nep-ino New Economics Papers
on Innovation
Issue of 2006‒10‒14
twenty-one papers chosen by
Koen Frenken
Universiteit Utrecht

  1. Dynamic Analysis of Innovation and International Transfer of Technology through Licensing By Hitoshi Tanaka; Tatsuro Iwaisako; Koichi Futagami
  2. Cross-Border Regional Innovation Systems By Michaela Trippl
  3. Innovative Software Business Strategies: Evidence from Finnish Firms By Elad Harison; Heli Koski
  4. Innovations and Economic Growth in a Fast Changing Global Economy: Comparative Experience of Asian Countries By Singh, Lakhwinder
  5. Endogenous skill bias in technology adoption: city-level evidence from the IT revolution By Paul Beaudry; Mark Doms; Ethan Lewis
  6. Innovation and competitive pressure By Vives, Xavier
  7. Importation and Innovation By Frank R. Lichtenberg
  8. Entry, Exit and Patenting in the Software Industry By Iain M. Cockburn; Megan J. MacGarvie
  9. Technology diffusion within central banking: the case of real-time gross settlement By Morten L. Bech; Bart Hobijn
  10. Benchmarking Efficiency of Telecommunication Industries in the US and Major European Countries : A Stochastic Possibility Frontiers Approach By Georg Erber
  11. Agricultural technology and health: understanding the links between agriculture and health By Lipton, Michael; Sinha, Saurabh; Blackman, Rachel
  12. Micro-dynamics of Free and Open Source Software Development. Lurking, laboring and launching new projects on SourceForge By Paul A. David; Francesco Rullani
  13. Is Venture Capital a regional business? – The role of syndication By Michael Fritsch; Dirk Schilder
  14. A new social compact: how university engagement can fuel innovation By Larry Isaac; Rick Mattoon; Laura Melle
  15. A Brief History of Mobile Telecommunication in Europe By Dunnewijk, Theo; Hultén, Staffan
  16. Technology and Customer Value Dynamics in Banking Industry: Measuring Symbiotic Influence in Growth and Performance By Rajagopal
  17. The cost of switching Internet providers in the French broadband industry, or why ADSL has diffused faster than other innovative technologies" By Jackie Krafft; Evens Salies
  18. Why some clusters succeed whereas others decline ? Modelling the ambivalent stability properties of clusters By Raphaël Suire(CREM - CNRS); Jérome Vicente (LEREPS - GRES); Yan Dala Pria (CSO - IEP - CNRS)
  19. Technological Progress, Structural Change and Productivity Growth in Manufacturing Sector of South Korea By Singh, Lakhwinder
  20. Copyright: A Plea for Empirical Research By Ivan Png
  21. Learning to Destroy By Per Hogselius

  1. By: Hitoshi Tanaka (Graduate School of Economics, Osaka University); Tatsuro Iwaisako (Faculty of Economics, Ritsumeikan University); Koichi Futagami (Graduate School of Economics, Osaka University)
    Abstract: This paper develops a quality-ladder type dynamic general equilibrium model with endogenous innovation and technology licensing as a major source of international technology transfer in developing countries. Examining the dynamic characteristics of the model fully, we explore the short- and long-run effects of both an improvement in the probability of reaching a licensing agreement with a given effort and an increase in the license fee rate. The model shows that the former promotes innovation and technology transfers in both the long and short run, while the latter discourages them.
    Keywords: Innovation; Licensing; Technology transfer
    JEL: F43 O33
    Date: 2006–02
  2. By: Michaela Trippl
    Date: 2006
  3. By: Elad Harison; Heli Koski
    Keywords: open source, software market, innovative business strategies
    JEL: L11 L86 M21 O32
    Date: 2006–10–04
  4. By: Singh, Lakhwinder
    Abstract: Innovations spur growth and economic transformation is widely acclaimed in economic growth literature. The transition in the national innovation system is the fundamental determinant of long-run economic growth and development. This is being reflected through the changes which are occurring in the economic structure of an economy as well as in the structure of the innovation system. Since the national economies are growing in the interdependent world, therefore national innovation system is continuously being influenced by the changes occurring in other parts of the world. Transformation of East Asian countries from imitation to reaching the frontier areas of innovations in a short span of time is a question that has been explored in this paper. Asian continent has emerged as the hub of innovative activities in the fast pace of globalization. Within Asian continent, there are wide differentials in the stage of economic development and transformation as well as in the national innovation systems. Two distinct patterns of economic transformation and systems of innovations which has evolved over time are-one, based on building strong industrial sector as an engine of innovations and growth; two, the engine of growth is the service sector and innovation system is heavily dependent on foreign capital. Recently, while recognizing the innovative capacity of some of the Asian countries, foreign R&D has devastated the boundaries of the Asian innovation system. Domestic agents of production have realized that there lies a dire need for the support of the state when innovations are being done on the frontiers of knowledge. Situational assessment surveys have also supported the view that Asian countries are fast approaching towards the frontiers of knowledge and innovations. Asian countries, themselves are competing to fast approach towards frontiers of knowledge and innovations so that newer areas of commercial activities can be explored and exploited in the global market. This paper while learning from East Asian innovation policies has also explored the role of national and international agencies in strengthening the national innovation systems of the less developed countries in the fast changing global economy.
    Keywords: Technology policy; technological indicators; national innovation system; structural transformation; innovation institutions; economic growth; Asia
    JEL: O33
    Date: 2006–10–03
  5. By: Paul Beaudry; Mark Doms; Ethan Lewis
    Abstract: This paper focuses on the bi-directional interaction between technology adoption and labor market conditions. We examine cross-city differences in PC adoption, relative wages, and changes in relative wages over the period 1980-2000 to evaluate whether the patterns conform to the predictions of a neoclassical model of endogenous technology adoption. Our approach melds the literature on the effect of the relative supply of skilled labor on technology adoption to the often distinct literature on how technological change influences the relative demand for skilled labor. Our results support the idea that differences in technology use across cities and its effects on wages reflect an equilibrium response to local factor supply conditions. The model and data suggest that cities initially endowed with relatively abundant and cheap skilled labor adopted PCs more aggressively than cities with relatively expensive skilled labor, causing returns to skill to increase most in cities that adopted PCs most intensively. Our findings indicate that neoclassical models of endogenous technology adoption can be very useful for understanding where technological change arises and how it affects markets.
    Keywords: Technological innovations ; Labor market
    Date: 2006
  6. By: Vives, Xavier (IESE Business School)
    Abstract: The effects of competition on process and product innovation are analyzed, obtaining robust results that hold for a range of market structures. It is found that increasing the number of firms tends to reduce R&D effort, whereas increasing the degree of product substitutability, with or without free entry, increases R&D effort -provided that the total market for product varieties does not shrink. Increasing the total market size increases R&D effort and has ambiguous effects on the number of varieties offered, while decreasing the cost of entry increases the number of entrants and varieties but reduces R&D effort per variety. The framework and results shed light on empirical strategies to assess the impact of competition on innovation.
    Keywords: cost reduction; X-inefficiency; market concentration; market size; substitutability; product introduction; corporate governance; globalization;
    Date: 2006–06–10
  7. By: Frank R. Lichtenberg
    Abstract: Importation of drugs into the U.S. would result in a decline in U.S. drug prices. The purpose of this paper is to assess the consequences of importation for new drug development. A simple theoretical model of drug development suggests that the elasticity of innovation with respect to the expected price of drugs should be at least as great as the elasticity of innovation with respect to expected market size (disease incidence). I examine the cross-sectional relationship between pharmaceutical innovation and market size among a set of diseases (different types of cancer) exhibiting substantial exogenous variation in expected market size. I analyze two different measures of pharmaceutical innovation: the number of distinct chemotherapy regimens for treating a cancer site, and the number of articles published in scientific journals pertaining to drug therapy for that cancer site. Both analyses indicate that the amount of pharmaceutical innovation increases with disease incidence. The elasticity of the number of chemotherapy regimens with respect to the number of cases is 0.53. The elasticity of MEDLINE drug cites with respect to cancer incidence throughout the world is 0.60. In the long run, a 10% decline in drug prices would therefore be likely to cause at least a 5-6% decline in pharmaceutical innovation.
    JEL: D21 D4 F1 I12 I18 O31
    Date: 2006–09
  8. By: Iain M. Cockburn; Megan J. MacGarvie
    Abstract: We examine the effects of software patents on entry and exit in 27 narrowly-defined classes of software products, using a dataset with comprehensive coverage of both mature public firms and small privately held firms between 1994 and 2004. Reflecting the complex economics underlying the relationship between patent protection, entry costs and industry structure, we find that patents have a mixture of effects on entry and exit. Controlling for firm and market characteristics, firms are less likely to enter product classes in which there are more software patents. However, all else equal, firms that hold software patents are more likely to enter these markets. The net effect on entry of increasing the number of software patents is difficult to measure precisely: estimates of the effect of an across-the-board 10% increase in patent holdings on the number of entrants into the average market in this sample range from -5% to +3.5%, with quite large standard errors. Evidence on exit and survival is consistent with these findings - holding patents appears to enhance the survival prospects of firms after entering a market.
    JEL: L1 L6 O34
    Date: 2006–10
  9. By: Morten L. Bech; Bart Hobijn
    Abstract: We examine the diffusion of real-time gross settlement (RTGS) technology across all 174 central banks. RTGS reduces settlement risk and facilitates financial innovation in the settlement of foreign exchange trades. In 1985, only three central banks had implemented RTGS systems, and by year-end 2005, that number had increased to ninety. We find that the RTGS diffusion process is consistent with the standard S-curve prediction. Real GDP per capita, the relative price of capital, and trade patterns explain a significant part of the cross-country variation in RTGS adoption. These determinants are remarkably similar to those that seem to drive the cross-country adoption patterns of other technologies.
    Keywords: Banks and banking, Central ; Foreign exchange ; Technological innovations
    Date: 2006
  10. By: Georg Erber
    Abstract: The impact of ICT on the efficiency of different national telecommunication industries of the US, Germany, France, the UK and the Netherlands is analysed by using a stochastic production possibility frontier approach. The relative inefficiencies of these industries measured as distances to the general production possibility frontier are estimated by a multi-country panel maximum-likelihood-estimation. By determining the technology efficiency effect frontiers for each single country one obtains a measure for the evolution of relative inefficiencies over time for each country's industry. Looking at these different patterns a common characteristic shape of stylised J-curves is revealed. This can be interpreted as J-curves of adoption of innovations in different national telecommunication industries. Since the troughs of these J-curves occur in different years for different countries a phase delay in adoption of innovations occurs differing from country to country. The time period covered by the data include a time when the deregulation of the telecommunication industries in these countries took place and the rapid diffusion of two key innovations - the Internet and mobile communications - changed the technological and organisational foundations everywhere. The results show that even if the US telecommunication industry led in this wave of major innovations as a first mover in comparison to the others and diminished by this their relative efficiency disadvantage opposite the European countries the EU countries still maintain a comparative efficiency advantage inherited from the early 1980's. In particular after their delayed adoption of the recent innovations like deregulation and Internet began there during the late 1990's the rapid catch up of the US telecommunication industry relative to the European industries has stalled. However, overall the inefficiency differences between national telecommunication industries have decreased in the long-run. Differences in the capability to establish and maintain a competitive and innovative national industry, however, still prevail between these countries even if they have become less pronounced as before.
    Keywords: Benchmarking, Production Possibility Frontiers, Efficiency/Inefficiency Measurement, J-Curve of Adoption of Innovations, Convergence
    JEL: L96 O33 O47 O57
    Date: 2006
  11. By: Lipton, Michael; Sinha, Saurabh; Blackman, Rachel
    Abstract: "Research, invention, and adoption of agrotechnology have played an important role in improving human nutrition and health. Agrotechnology has introduced more effective plant breeds (such as high-yielding varieties), enhanced land management techniques (such as terracing), and improved water management tools (such as irrigation). The adoption of these techniques has benefited nutrition, largely through boosting crop productivity, thereby providing employment and income to rural populations and increasing local and global food supplies... for the health needs of small farmers and laborers—as well as poor consumers—to influence research decisions, governments need to develop (1) institutions and incentives to promote such people's participation and communication with the formal research community; (2) competition among private research providers; and (3) public research in activities that respond to farmers' needs but are unlikely to attract formal private research." From text
    Keywords: Agriculture, Health and nutrition, Agricultural technology, Environmental management, Plant breeding Technological innovations, Community participation, public research, Private sector, Agriculture-health linkages,
    Date: 2006
  12. By: Paul A. David; Francesco Rullani
    Abstract: Quantitative methods are employed to describe two fundamental processes in the creation of free (libre) and open source software (FLOSS) that are at work in the collaborative development environment of the SourceForge.Net platform: resource mobilization, and “entrepreneurial initiatives” which generate new development projects. The micro dynamics of the individuals’ involvements in these processes are analysed by defining “activity states” that correspond to “lurking” (contributing to projects without become a member), “laboring” (joining one or more projects as members), and “launching” (founding one or more projects). The transition probability matrices constructed from observations on the activities of 222,835 individuals who registered on (during a 14-month period, mainly in 2001) characterize first-order Markov chains describing processes that are ergodic. The existence of a limiting “equilibrium” distribution of individual joining and launching activities is used to abstract from effects of transient disturbances (arising from the flow of new registrations), in order to reveal the implications of the underlying entrepreneurial and recruitment dynamics at work on the platform. Although only a small proportion of this cohort of registrants become even minimally active, and a still smaller proportion among those join projects, the active “core” of project members still numbers in the tens of thousands, and their ranks contain well more a thousand who found new projects. SourceForge is seen to be more than an attractor of projects that are being “born again” under open source licenses: this virtual collaborative development environment shares the regenerative properties of tangible “industrial districts” that give rise to new, innovative enterprises.
    Keywords: Open source software, Collaborative development environments, Industrial districts, Project founding, Project joining, Entrepreneurship and social communication skills, SourceForge, Markov chain models.
    Date: 2006–10–05
  13. By: Michael Fritsch; Dirk Schilder
    Abstract: We investigate whether the supply of Venture Capital (VC) in Germany is driven by spatial influences. The study is based on information from more than 300 VC investments made in Germany between 2004 and 2005. We find evidence that the geographical distance between a VC company and the portfolio firm is not an important factor for German VC investments. Syndication of investments helps to overcome the problem of distance to portfolio firms if one of the investors is located close to the investment. Altogether, we find no evidence for a severe regional equity gap for young and innovative companies in Germany.
    Keywords: Venture Capital, regional equity gap, start-up financing
    JEL: G24 O16 D21 M13 R12
    Date: 2006–10
  14. By: Larry Isaac; Rick Mattoon; Laura Melle
    Abstract: Richard K. Lester feels that colleges and universities, because they are immobile, can replace local institutions whose leadership has been eroded by globalization. However, university attempts to improve the regional economy must be well-planned. North Dakota clearly illustrates benefits of a strategic approach to university and college interaction with the economy. This paper examines the degree to which their Higher Education Roundtable fits into the specific model of engagement proposed by Lester. Much of the specificity of the North Dakota plan came in the implementation, which has been guided by specific accountability measures. Because such measures can not only reflect priorities but also set them, this paper evaluates the new initiatives in North Dakota with an independent set of metrics that assess university efforts to foster innovation. While the two sets of metrics are largely compatible, North Dakota University System does not evaluate qualitative goals throughout the university system. This paper argues that qualitative outputs from higher education are often under reported in assessments of economic and social benefits attributed to universities and colleges.
    Date: 2006
  15. By: Dunnewijk, Theo (UNU-MERIT); Hultén, Staffan (Stockholm School of Economics)
    Abstract: Since the introduction of mobile telephony in the early fifties in Europe, US and Japan the demand for this service exploded. It seems that the latent demand for mobile telecommunication services for decade's continued to be very strong. Since the introduction of cellular technology the capacity of the services increasingly became able to meet the massive demand. Next and future generations of mobile telecommunication technologies bring increased transmission speed and more versatile services. This forces network operators to organise multi- sourced information flows supplied by service providers to increase the network effect of the system instead of providing the network infrastructure and leave the content to the users as in pure voice telephony. The drivers and inhibitors behind the emergence and recent developments of mobile telecommunications systems in Europe are highlighted in this paper. Liberalisation of the telecom markets in Europe drove new entrants to the market and curbed excessive pricing. However, in recent years the lack of challenging service is the main cause for the wavering development of newer generations of mobile telecommunication services.
    Keywords: Telecommunications, Market Structure, Production, Pricing, Technological Change, Economic History, Europe
    JEL: L96 L11 O31 N70
    Date: 2006
  16. By: Rajagopal (Tecnológico de Monterrey, Campus Ciudad de México)
    Abstract: This paper attempts to critically examine the available literature on the subject, discuss a model that provides a framework for analyzing the variables associated with customer value, and to identify potential research areas. The paper argues through a set of linear equations that maximizing customer value which is interdependent factor for technology adoption and profit optimization in the banks need to be backed with appropriate economic parameters for attaining competitive efficiency and optimizing profit. The framework of the construct is laid on the theory of competitive advantage and customer lifetime value, so as to maximize the potential of the organization and all its subsystems to create and sustain satisfied customers. The paper draws theoretical impetus from new technologies in banking services such as mobile banking in the North American region and discusses the technology led marketing process towards optimizing profit. The discussion in the paper also analyzes the main criteria for successful internet-banking strategy and brings out benefits of e-banking from the point of view of banks, their technology and customer values and tentatively concludes that there is increasing returns to scale in the bank services in relation to the banking products, new technology and customer value.
    Keywords: Banking technology, customer value, profit optimization, diffusion and adoption process
    JEL: C21 C51 D21 D91 G21 O14 O33
    Date: 2006–08
  17. By: Jackie Krafft (CNRS); Evens Salies (Observatoire Français des Conjonctures Économiques)
    Date: 2006
  18. By: Raphaël Suire(CREM - CNRS); Jérome Vicente (LEREPS - GRES); Yan Dala Pria (CSO - IEP - CNRS)
    Abstract: The aim of this paper is to study the ambivalent properties of stabilities of clusters. We propose to enter the black box of the local knowledge externalities by focusing on the location decision externalities. In particular, we show that the nature of mimetic strategies in the convergence process of locational choices influence the dynamic stability of clusters. Thus, when uncertainty and search for legitimacy prevail on the need for coordination and the associated necessities of compatibility and technological convergence, the clusters are unstable, due to an excess of cognitive proximity and a risk of unintended spillovers. Nevertheless, this search for legitimacy, through the strategy which consists in following the locational choice of companies leader of a sector, can lead to the fast emergence of a cluster. But without relational proximity, its stability is not insured. These results are obtained following the formulation of some theoretical proposals on the links between location decision externalities and the resulting forms of socioeconomic proximities. This set of proposals is validated firstly by a model of simulation which makes it possible to test the properties of stability of aggregate outcomes of locational choices. Secondly, they are illustrated by a comparative empirical analysis of two main French clusters (Silicon Sentier and Sophia-Antipolis)..
    Keywords: clusters, proximities, stability, location under decision externalities, Silicon Sentier, Sophia-Antipolis
    JEL: C63 D85 R3
    Date: 2006
  19. By: Singh, Lakhwinder
    Abstract: This paper focuses on the impact of technology, structural change on the aggregate productivity growth in manufacturing sector of South Korea, using the eight firm size classes over the period 1970-2000. The conventional shift-share analysis is used to measure the impact of shift of both labor and capital inputs. The results show that structural change on average has been conducive to productivity growth during the 1970s and this pattern reversed afterwards. Small and medium industries were more dynamic in terms of reallocation of resources, however, their positive impact out-weighed because of the dominance of large sized firms in the manufacturing sector. Deliberate state policy favoring large sized firms has impeded restructuring process facilitated by technical progress may have a penalty in terms of forgone growth.
    Keywords: Productivity growth; structural share analysis; technological change; manufacturing employment growth; South Korea
    JEL: L6 O4 O33
    Date: 2006–10–04
  20. By: Ivan Png
    Date: 2006–10–08
  21. By: Per Hogselius
    Abstract: This paper investigates the process of creative destruction and creative destuction management in the Baltic Sea region through a series of case studies of conrete technologies that both Eastern and Western countries in the region have tried to get rid of during the past decade or so. The cases are: old-style banking technologies, old-generation nuclear power, copper-wire telephone lines and fossil-fuel energy production. It is shown that it in general it has been extremely difficult for countries to creatively destroy these outdated technologies, but that it is also possible to point at a number of success stories. The paper identifies several factors underlying successful creative destruction in the Baltic Sea region, concluding that these factors differ between Eastern and Western countries. It also discusses the ways in which the corresponding processes have - and have not - been actively managed at the political level.
    Date: 2006–09

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