nep-ino New Economics Papers
on Innovation
Issue of 2004‒12‒12
23 papers chosen by
Koen Frenken
Universiteit Utrecht

  1. The geography of innovation: the effects of university research By Barrrio,T.; García-Quevedo,J.
  2. When Does Patent Protection Stimulate Innovation? By Andreas Panagopoulos
  3. A knowledge-based approach to innovation: an application for project-based firms By Bosch-Sijtsema, P.; Postma, T.J.B.M.
  4. Entrepreneurship over Time: Measures of Activity and Recent Changes in the US: 1993-2002 By Paul Reynolds
  5. Science linkages in technologies patented in Japan By Schumpeter Tamada; Yusuke Naito; Kiminori Gemba; Fumio Kodama; Jun Suzuki; Akira Goto
  6. Population, Population Density, and Technological Change By Stephan Klasen; Thorsten Nestmann
  7. Productivity Spillovers of R&D in Sweden By Ejermo, Olof
  8. Technological Diversity and Jacobs' Externality Hypothesis Revisited By Ejermo, Olof
  9. Spatial Inventor Networks As Studied by Patent Coinventorship By Ejermo, Olof; Karlsson, Charlie
  10. The Importance of Accessibility to R&D on Patent Production in Swedish Municipalities By Gråsjö, Urban
  11. Towards a Dynamic Theory for the Spatial Knowledge Economy By Karlsson, Charlie; Johansson, Börje
  12. Does Knowledge Diffusion between University and Industry Increase Innovativeness? By Lööf, Hans; Broström, Anders
  13. Dynamic Optimal Capital Structure and Technical Change By Lööf, Hans
  14. Technology Adoption and Workforce Skill in U.S. Manufacturing Plants By Dunne, Timothy; Troske, Kenneth
  15. Innovation and growth: What have we learnt from the robustness debate? By Christian Groth
  16. Competition and Growth in Neo-Schumpeterian Models By Piercarlo Zanchettin; Vincenzo Denicolò
  17. The Economics of Technology Sharing: Open Source and Beyond By Josh Lerner; Jean Tirole
  18. Handbook on Hedonic Indexes and Quality Adjustments in Price Indexes: Special Application to Information Technology Products By Jack Triplett
  19. Sectoral and Geographical Specificities in the Spatial Structure of Economic Activities By Giulio Bottazzi, Giovanni Dosi, Giorgio Fagiolo, Angelo Secchi
  20. What Do Endogenous Growth Models Contribute? By Dave Mare
  21. Information Technology and India’s Economic Development By Nirvikar Singh
  23. Bridging the Barriers: Knowledge Connections, Productivity, and Capital Accumulation By R. Quentin Grafton; Tom Kompas; P. Dorian Owen

  1. By: Barrrio,T.; García-Quevedo,J. (Universitat de Barcelona)
    Abstract: Applied studies on the relationship between geography and technological innovation for United States, Germany, France and Italy have shown the positive effects that academic research exerts on the innovate output of firms at spatial level. The purpose of this paper is to look for new evidence on the possible effects of the university research for the case of Spain. To do so, within the framework of a Griliches-Jaffe knowledge production function, and using panel data and count models, the relationship between innovate inputs and patents, in the case of the Spanish regions is explored.
    Keywords: Hysteresys, panel unit root tests, structural break
    JEL: O30 O18 R30 R58
    Date: 2004
  2. By: Andreas Panagopoulos
    Abstract: Patents act as an incentive to innovate. However, as this paper argues, patents can lead the patent holder to rest on his laurels and at the same time discourage some innovators from innovating, reducing knowledge spillovers. The combined result of the above suggests an inverse U relationship between patent protection and output growth.
    Keywords: Intellectual property, patent races, growth.
    JEL: K0 O11
    Date: 2004–11
  3. By: Bosch-Sijtsema, P.; Postma, T.J.B.M. (Groningen University)
    Abstract: The knowledge-based view (KBV) of firms has received increasingly attention. A relatively unexplored area is knowledge transfer in project-based industries (PBIs). Traditional project management literature relies upon combining expertise from several internal and external parties in order to deliver their own capabilities in a one-off process. Due to the unique character of projects, knowledge of projects is difficult to transfer. Furthermore, the short-term perspective and fluctuating partners make it harder to develop new knowledge in cooperation with parties in the network. This paper aims at developing a conceptual framework for investigating innovation in PBI from a network perspective. We discuss knowledge properties of the project-based organization (PBO) and its network, governance relationships that affect the knowledge transfer and the impact of the industry context on knowledge transfer and innovation performance. We present illustrations from the construction industry and end with a set of propositions.
    Date: 2004
  4. By: Paul Reynolds
    Abstract: Data from three different research programs, all measuring the prevalence rate of new firm creation in the US adult population, suggest that from 1993 to 2002 the level of entrepreneurship may have increased up to three fold, from 4 to over 13 percent of those 18-74 years of age - a shift from one in twenty adults to one in six adults. In 1993 entrepreneurial activity was more prevalent than marriages or parenting, by 2001 it was twice as common as marriages and parenting combined. Current evidence indicates that the high level of participation in start-ups in 1999-2002 was not reflected in the presence of new firms, suggesting that a smaller proportion of start-ups made the transition to an operating business. This may reflect a "rush to entrepreneur" among those with insufficient preparation or resources to successfully launch a new firm.
    Date: 2003–04
  5. By: Schumpeter Tamada; Yusuke Naito; Kiminori Gemba; Fumio Kodama; Jun Suzuki; Akira Goto
    Abstract: We constructed an original database concerning science linkages based on text of Japanese Patent Gazette published since 1994. We discovered that Japanese inventers cite many academic papers in the texts of the patent applications in the Japanese Patent System. Based on this finding, we constructed science citation index by data mining the texts of Japanese patent system for the first time. First, more than 880,000 patent data classified into about 600 categories. Then, we extracted non-patent references from all the granted patents and counted the number of them. This number shows the strength of the linkage between science and technology and therefore is called "science linkage index." The science linkage indexes among different patent classifications differ significantly from each other. The technologies related to bio -technology were by far the closest to science. It suggests that the process of creating new technology differs from technology to technology.
    Date: 2004–11
  6. By: Stephan Klasen (Universität Göttingen); Thorsten Nestmann
    Abstract: In a model on population and endogenous technological change, Kremer combines a short-run Malthusian scenario where income determines the population that can be sustained, with the Boserupian insight that greater population spurs technological change and can therefore lift a country out of its Malthusian trap. We show that a more realistic version of the model, which combines population and population density, allows deeper insights into these processes. The incorporation of population density also allows a superior interpretation of the empirical regularities between the level of population, population density, population growth, and economic development, both at aggregated and disaggregated levels.
    JEL: O3 J1 N3
    Date: 2004–11–12
  7. By: Ejermo, Olof (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Although Sweden is one of the most R&D-intensive OECD-countries, the importance of R&D spillovers in the country has not been systematically analyzed. This paper employs a cross-sectional dataset of 264 R&D-performing Swedish firms from 1996-97. With this set, knowledge production functions are estimated, where industry groups are treated as subsamples. In addition, 160,614 non R&D-performing firms are used to examine the effects of R&D spillovers also among non R&D-performers. The estimations use three different weight methods for R&D that spills over from other industries: two input-output measures and a technology flow matrix in the spirit of Jaffe (1986). The results indicate that R&D-performing firms gain in Total Factor Productivity from their own R&D. In two of the three weighing matrices spillovers from R&D result in higher Total Factor Productivity among R&D-performers. Among non R&D-performers, the Total Factor Productivity effect of R&D-spillovers is robustly positive and significant across specifications. Examination of the social returns of R&D from specific industries, one at a time, on other industries does not reveal substantial social effects beyond the effect on the own firm. It is reasoned that the most likely reason for the small size of R&D-spillovers rests in the Swedish corporate structure, with most R&D being conducted by large multinationals.
    Keywords: Interindustry R&D spillovers; total factor productivity; rate of return to R&D; Sweden
    JEL: D24 H41 L60 O31
    Date: 2004–11–29
  8. By: Ejermo, Olof (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Recent empirical evidence strongly supports Jacobs’ (1969) externality hypothesis, that urban diversity provides a more favorable environment for economic development. In order to correctly gauge Jacobs’ hypothesis, economic development should be understood as a result of innovations. Furthermore, it is argued that a relevant diversity-measure should take into account the degree of diversity between the inherent classes (e.g. pharmaceuticals are closer to chemicals than to forestry). These ideas are tested using regionally classified Swedish patent application data as a measure of innovativeness. Patent data are also used to reflect technological diversity. Recent empirical evidence strongly supports Jacobs’ (1969) externality hypothesis, that urban diversity provides a more favorable environment for economic development. In order to correctly gauge Jacobs’ hypothesis, economic development should be understood as a result of innovations. Furthermore, it is argued that a relevant diversity-measure should take into account the degree of diversity between the inherent classes (e.g. pharmaceuticals are closer to chemicals than to forestry). These ideas are tested using regionally classified Swedish patent application data as a measure of innovativeness. Patent data are also used to reflect technological diversity. The results show that the number of patent applications in Swedish regions is highly and positively dependent on regional technological specialization, quite the opposite to Jacobs’ prediction. The paper raises general questions about earlier empirical results. It is concluded that the size of regions is important is an important factor to consider, since this in itself may affect patenting intensity and technological diversity.
    Keywords: Specialization; diversity; patenting; Sweden; regions
    JEL: H41 O31 O40 R12
    Date: 2004–11–29
  9. By: Ejermo, Olof (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Karlsson, Charlie (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: We study the structure of the spatial inventor networks in Sweden by examining the residence of inventors and coinventors in Swedish patent applications to the European Patent Office. Several factors are found to influence the spatial affinity. We find that spatial affinity is strongly influenced by the general size of the nodes, as measured by population. In addition, affinities are strongly influenced by distance, but different technologies responded differently to distance. The most distance-sensitive technology, i.e. with the highest agglomeration of coinventors, was almost three times as sensitive to distance as the least sensitive. Interestingly, "Information technology" was the least distance-sensitive technology, which would be in line with predictions of "the death of distance". Higher affinity was also registered for many technologies when more university researchers were employed in one of the regions. Hence, a technology division is appropriate for understanding the span of innovation networks over regions, and how these could develop in response to policy initiatives.
    Keywords: Inventor networks; localization; patents; Sweden; affinity
    JEL: O31 O32 R12
    Date: 2004–11–29
  10. By: Gråsjö, Urban (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: The main purpose in this paper is to study to what extent accessibility to R&D can explain patent production. Therefore a knowledge production function is estimated both on aggregated level and for different industrial sectors. The output of the knowledge production is the number patent applications in Swedish municipalities from 1994 to 1999. In order to account for the importance of proximity, the explanatory variables are expressed as accessibilities to university and company R&D. The total accessibility is then decomposed into local, intra-regional and inter-regional accessibility to R&D. The results indicate that high accessibility (local) to company R&D has the greatest effect on patent production. Local accessibility to university R&D has also a significant positive effect but the magnitude is smaller. There is also evidence that intra-regional accessibility to company R&D affects patent production positively.
    Keywords: Innovations; patents; R&D; knowledge production functions
    JEL: H41 O33 R11
    Date: 2004–12–02
  11. By: Karlsson, Charlie (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Johansson, Börje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: In recent decades the world has witnessed the emergence of a global knowledge economy. For example, the evolution in recent decades of the developed economies has been accompanied by a regional shift in economic activity away from traditional industrial regions to new agglomerations of high technology, creating an explosion of entrepreneurial activity and new firm formation. For the OECD countries in particular, we can observe a transfer from an industrial economy to a knowledge economy. The supporting evidences are overwhelming and indicate that the trend is global. The emerging knowledge economy have attracted much interest among economist and generated many important contributions during the last two decades. However, the literature does not provide a comprehensive picture and we are indeed lacking a “general theory” of the knowledge economy. Various aspects of the emerging knowledge economy has been thoroughly analysed both theoretically and empirically but the overall synthesis is not yet present. Something to ask for would be a coherent theoretical framework that can explain how growth-induced investments in knowledge production stimulate localised, entrepreneur-driven innovations, which generate structural change and economic growth in an integrated system of functional regions. An interesting observation is that many of the necessary building blocks already seem to exist but that they are still waiting for someone to integrate them. The current state-of-the-art also includes inconsistent components. The purpose of this paper is to contribute to such an integration of the existing pieces of knowledge.
    Keywords: Knowledge; Economic Growth; New Economic Geography; Innovation Systems; Entrepreneurship
    JEL: M13 O31 O40 R11
    Date: 2004–12–02
  12. By: Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Broström, Anders (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Empirically this paper seeks to assess the effect of firms’ R&D collaboration with universities on innovation. A cross-sectional propensity score matching estimator is applied to the Swedish Community Innovation Survey data over 1998-2000, which provides information about cooperation on innovation reported by 790 R&D or innovation investing firms with at least 10 employees. Approximately 25 percent of these firms collaborated with universities on innovation projects. The results shows that university/industry collaboration has a significant and positive influence on three measures of innovative activity. First, the average R&D firm that cooperate on innovation with universities spend more money on R&D compared to an almost identical R&D firm (constructed by the two nearest neighbours) witch has no collaboration with academic researchers. Second, collaborating firms have a larger propensity to apply for patents than other R&D firms. Finally, income from new product sales is considerable greater for a firm that have joint research projects with universities than for a non-collaborating twin firm.
    Keywords: R&D investment; innovation; patents; industry-university link; matching methods.
    JEL: C24 L10 O30 O31 O38 O40
    Date: 2004–12–02
  13. By: Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: The importance of capital structure is explored by comparing existing archetypes of financial systems through a new methodological application. Differences in firms’ cost of capital show that capital structure is relevant in R&D and other investment decisions. The conclusions are that 1) there are large and also unexpected cross-country differences in determinants to optimal capital structure; 2) observed leverage is often different from target in both equity (or stock market based) and debt (or bank based) dominated systems; 3) faster speed towards the target is observed in the equity based system indicating a higher flexibility.
    Keywords: Capital structure; dynamic adjustment; panel data; optimal leverage; financial markets; cross-country comparison; technological change; creative destruction.
    JEL: C23 C51 G32 O16 O31
    Date: 2004–12–09
  14. By: Dunne, Timothy (University of Oklahoma); Troske, Kenneth (University of Missouri-Columbia and IZA Bonn)
    Abstract: This paper examines the relationship between technology adoption and workforce skill in US manufacturing plants. Using information on the use and adoption of seven different information technologies, we find that the relationship between technology adoption and workforce skill varies across the technologies. Technologies more closely related to engineering and design tasks are associated with more skilled workforces. Technologies more closely related to production activities are not. When we examine the relationship between technology adoption and skill upgrading of workforces, we find little correlation between the use and/or adoption of technologies and changes in workforce skill at the plant level. However, we do find that plants adopting technologies related to engineering and design tasks do grow faster over the period 1987-1997.
    Keywords: technology adoption, workforce skill
    JEL: J2 O3
    Date: 2004–12
  15. By: Christian Groth (Institute of Economics, University of Copenhagen)
    Abstract: The recurrent issues of "non-robustness" and "scale effects" are discussed within a unified framework for the presentation of different generations of innovation-based growth models. With a certain proviso robust innovation-based growth models tend to end up with the long-run per capita growth rate pinned down by population growth. That is, the long-run prospect seems to be semi-endogenous growth. This is so also when essential non-renewable resources are taken into account. Semi-endogenous growth need not imply policy-invariant growth. Non-renewable resources may imply instability problems of an unfamiliar kind. The projected slowdown of population growth is likely to decrease future per capita growth as well as the discount rate relevant for evaluation of long-term environmental projects.
    Keywords: endogenous growth; non-renewable resources; instability; limits
    JEL: O4 Q3
    Date: 2004–06
  16. By: Piercarlo Zanchettin; Vincenzo Denicolò
    Abstract: We study the effect of product market competition on the incentives to innovate and the economy's rate of growth in an endogenous growth model. We extend previous works in industrial organization by assuming that innovation is sequential and cumulative, and early endogenous growth models by accounting for the possibility that in each period many asymmetric firms (i.e., an endogenously determined number of successive innovators) are simultaneously active. We identify the price effect, the front loading of profits, and the productive efficiency effect associated with an increase in competitive pressure. The price effect reduces the incentives to innovate, but both the front loading of profits and the productive efficiency effect raise the incentives to innovate. We demonstrate circumstances in which the productive efficiency effect dominates the price effect. In these circumstances, the front loading of profits and the fact that the productive efficiency effect dominates the price effect compound to make the equilibrium rate of growth increase with the intensity of competition.
    Date: 2004–10
  17. By: Josh Lerner; Jean Tirole
    Abstract: This paper reviews our understanding of the growing open source movement. We highlight how many aspects of open source software appear initially puzzling to an economist. As we have acknowledge, our ability to answer confidently many of the issues raised here questions is likely to increase as the open source movement itself grows and evolves. At the same time, it is heartening to us how much of open source activities can be understood within existing economic frameworks, despite the presence of claims to the contrary. The labor and industrial organization literatures provide lenses through which the structure of open source projects, the role of contributors, and the movement's ongoing evolution can be viewed.
    JEL: L8 O3
    Date: 2004–12
  18. By: Jack Triplett
    Abstract: This handbook reviews the methods employed in price indexes to adjust for quality change: “conventional” quality adjustment methods, which are explained in Chapter II, and hedonic price indexes (Chapter III). Hedonic indexes have a prominent place in price indexes for information and communication technology (ICT) products in several OECD countries, and are also used for measuring prices for some other goods and services, notably housing. The handbook’s objective is to contribute to a better understanding of the merits and shortcomings of conventional and hedonic methods, and to provide an analytic basis for choosing among them. This handbook compares and contrasts the logic and statistical properties of hedonic methods and conventional methods and the results of employing them in different circumstances. In Chapter IV, it reviews empirical evidence on the difference that alternative methods make in practice, and offers an evaluation framework for determining which is better. In Chapters III, V, and VI, the handbook sets out principles for “best practice” hedonic indexes. These principles are drawn from experience with hedonic studies on a wide variety of products. Although most of the examples in the handbook are drawn from ICT products, the principles in it are very general and apply as well to price indexes for non-ICT products that experience rapid quality change, and also to price indexes for services, which are affected by quality changes fully as much as price indexes for goods, though sometimes that has not been recognised sufficiently. Some objections that have been raised to hedonic indexes are presented and analysed in Chapter VII. An appendix discusses issues of price index theory that apply to quality change, and presents the economic theory of hedonic functions and hedonic price indexes. The handbook brings together material that is now scattered in a wide number of places, but goes beyond the economic literature in significant respects. The handbook has been written because there is a widespread view that the principles for conducting hedonic investigations are not written down fully anywhere. Research practices have just coalesced from procedures used by the most rigorous researchers. They are not therefore readily assembled for statistical agency work which is the primary audience of the handbook, although researchers involved in empirical work in areas such as productivity, innovation and technological or structural change will also benefit from the discussion of methods, theory and its application to ICT. <P> Classification-JEL:
    Date: 2004–10–08
  19. By: Giulio Bottazzi, Giovanni Dosi, Giorgio Fagiolo, Angelo Secchi
    Abstract: This work explores the spatial structure of location of production activities. We try to disentangle location- from sector-specific drivers in the dynamic process of spatial agglomeration. We argue that the former typically apply "horizontally" (i.e. across all industrial sectors), while the latter unfold in the form of non-decreasing dynamic returns to the current stock of installed business units. A stochastic model of location is developed and three different specifications are tested against Italian data on the location of manufacturing firms. Our results suggest that different locations exert different structural influences on the distribution of production activities. Moreover, a widespread horizontal power of "urbanization", which makes particular locations more attractive irrespectively of the sector, does emerge. However, after controlling for the latter, one is still left with sector-specific forms of dynamic increasing returns to agglomeration, which vary a lot across different manufacturing activities.
    Keywords: Industrial Location, Agglomeration, Markov Chains, Dynamic Increasing Returns.
  20. By: Dave Mare (Motu Economic & Public Policy research)
    Abstract: Endogenous growth theory is one of the mainstream economics approaches to modelling economic growth. This paper provides a non-technical overview of some key strands of the endogenous growth theory (EGT) literature, providing references to key articles and texts. The intended audience is policy analysts who want to understand the intuition behind EGT models. The paper should be accessible to someone without much economics training.
    Keywords: Endogenous Growth, Innovation
    JEL: O31 O40
    Date: 2004–12–05
  21. By: Nirvikar Singh (University of California, Santa Cruz)
    Abstract: This paper discusses the possibilities for broad-based IT-led economic growth in India, including increasing value-added, using better telecom links to capture more benefits domestically through offshore development for developed country firms, greater spillovers to the local economy, broadening the IT industry with production of telecom access devices, improving the functioning of the economy through a more extensive and denser communications network, and improving governance. We also examine the policy environment, arguing that government policy is better focused on removing labor market distortions and infrastructure constraints, rather than providing output or export subsidies to the software industry.
    Keywords: information technology, software, complementarities, telecommunications
    JEL: M21 L63 O12 O3
    Date: 2004–12–07
  22. By: Fabio Hideki Ono; José Luis Oreiro
    Abstract: The paper presents a post-keynesian growth model in which (i) the mark-up rate varies in the long-term due to a misalignment between the actual rate and the 'desired' profit rate; and (ii) the capital-output ratio is not necessarily constant, on the contrary it may shift as a result of the technological progress, which according the Harrod's typology can be neutral, capital saving or capital intensive. We demonstrate that the economic stability is only reached if the technological progress is neutral or capital intensive and the investiment is susceptible to fluctuations in the mark-up rate. After undergoing computer simulations, we noticed that an endogenous transition from a wage-led to a profit-led accumulation regime is feasible. Furthermore, we identified a tendency to the stabilization of the profit rate, conditioned to a high savings out of profits ratio.
    JEL: E12 O49 C62
    Date: 2004
  23. By: R. Quentin Grafton; Tom Kompas; P. Dorian Owen
    Abstract: The paper explains the large differences in cross-country productivity performance by modeling and testing the effects of social barriers to communication on productivity and capital accumulation. In an optimal growth model, social barriers to communication that impede the formation of knowledge connections are shown to reduce both transitory and steady-state levels of total factor productivity (TFP), per capita consumption, and reproducible capital. A ‘bridging’ parameter in the growth model that lowers the disutility of forming knowledge connections generates testable and dynamic implications about the effects of social barriers on capital, consumption, and productivity. Extensive empirical testing of the theoretical propositions yields a robust and theoretically consistent result — linguistic barriers to communication reduce productivity and capital accumulation. The findings provide a theoretical justification and a robust explanation for cross-country differences in TFP, and fresh insights into how productivity ‘catch up’ may be initiated.
    JEL: O41 C61 C21
    Date: 2004

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