nep-ino New Economics Papers
on Innovation
Issue of 2006‒03‒11
eleven papers chosen by
Koen Frenken
Universiteit Utrecht

  1. Insurance and Incentives for Medical Innovation By Alan M. Garber; Charles I. Jones; Paul M. Romer
  2. R&D of Multinationals in China: Structure, Motivations and Regional Difference By Kazuyuki Motohashi
  3. Is Demand-Pulled Innovation Equally Important in Different Groups of Firms? By Mariacristina Piva; Marco Vivarelli
  4. Policy Processes for Low Carbon Innovation in the UK: Successes, failures and lessons By Tim J. Foxon; Peter J. Pearson
  5. "Job-Hopping in Silicon Valley: Some Evidence Concerning the Micro-Foundations of a High Technology Cluster" By Bruce Fallick; Charles A. Fleischman; James B. Rebitzer
  6. Issues in measuring the degree of technological specialization with patent data By Nicolas van Zeebroeck; Bruno van Pottelsberghe de la Potterie; Wook Han
  7. Consumer Innovativeness and GLB: A comparative study By B. VANDECASTEELE; M. GEUENS
  8. Venture Capital Industries and Policies: Some Cross-Country Comparisons By Morris Teubal; Terttu Luukkonen
  9. International Intrafirm Transfer of Management Technology by Japanese Multinational Corporations By Shujiro Urata; Toshiyuki Matsuura; Yuhong Wei
  10. Innovation in Small and Medium-Sized Enterprises: A Study of Businesses in New South Wales, Australia By Olsen, Jane; Lee, Boon-Chye; Hodgkinson, Ann
  11. Venture Capital Industry in Finland - Country Report for the Venture Fun Project By Terttu Luukkonen

  1. By: Alan M. Garber; Charles I. Jones; Paul M. Romer
    Abstract: This paper studies the interactions between health insurance and the incentives for innovation. Although we focus on pharmaceutical innovation, our discussion applies to other industries producing novel technologies for sale in markets with subsidized demand. Standard results in the growth and productivity literatures suggest that firms in many industries may possess inadequate incentives to innovate. Standard results in the health literature suggest that health insurance leads to the overutilization of health care. Our study of innovation in the pharmaceutical industry emphasizes the interaction of these incentives. Because of the large subsidies to demand from health insurance, limits on the lifetime of patents and possibly limits on monopoly pricing may be necessary to ensure that pharmaceutical companies do not possess excess incentives for innovation.
    JEL: I1 O30
    Date: 2006–03
  2. By: Kazuyuki Motohashi
    Abstract: In this paper, the motivations of R&D by multinationals are investigated by using a large firm level dataset from Chinese official statistics on science and technology activities. Growing intensity of R&D activities is found both for foreign owned and domestic firms. But, it is also found that the R&D intensity at foreign owned firms is relatively smaller. This may be due to the fact that foreign owned firms are operating by relying of technological capabilities at home. Statistical analysis confirms that the major motivation of foreign R&D in China is "market driven" instead of "technological driven" or "human resource driven". However, there is a great variation of foreign R&D strategy across regions. Market driven R&D is found mainly in Guangdong, which is called a world IT factory, and does not have strong universities or PRIs. In contrast, R&D strategy in Beijing is oriented toward technology driven approach, because we can find a cluster of scientific institutions there. Shanghai, with both a large industrial base as well as strong science sector, is in-between.
    Date: 2006–02
  3. By: Mariacristina Piva (Catholic University of Piacenza); Marco Vivarelli (Catholic University of Piacenza, CSGR Warwick, Max Planck Institute of Economics Jena and IZA Bonn)
    Abstract: Previous empirical literature - mainly cross-sectional - has tested the demand-pull hypothesis and found that overall, evidence does not conflict with the idea that innovation may be driven by output. Using a balanced panel of 216 Italian manufacturing firms over the 1995-2000 period, and checking for fixed effects, time, sectoral and size dummies and for the pathdependent nature of R&D, we also find a (barely significant) role of sales in inducing R&D expenditures. However, at the micro level, the demand-pull effect plays a varying role for the different sub-samples of firms. In particular, exporting firms, those which are liquidityconstrained, those not receiving public subsidies and those not heading a business group, seem to be particularly sensitive to sales in deciding their R&D expenditures. These microeconometric results have been obtained using a Least Squares Dummy Variable Corrected (LSDVC) estimator, a recently-proposed panel data technique particularly suitable for small samples.
    Keywords: R&D expenditures, demand-pull, innovative firms, LSDVC estimator
    JEL: O31
    Date: 2006–02
  4. By: Tim J. Foxon (4CMR – Cambridge Centre for Climate Change Mitigation Research, Department of Land Economy, University of Cambridge.); Peter J. Pearson (Centre for Environmental Policy, Imperial College London, SW7 2AZ, UK.)
    Abstract: This paper analyses recent, current and potential future relations between policy processes and substantive outcomes in UK low carbon innovation policy. It examines the development of policy processes relating to the adoption and implementation of the Renewables Obligation and how these may affect the current and likely future success of the Obligation in promoting low carbon innovation. It looks at the new policy and institutional processes put in place in the 2003 Energy White Paper and argues that these are unlikely to provide the strategic long-term framework needed to realize the ambitious goals for UK energy policy set out in the White Paper. Finally, it outlines some suggestions for further development of policy processes to facilitate improved delivery of these goals, based on guiding principles for sustainable innovation policy processes, developed by the authors and colleagues.
    Keywords: Low carbon innovation policy, Renewables Obligation, guiding principles, sustainable innovation policy processes.
    Date: 2006
  5. By: Bruce Fallick; Charles A. Fleischman; James B. Rebitzer
    Abstract: Observers of Silicon ValleyÕs computer cluster report that employees move rapidly between competing firms, but evidence supporting this claim is scarce. Job-hopping is important in computer clusters because it facilitates the reallocation of talent and resources toward firms with superior innovations. Using new data on labor mobility, we find higher rates of job-hopping for college-educated men in Silicon ValleyÕs computer industry than in computer clusters located out of the state. Mobility rates in other California computer clusters are similar to Silicon ValleyÕs, suggesting some role for features of California law that make non-compete agreements unenforceable. Consistent with our model of innovation, mobility rates outside of computer industries are no higher in California than elsewhere.
    Date: 2005–12
  6. By: Nicolas van Zeebroeck (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels); Bruno van Pottelsberghe de la Potterie (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels); Wook Han
    Abstract: This paper analyses several issues that arise when measuring technological specialisation with patent data. Three starting choices are required regarding the data source, the statistical measure and the sectoral aggregation level. We show that the measure is highly sensitive to the data source and to the level of sectoral aggregation. The statistical analysis further suggests that the most stable and reliable measures of technological specialization are obtained with patents applied at the EPO, with Gini or C20 as statistical measure and the 4-digits aggregation level of the IPC classification system.
    Keywords: Technological specialisation, patent data, patents statistics
    JEL: L16 O3 O57
    Date: 2005–05
    Abstract: Many companies survive because of the development and the introduction of successful new products3. According to Hultink and Schoormans (2004), 40 to 50 percent of the return and the profit of US and UK companies comes from products introduced on the market less than five years ago. However, new products often do not find their way to buyers: Hultink and Schoormans (2004) state that 30 to 50% of new products fail. The diffusion literature (e.g. Rogers, 2003) counts on innovative people to make a new product successful. When these innovative persons are known, a deliberate and efficient communication campaign can be developed and innovators can be targeted (Fell et al. 2003). But, who are innovative persons and how can they be effectively targeted? Marketers often try to reach and attract them via mass media communication and mass sampling, without much success though. Therefore, it would be interesting to find a subgroup within the society that is significantly more innovative than others. In this respect, several non-academic articles refer to the assumed innovativeness of gays, lesbians and bisexuals (GLB) (Kolko et al. 2003, Wilke 2000, 2000). GLB are supposed to be trendsetters and are called “the avant-garde of consumers” (Bilsen et al., 2000, p. 242). Kolko et al. (2003) state that “gays lead in the adoption of a whole host of emerging technologies and almost every online activity […]” (p.2). Nevertheless, to our knowledge, no academic research has been carried out measuring the innovativeness of GLB. Therefore, the purpose of this article was to investigate the innovativeness of both GLB and heterosexuals and to see whether empirical evidence can be found for the myth that GLB are more innovative and trendsetting than heterosexuals. Moreover, also the extent to which this innovativeness translates in new product trial was studied.
    Date: 2006–01
  8. By: Morris Teubal; Terttu Luukkonen
    Abstract: The paper summarizes the findings obtained during the first year of the Venture Fun project, carried out in an EU Network of Excellence PRIME and funded from the Sixth Framework Programme. The paper defines the central concepts of the project, identifies questions for further elaboration and study, and finally provides a rough idea of the different profiles that the studied countries (Finland, Israel, France, Italy, and the UK) evidence in the organization of their VC industries. One of the conclusions of the paper is that Israel, and to a lesser extent, Finland, has succeeded in developing a specialized, independent VC industry oriented to the early phase finance and support of ICT start-ups. By contrast, though the UK has a strong Private Equity industry, it is, however, not focusing on early-stage or high tech areas. Italy and France showed a significant presence of Venture Capital and Private Equity industries (public/private organisations), but in Italy an early phase VC industry has almost disappeared after 2001. The paper further summarises factors that have influenced the development of VC industries in the studied countries.
    Keywords: venture capital, industry emergence, start-ups, venture capital -directed policy, innovation policy
    JEL: O16 O38
    Date: 2006–03–01
  9. By: Shujiro Urata; Toshiyuki Matsuura; Yuhong Wei
    Abstract: Authors analyze the pattern of intrafirm transfer of management technology from Japanese multinational corporations (MNCs) to their overseas affiliates by using firm-level micro data and discern the determinants of the extent of technology transfer achieved. Defining intrafirm transfer of technology achieved as the case where responsibility of the task such as top management, sales, and labor management is given to local staff rather than Japanese staff, authors found that top management has been transferred at a limited number of affiliates, while the task of labor management has been transferred at many affiliates. Among the affiliates in different regions, technology transfer has been relatively more extensively achieved at affiliates in Europe, while it has been relatively limited at affiliates in ASEAN countries. An examination of the determinants of technology transfer revealed that the length of operation of the affiliates, and the quality of labor in the host countries have significantly positive impacts for the affiliates in Asia. These observations indicate the importance of providing an FDI friendly environment, under which MNCs are likely to stay for a long period, and the importance of improving the quality of human resources through education and training, in order to promote intrafirm transfer of management technology.
    Date: 2006–02
  10. By: Olsen, Jane; Lee, Boon-Chye (University of Wollongong); Hodgkinson, Ann (University of Wollongong)
    Abstract: This paper examines the process of innovation within SMEs, focusing on a sample of firms in New South Wales, Australia. The trend of the last several decades towards increased integration of global markets, or globalization, has meant that many firms are experiencing continuously increasing pressure to remain viable as their markets expand, and they begin competing with a larger number of firms. SMEs, in particular, are vulnerable to this pressure, since they tend to be disadvantaged relative to larger firms that generally have better access to funding and other resources. The ways in which SMEs operate to remain economically viable, and contribute to economic performance, is of especial interest to governments given the prominent roles that they play in most economies. One way of doing so is through innovation. In this paper, we present a more complex model of the innovation process than the traditional linear model involving R&D investment, what we term the "Ripple Effect Model", building upon recent developments in the literature. The Ripple-Effect Model appears to be substantially supported.
    Keywords: Structural break, unit root test, Lebanon economy
    Date: 2006
  11. By: Terttu Luukkonen
    Abstract: This report is a descriptive account of the major features of the Venture Capital (VC) Industry in Finland. It has been prepared as a background report for a project entitled Venture Fun, carried out in an EU Network of Excellence PRIME and funded from the Sixth Framework Programme. The report provides a brief overview of the evolution and present structures of the VC industry in Finland, and draws attention to factors that affect the development of VC industry, among others, to the nature of policies pursued in this field. One of its observations is the fact that the primary rationale for policies has been closing the early phase funding gap for start-ups, the promotion of SMEs, regional development or other socio-economic objectives, rather than the promotion of VC industry. As a result, policy measures have tended to be permanent, not temporary, since the objectives are difficult to achieve in a fixed time period. Furthermore, the policies pursued have made a separation of the monetary and non-monetary value-adding functions of VC, and only recently have acknowledged the value of the latter for the growth of high-tech start-ups.
    Keywords: venture capital, start-ups, venture capital -directed policy, innovation policy
    JEL: O16 O38
    Date: 2006–03–01

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