an increase in non-price-competitiveness in that segment of the industrial

sector.

On the other hand, several firms belonging to the (medium) high tech branches did not follow

the same path, as the industrial companies of said sectors born in that phase did not result in a

rise in productivity. In that case, that segment of the manufacturing sector chose to take

advantage of the price-competitiveness gain engendered by the devaluation of 2002, although

it did not initiate a process of gradual increase in non-price-competitiveness and, therefore, of

systematic convergence to the global state of the art. The lagging-behid of these industries

in Argentine manufacturing is quite notorious.

V Determinants of inter-industry productivity growth differentials:

V.1. Innovation intensity by industrial activity:

Probably, the main source of productivity growth differentials across industrial activities

derives from differences in innovation expenditure (that includes R&D) carried out by firms

in different areas of manufacturing.

Consider first local expenditure as compared with European nations and also with Brazil. As

Graph V.I indicates, Argentine firms spend much less in innovation (1.3% of sales) than

German (5%), Belgium (4.9%), French, Italian or Spanish companies. The former also spend

less than Brazilian firms (2.78% of sales).


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GRAPH V.1.INNOVATION EXPENDITURE OF INDUSTRIAL FIRMS IN SELECTED COUNTRIES. 2004.

As a share of respective sales:

5,03%4,92%

3,18% 3,09%2,96%

2,86% 2,78%

2,58%

1,87%

1,30%

0%

1%

2%

3%

4%

5%

6%

Germany Belgium France Netherlands Italy Portugal Brazil (*) UnitedKingdom Spai n Arge nt ina(*)

(*) Brazilian and Argentina data is from 2005.

Source: Based on data from INDEC (2006), IBGE (2007) and EUROSTAT (2008).

Considering next the inter-industry picture (Table V.1), we notice that there is not much

difference in the innovation investment to sales ratio when we compare (medium) high tech

sectors and (medium) low tech industries in Argentina. Interestingly enough, we also notice

that the Brazilian pattern is quite different and that the gap between (medium) high tech

industries and low tech industries as far as expenditure in innovative activities is concerned is

clear.

In fact, the Brazilian industry exhibited a higher innovation expenditure than Argentina for all

manufacturing branches, with the only exceptions of Wood and wood products and Tobaccoproducts. More so, the difference between both nations was superior in the high and medium

high tech industrial sectors, like Rest of transport equipment (in which Brazil counts with the

plane assembler EMBRAER).


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TABLE V.1.INNOVATION EXPENDITURE OF ARGENTINE AND BRAZILIAN INDUSTRIAL FIRMS BY MANUFACTURING

ACTIVITY. 2004,ARG; 2005,BR.As a share of total sales:

Manufacturing activity Argentina Brazil


Rest of transport equipment 1,4% 6,1%Automotive industry 1,4% 4,4%

Machinery and equip. n.e.c. 1,7% 4,1%

Radio, tv and comunication equipment 3,0% 5,2%


Electronic machinery and equip. n.e.c. 1,5% 3,5%

Desk machinery and informatic equip. 2,0% 3,8%

Coke, petroleum ref ination and nuclear fuel 0,4% 1,4%

Metal products, excl. mach. and eq. 2,3% 3,0%

Rubber and plastic products 2,3% 3,3%

Basic metals 0,9% 2,0%



Furniture 1,3% 2,9%

Food and beverage production 0,7% 1,7%




Textiles 1,1% 2,9%

Clothing industry 0,6% 1,7%

Tobacco products 1,7% 1,4%

(Medium) High tech

Medium-Low Tech

Low Techn

Source: Based on data from INDEC (2006) and IBGE (2007).

Summarizing: Argentine industrial firms spend little in innovative activities and the gap is

comparatively larger in high and medium high tech manufacturing sectors. This is clearly animportant part of the explanation of these industries systematically falling-behind the

international technological frontier over the past two decades.

On the contrary, (medium) low tech domestic companies low innovative expenditureacquires a clearly inferior relevance, since the former have: i) reached the global knowledge

frontier; ii) employ product and process technologies that are changing at a rather slower pace

(reason for which they are considered technological mature activities).

V.2. Main obstacles for innovation in Argentina:

National Innovation surveys indicate that Argentine firms face various fundamentalrestrictions when considering their commitment to innovation efforts during the 1990s

2. Lack

of financing for innovation activities, insufficient market size, high cost of innovation, risk

and uncertainty appear among the main barriers firms identify as discouraging them from

undertaking technological efforts (Table V.2).

2No data is available regarding barriers encountered by industrial companies in the new century. Nevertheless,

the persistence of these obstacles during the nineties sustains the perception that they should have been relevant

after 2001.


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TABLE V.2.ARGENTINE INDUSTRIAL FIRMS INNOVATION BARRIERS. 1992-1996 / 1998-2001.

As a share of total answers*:

Barrier 1992-1996 1998-2001

Long return period 32 51

Shortage of qualified labor 6 37

Innovation risks 43 32Organizational rigidity 7 28

Difficulties regarding credit access 63 68

Markets size 32 58

Markets structure 12 55

Limited sectorial technological dynamics 6 40

Limited cooperation with firms and institutions 4 40

Easy imitation by rivaling firms 5 32

High innovation costs 43 51

Weak public policies regarding Science and Technology 10 42

Weak development regarding Science and Technology institutions 2 38

Physical infrastructure 21 29

Insufficient information regarding markets 6 27

Insufficient information regarding technologies 6 22

Intelectual Ownership System 10 14

Microeconomic

Mesoeconomic

Macroeconomic

* This percentage is a result of dividing answers that considered that each barrier had high or mediumrelevance by total answers.

Source: Based on data from INDECs various Innovation Surveys.

Five of the six main innovations barriers (credit access, markets size and structure and

innovative costs and risks) appear to be stronger for Small and Medium firms than for bigger

companies (Table V.3).

TABLE V.3.

ARGENTINE INDUSTRIES INNOVATION BARRIERS BY FIRM SIZE. 1998-2001.As a share of total answers:

Barrier Small Firms Medium Firms Big Firms

Difficulties regarding credit access 73,7 58,7 45,4

Markets size 59,1 57,1 52,1

Markets structure 55,6 54,5 49,5

High innovation costs 54,9 43,5 36,8

Long return period 49,3 55,8 60,4

Innovation risks 35,6 25,1 17,6 Source: Based on data from INDEC (2003).

Of the barriers to innovation mentioned above, received literature normally mentions firms

size and markets structure. Yoguel and Rabertino, 2000; Arza, 2003; Sanguinetti, 2005;

Chudnovsky et al, 2006; Goncalves et al, 2008; found that size is positively correlated with

firms innovative expenditure. On the other hand, Goncalves et al (2008) argue that the degree

of business concentration is positively correlated with innovative dynamics, while Sanguinetti

(2005) and Snchez et al (2006) found the opposite to be true.

It is important to notice that these difficulties do not appear to have a similar impact in

different sectors of manufacturing production, neither in companies of a different size or


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23

nationality. Credit access appears as the main restriction firms faced in order to undertake

innovation activities during the 1990s.

As this restriction is strongly correlated with firm size, it is interesting to mention that large

local companies operating globally in industries such as Foodstuffs, Steel, Aluminum,

Petrochemical, Pulp and Paper and Vehicles have smooth access to internal (intra-company)

and external (national and international banks, capital markets and suppliers and multilateralinstitutions) funding for innovation activities.

Second, Innovation risks also appear as a major source of restriction for Argentine firms

undertaking innovative efforts. Again, this barrier to innovative activities appear to be

stronger for small and medium size manufacturing companies than for large firms.

Innovations risk has both a macroeconomic (cyclical and symmetrical) and a microeconomic

(structural and asymmetrical) component. As was argued in our introductory section,

macroeconomic volatility raises innovation risks, especially when macro policy regimes

change abruptly. In said circumstances, firms tend to postpone any type of commitment

investment or R&D efforts with a long gestation or planning horizon. This is a

countercyclical type of risk, which tends to disappear when the fundamentals of the economyget under control. On the contrary, microeconomic innovations risk is structural and

asymmetrical, since it is related to the type of R&D project the firm has under consideration.

(Medium) high tech industries tend to undertake more risky innovation efforts which involve

a longer planning horizon. In case of SMEs developing new product and process

technologies, they have to add further difficulties in accessing to funds to finance their R&D

activities. On the other hand, (medium) low tech industries (e.g. Food and Beverage, Basic

Metals, Petrochemistry, Paper) quite frequently innovate on the basis of imported capital

equipment embodying new process technology and codified digital production routines.

Third, markets size and structure also appear as major forces conditioning innovation

efforts. As in the case of risk and access to funds for R&D activities, market size and structureseem to affect more small and medium firms than large ones.

Market size affects innovation through its incidence upon the return to R&D activities.

Innovative efforts yield higher returns when firms operate in bigger markets and enjoy a

certain amount of market power which allows them to capture monopoly rents from the

introduction of new product or process innovations, permitting them to reduce production

costs.

(Medium) high tech industries (excluding Vehicles manufacturers and Petrochemical firms)

normally cater for a small fraction of the domestic or foreign market they serve, and lack

market power that would allow them to capture monopoly rents through the introduction of

new technology.

On the contrary, (medium) low tech industries, excluding Textiles, Clothing and Furniture,

participate in big markets, as they not only cater for local demand but, also, have a significant

presence in foreign markets3. Besides, although these agents are price-takers as exporters,

they exploit their market power locally (especially, Food and Beverage, Steel and Paper

3In this respect, some published studies (Yoguel and Rabertino, 2000; Chudnovsky et al, 2006) found a positive

relationship between exports and innovation.


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24

industries) which appear as mature oligopolies in the domestic environment.

Finally, non-exporting firms have to deal with a domestic market that is not only small but,

also, highly volatile. Volatility encourages defensive strategies as firms can not count on a

sufficiently long planning horizon in which to recover R&D expenditure. Both factors operate

together in (medium) high tech industries, mostly catering for local demand. As the market

undergoes recurrent cycles of expansion and contraction, they find it particularly difficult torecover their innovation expenses.

VI Concluding remarks:

The empirical evidence examined in this monograph indicates that lower macroeconomic

volatility and a higher real exchange rate induced a high net entry ratio of new firms to the

economy in the period 2003-2008, as Argentina recovered from the deep recession it plunged

into upon abandoning the currency board regime it had under operation for nearly one

decade.

The process was particularly noticeable in low tech manufacturing activities and, also, in a

few (medium) high tech industries, in which the new firms entering the economy brought

with them better technologies which allowed a faster pace of labor productivity growth.

As a consequence of the above, low tech industrial sectors and a few (medium) high tech

activities - like Machinery and Equipment and the Vehicle industry - increased their share in

total manufacturing production (Table VI.1)


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TABLE VI.1.PARTICIPATION OF EACH SECTOR IN TOTAL MANUFACTURING GDP. 1998-2008.

As a share (constant 2003 prices):

Manufacturing activity 1998 2008

(Medium) High tech Subtotal 31,3% 31,4%


Automotive industry 6,6% 6,9%

Machinery and equip. n.e.c. 5,0% 5,8%Rest of transport equipment 0,9% 0,6%

Radio, tv and comunication equipment 1,1% 0,8%


Electronic machinery and equip. n.e.c. 2,0% 1,5%

Medium-Low tech Subtotal 26,3% 25,9%

Coke, petroleum refination and nuclear fuel 6,2% 5,9%

Basic metals 6,6% 6,7%

Metal products, excl. mach. and eq. 6,0% 5,0%


Plastic and rubber products 3,7% 4,2%

Low tech Subtotal 42,4% 42,8%


Furniture 2,5% 1,4%Food and beverage production 21,6% 24,5%




Textiles 4,8% 3,1%

Clothing industry 2,3% 1,9%

Tobacco products 0,4% 0,4% Source: Based on data from INDEC.

At variance with the above pattern, a number of (medium) high tech branches plus some low

tech sectors such as Textiles, Garment and Wood and Furniture lost participation in

manufacturing GDP, as very little was gained by newly arriving companies in terms of labor

productivity growth. This group of industries benefited from the local currency devaluationbut did not attain much in terms of technological deepening and modernization.

In terms of the macro-to-micro conceptual framework presented in the initial pages of this

paper, we conclude that macroeconomic stability is a necessary but not sufficient condition

for ensuring a virtuous innovative dynamics. As we showed in this paper, real exchange rates

increase was insufficient to promote an innovative dynamics in part of (medium) high tech

manufacturing sectors between 2003 and 2008.

Inadequate macro policies (e.g. real exchange rate appreciation during the nineties) and

uncertainty and volatility negatively affect profit margins and promote the adoption of

defensive strategies, but this is compounded by microeconomic barriers to innovation

associated to lack of funding for R&D projects, small market size and elevated risks of theseactivities.

Our research shows that a number of manufacturing activities have managed to cope with

these macro and micro barriers to innovation and have been able - through new company

entry - to attain significant improvements in productivity and exports. In fact, (medium) low

tech sectors such as Food and Beverage, Steel and Aluminum, plus the Vehicle and the

Petrochemical industries have managed to do so on the basis of the large size of their

companies and their access to domestic and external funding for innovation and new


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26

investment in production capacity.

Contrary to the above, several (medium) high tech industries companies were not big enough

as to successfully avoid the impact of macro and micro innovative barriers, and only a few

notable exceptions (like medical equipment, sowing machines and pharmaceuticals) have

attained an above average innovative dynamics during the past decade, deriving in high

productivity growth and exports.

What are the main policy lessons we can derive from the results so far presented? It is quite

clear that a strategy to increase innovation in (medium) high tech manufacturing activities

should have two components. On the one hand, a macroeconomic component dealing with

stability in the fundamentals of the economy and a high and stable exchange rate. These

constitute necessary although not sufficient conditions for a strong innovative dynamics.

On the other hand, innovation is usually not an individual (and frequently incremental)

behaviors result, but a consequence of a collective process (Yoguel et al, 2006). That is why

(medium) high tech manufacturing activities have not been able to surpass obstacles by

themselves and, therefore, States presence becomes imperative to tackle the most severe

innovative restrictions.

As weak funding constitutes innovations most relevant hurdle in Argentina, Governments

policys main objective should be to resolve said obstacle. In this respect, international

comparisons reveal that credit access does not operate like the fundamental impediment for

other countries investment.

International comparisons indicate that Argentina is particularly weak on this front. 19% of

Brazilian industrial SMEs received public funding during 2001-2003, mainly by means of

their national development bank (BNDES) and other governmental institutions (Banco de

Brazil, Caixa Economica Federal and Banco del Nordeste). Also, governmental financing

reached between 25% and 45% of European innovative manufacturing SMEs.

In notorious contrast, only 13% of domestic industrial SMEs received public funding between

1998 and 2001, mainly coming from Banco Nacion and FONTARs (Argentine

Technological Fund) loans. Thus, access to funds for R&D activities appears as less of an

impediment to innovation in other countries vis a vis the case of Argentina.

As this international comparison demonstrates, the necessary increase in innovations funding

should be heavily assisted by the public sector, especially through FONTARs funds

expansion. Simultaneously, the rest of the most relevant Argentine innovative hurdles should

be addressed.

Although it is not our purpose here to enter into details of future policy action, it is important

to mention that innovation should be placed as a national long term priority. Also, it isimportant to address that the former policy should be associated with the achievement of

required results in specified terms, especially regarding technological, export and, even,

qualified employment levels. In this respect, Southeast Asian experiences, especially in

Korean Republics case, demonstrate that (medium) high tech sectors development was

enticed by the prevalence of reciprocity rules related to innovative and exporting dynamics in

a defined period (Amsden, 1989).


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Arza, V. (2003), Trade Reforms and Technological Accumulation: the Case of the Industrial Sector inArgentina during the 1990s; Paper No. 96; SEWPS; Science and Technology Policy Research.

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Caballero, R. (1991), On the Sign of the Investment-Uncertainty Relationship, American EconomicReview, vol. 81, No. 1.

Chudnovsky, D., A. Lpez and G. Pupato (2006), Innovation and productivity in developing countries: Astudy of Argentine manufacturing firms behavior (19922001), Research Policy, Volume 35, Issue 2

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Easterly, W., R. Islam and J. E. Stiglitz (2000), "Shaken and Stirred: Explaining Growth Volatility", WorldBank, Washington.

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Kosacoff, B. and A. Ramos (2006), Comportamientos microeconmicos en entornos de alta incertidumbre:la industria argentina, Documento de Proyecto, CEPAL, Oficina Buenos Aires, Argentina.

Nelson, R. (1991), Why do firms differ, and how does it matter?, Strategic Management Journal, vol. 12. Pindyck, R. and A. Solimano (1993), Economic Instability and Aggregate Investment, NBER Working

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Pindyck, R. (1988), Irreversible Investment, Capacity Choice, and the Value of the Firms, The AmericanEconomic Review, vol. 78, No. 5.

Snchez, G, H. Rufo and P. Nahirak (2006), La innovacin en las empresas argentinas. Una miradacomparativa entre pases, Documento de Discusin N6, Serie Competitividad Sistmica, IERAL,

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Sanguinetti, P. (2005), Innovation and R&D Expenditures in Argentina: Evidence form a firm levelsurvey, Department of Economics, Universidad Torcuato Di Tella, Buenos Aires, Argentina.

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Yoguel, G. and R. Rabertino (2000), El desarrollo de las capacidades tecnolgicas de los agentes en laindustria manufacturera argentina en los aos noventa, in El desempeo industrial argentino, Kosacoff,

B. (comp), CEPAL, Oficina Buenos Aires, Argentina.

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