The microeconomics of directed technological change.The evidence at the firm level

This paper aims at exploring the determinants of the direction of technological change at the firm level of analysis. Following the localized technological change approach, we suggest that firms will respond to change in factor market costs by introducing neutral or biased technological changes according to their innovation and knowledge generation related attributes. In the empirical analysis we use a panel of 1113 companies listed on UK and the main continental Europe financial markets (Germany, France and Italy) for the period 1995-2003. We find that small firms, relying more on tacit knowledge than on formal research and development activities, and less able to appropriate the benefits of their technological innovations are more likely to introduce biased technological change in order to make a more intensive use of the factor that has become more abundant