This paper examines how unionization affects economic growth through its impact on industry concentration in a two-country model of international trade and endogenous productivity growth. Knowledge spillovers link firm-level productivity in innovation with geographic patterns of industry ensuring a faster rate of output growth when industry is relatively concentrated in the country with the greater labor supply. We show that stronger bargaining power in the relatively large country increases the rate of output growth when labor unions are employment-oriented but decreases the rate of growth when unions are wage-oriented. We then calibrate the model using labor market data for the United Kingdom and France and study the effects of union bargaining power on industry location patterns, output growth, and national welfare.

We study the international innovation strategies of Australian and New Zealand (ANZ) firms in the European context, to explain their investment motives, knowledge flows and innovation performance. Our thematic analysis of seven case studies suggests that ANZ investors' motives for innovation in Europe are often both market- and knowledge-seeking and that some are also motivated by diversification and cooperation. While the strategic intent is often for the knowledge to flow in multiple directions among subsidiaries and headquarters (HQ), distance poses challenges to the efficiency of the process. European subsidiaries are often seen as potentially playing a key role in firms' global innovation systems, particularly with regards to radical innovation. However, because of distance and communication bottlenecks (e.g., time zone differences), HQ does not always recognise this potential. We develop a model proposing that HQ–subsidiary trust and strategic motives are moderators in the process of international knowledge connectivity and knowledge creation.

Inspired by recent literature that approaches the dissemination of knowledge from a social interaction perspective, the article explores the dynamics of a prototypical optimal control growth problem structured upon the following features: (i) the model economy is populated by a large number of rational agents; (ii) each agent allocates time, optimally, among production and social interaction; (iii) knowledge spreads through the contact with others; (iv) the propagation of ideas follows two steps—in a first stage, interaction promotes the acquisition of theoretical knowledge and, in a second stage, it works as a catalyst for the successful implementation of the theory to practical productive uses; (v) interaction contributes not only to the diffusion of a given state of technical knowledge—it fosters, as well, the growth of ideas and techniques. The model allows for the endogenous determination of optimal trajectories concerning the allocation of time and the intensity of interaction; moreover, a long-term endogenous growth rate for the economy is derived, with optimal growth being essentially driven by the state of techniques and by the forces that shape the human interaction process.

Building on prior research on management fashion, this paper seeks to understand how management consultants respond to the boom-to-bust cycles of competing management fashion trends. Specifically, we examine how US management consulting firms offering total quality management (TQM) services responded to the rise and fall of the rival management practice, business process reengineering (BPR), with an empirical focus on the adoption of BPR services. We find that a consulting firm offering TQM services was more likely to adopt BPR services if the firm’s organizational capabilities and institutional environments were more connected to BPR’s principles than to TQM’s principles. This suggests that management fashions are not simply bandwagon phenomena, but involve resource- and identity-based decision making. We also find that the significance of organizational capabilities increased while that of network influences decreased as BPR’s boom turned to bust. The reversal of well-established institutional accounts of innovation diffusion is explained by reference to the characteristics of management fashion.

This paper investigates the effects of R&D subsidies on aggregate product variety and endogenous productivity growth without scale effects. In a two-country model with imperfect knowledge diffusion, the larger country has a greater share of firms with higher productivity levels. The concentration of relatively productive firms increases knowledge flows between firms, causing an increase in firm-level employment in innovation. Accordingly, the aggregate growth rate is higher when counties are asymmetric than when they are similar in size. The larger scale of firm-level innovation activity reduces market entry, however, and aggregate product variety falls. In this framework, national R&D subsidies have positive effects on the industry share, relative productivity, and wage rate of the implementing country. If the smaller country introduces an R&D subsidy, aggregate product variety rises and productivity growth falls. If the larger country introduces an R&D subsidy, productivity growth rises, but aggregate product variety may rise or fall.