This thesis investigates whether and to what extent innovation and technological change in the mining sector may represent a factor that triggers natural resource-based economic development. Natural resource specialisation tends to favour, and is hence associated with, the emergence of structural weaknesses that may hinder economic development. We suggest that the removal of two major and intertwined structural weaknesses associated with natural resources production, i.e. the lack of innovation in the mining sector and the lack of diversification of productive activities in developing resource-abundant countries can be a successful strategy to pursue natural resource-based development. It is worth stressing that specialisation can co-exist with some degree of diversification. In fact, a country can specialise in the products in which it has a comparative advantage, but also pursue new development opportunities by investing in new promising, higher value-added activities, diversifying into new industries, and extending the range of industries it specialises in. This thesis addresses four major open questions regarding the links between specialisation in mining industries and development: to what extent being specialised in natural resources is associated with innovation and learning opportunities? Is there path dependence in terms of technologies, regions and firms involved in innovative activities in mining? To what extent are suppliers to mining companies innovative and thus able to establish productivity enhancing linkages with mining companies? To what extent is carrying out mining innovation activities convenient and, hence, profitable for individual companies? The general introduction of this thesis (i.e. Chapter 1) provides the framework for the above research questions. Chapter 2 examines specialisation patterns in the Latin American mining sector, in terms of exports of mining products, of its exports of mining equipment, and of its production of mining technologies (i.e. innovation). Results suggest that Latin American countries are specialised in the extraction and export of mining products (i.e. minerals), and de-specialised in the production of mining equipment and of mining technology, while they heavily rely on imports of equipment and technology. We also find that the mining innovation taking place in Latin America is of relatively low quality. Considering that innovation in the mining sector is supplier-dominated, the weak technological specialisation of Latin American countries in the mining sector reflects mainly the low innovation capacity of local suppliers of inputs, especially machinery, to mining companies, in comparison with the global average. Chapter 3 studies technological change in the mining industry at the global level between 1970 and 2015 using patent citation networks. The analysis is further undertaken at the “sub-trajectory” level, by considering nine mining-related technological fields, i.e. sub-networks that represent the 9 technological sub-trajectories. Consistent with previous literature focused on other technological domains, we find that innovation patterns are “technology bounded” in the mining sector, i.e. they are largely shaped by patenting activities carried out in a very limited range of mining technological fields, even though we detect a shift from exploration to environmental mining technologies (emergence of a new technological paradigm). In addition, we examine two aspects of technical change that have been largely disregarded in extant research: the geographical patterns of inventive activities and the role of key applicants in such patterns. We show that core mining patents and leading inventors involved originate almost exclusively from the US, so that trajectories appear to be heavily geographically bounded, revealing that developing resource-rich countries lag behind the technological frontier in mining. Moreover, only a few applicant firms are responsible for most inventive activities (oligopolistic structure), hence characterizing trajectories as “applicant bounded”. Similar results and implications are observed at the level of sub-trajectories, although with few exceptions. Specifically, we find that the Mine operation, Processing and Transport sub-trajectories are the less applicant bounded and, consequently, the less geographically bounded sub-trajectories. This means that a relatively greater number of countries and players (firms) participates to the creation (and diffusion) of knowledge related to these specific mining technologies. Given the importance of innovation and technical change for natural resource-based development as shown in the previous chapters of this thesis, Chapter 4 examines how the profitability of firms engaged in mining innovation is affected by their portfolios of patents. Combining WIPO data on the patenting activities of over 245,000 firms with specific reference to nine mining technologies for the period 1970-2015 with Orbis data on these firms’ profitability over the period 2010-2018, we find that mining companies’ innovative activities have on average a negative effect on their profitability, presumably reflecting the high costs of innovation in this field, the relatively narrow range of application opportunities for most new mining technologies, and a conservative attitude of firms in most segments of the mining value chain. Innovation in blasting and metallurgy technologies is a relevant exception to this rule, as patenting in this field appears to have a strong and significantly positive effect on firms’ profits. This may relate to the nature of such technologies which are both cost-cutting and applicable in a variety of different contexts within and across the boundaries of the mining industry, hence yielding higher profits. Conversely, environmental technologies have a negative impact on profitability possibly because they are more sector-specific and they compel firms to bear compliance costs due to stricter environmental regulations at the national level. We also find that being technologically diversified in terms of innovation activities across different stages of the mining value chain negatively affects the companies’ profits, potentially indicating that it is less costly (and more profitable) to develop mining innovations that are related to the firms’ core technological competencies. The analysis conducted in this thesis highlights the potential tensions between country - and industry - level development opportunities that are associated with innovation and with broader specialisation patterns, going beyond mining industry alone; and firm level propensity to adopt conservative, low innovation and low diversification strategies, especially in terms of the range of competencies accumulated, given the nature of technologies at stake and of appropriability conditions. From this perspective relatively underdeveloped, resource abundant economies may be bound not to escape the poverty trap, unless innovation oriented public policies are undertaken at the national and supra-national levels to overcome the low private incentive to innovate.

Innovation and Technological Change in the Mining Industry and Development

Alessandri Enrico
2021

Abstract

This thesis investigates whether and to what extent innovation and technological change in the mining sector may represent a factor that triggers natural resource-based economic development. Natural resource specialisation tends to favour, and is hence associated with, the emergence of structural weaknesses that may hinder economic development. We suggest that the removal of two major and intertwined structural weaknesses associated with natural resources production, i.e. the lack of innovation in the mining sector and the lack of diversification of productive activities in developing resource-abundant countries can be a successful strategy to pursue natural resource-based development. It is worth stressing that specialisation can co-exist with some degree of diversification. In fact, a country can specialise in the products in which it has a comparative advantage, but also pursue new development opportunities by investing in new promising, higher value-added activities, diversifying into new industries, and extending the range of industries it specialises in. This thesis addresses four major open questions regarding the links between specialisation in mining industries and development: to what extent being specialised in natural resources is associated with innovation and learning opportunities? Is there path dependence in terms of technologies, regions and firms involved in innovative activities in mining? To what extent are suppliers to mining companies innovative and thus able to establish productivity enhancing linkages with mining companies? To what extent is carrying out mining innovation activities convenient and, hence, profitable for individual companies? The general introduction of this thesis (i.e. Chapter 1) provides the framework for the above research questions. Chapter 2 examines specialisation patterns in the Latin American mining sector, in terms of exports of mining products, of its exports of mining equipment, and of its production of mining technologies (i.e. innovation). Results suggest that Latin American countries are specialised in the extraction and export of mining products (i.e. minerals), and de-specialised in the production of mining equipment and of mining technology, while they heavily rely on imports of equipment and technology. We also find that the mining innovation taking place in Latin America is of relatively low quality. Considering that innovation in the mining sector is supplier-dominated, the weak technological specialisation of Latin American countries in the mining sector reflects mainly the low innovation capacity of local suppliers of inputs, especially machinery, to mining companies, in comparison with the global average. Chapter 3 studies technological change in the mining industry at the global level between 1970 and 2015 using patent citation networks. The analysis is further undertaken at the “sub-trajectory” level, by considering nine mining-related technological fields, i.e. sub-networks that represent the 9 technological sub-trajectories. Consistent with previous literature focused on other technological domains, we find that innovation patterns are “technology bounded” in the mining sector, i.e. they are largely shaped by patenting activities carried out in a very limited range of mining technological fields, even though we detect a shift from exploration to environmental mining technologies (emergence of a new technological paradigm). In addition, we examine two aspects of technical change that have been largely disregarded in extant research: the geographical patterns of inventive activities and the role of key applicants in such patterns. We show that core mining patents and leading inventors involved originate almost exclusively from the US, so that trajectories appear to be heavily geographically bounded, revealing that developing resource-rich countries lag behind the technological frontier in mining. Moreover, only a few applicant firms are responsible for most inventive activities (oligopolistic structure), hence characterizing trajectories as “applicant bounded”. Similar results and implications are observed at the level of sub-trajectories, although with few exceptions. Specifically, we find that the Mine operation, Processing and Transport sub-trajectories are the less applicant bounded and, consequently, the less geographically bounded sub-trajectories. This means that a relatively greater number of countries and players (firms) participates to the creation (and diffusion) of knowledge related to these specific mining technologies. Given the importance of innovation and technical change for natural resource-based development as shown in the previous chapters of this thesis, Chapter 4 examines how the profitability of firms engaged in mining innovation is affected by their portfolios of patents. Combining WIPO data on the patenting activities of over 245,000 firms with specific reference to nine mining technologies for the period 1970-2015 with Orbis data on these firms’ profitability over the period 2010-2018, we find that mining companies’ innovative activities have on average a negative effect on their profitability, presumably reflecting the high costs of innovation in this field, the relatively narrow range of application opportunities for most new mining technologies, and a conservative attitude of firms in most segments of the mining value chain. Innovation in blasting and metallurgy technologies is a relevant exception to this rule, as patenting in this field appears to have a strong and significantly positive effect on firms’ profits. This may relate to the nature of such technologies which are both cost-cutting and applicable in a variety of different contexts within and across the boundaries of the mining industry, hence yielding higher profits. Conversely, environmental technologies have a negative impact on profitability possibly because they are more sector-specific and they compel firms to bear compliance costs due to stricter environmental regulations at the national level. We also find that being technologically diversified in terms of innovation activities across different stages of the mining value chain negatively affects the companies’ profits, potentially indicating that it is less costly (and more profitable) to develop mining innovations that are related to the firms’ core technological competencies. The analysis conducted in this thesis highlights the potential tensions between country - and industry - level development opportunities that are associated with innovation and with broader specialisation patterns, going beyond mining industry alone; and firm level propensity to adopt conservative, low innovation and low diversification strategies, especially in terms of the range of competencies accumulated, given the nature of technologies at stake and of appropriability conditions. From this perspective relatively underdeveloped, resource abundant economies may be bound not to escape the poverty trap, unless innovation oriented public policies are undertaken at the national and supra-national levels to overcome the low private incentive to innovate.
2021
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