nep-ino New Economics Papers
on Innovation
Issue of 2007‒01‒13
thirty-two papers chosen by
Koen Frenken
Universiteit Utrecht

  1. Pricing Patents through Citations By Fernando Leiva B.
  2. Technology Innovation and Market Turbulence: A Dotcom Example By Zhu Wang
  3. Knowledge, Spillovers and Firms’ International Growth. An Analysis at the Italian NUTS 3 Level By Andrea Bonaccorsi; Lucia Piscitello; Cristina Rossi
  4. "Collaborative R&D in the robot technology in Japan: an inquiry based on patent data analysis (1991-2004)" By Sebastien Lechevalier; Yukio Ikeda; Junichi Nishimura
  5. Trade Balance of Patent Rights: Who Gains What from International Patent Harmonization, and Why? By Deng, Yi
  6. The Democratization of U.S. Research and Development after 1980 By Robert M. Hunt; Leonard I. Nakamura
  7. Developing science, technology and innovation indicators: what we can learn from the past By Soete, Luc; Freeman, Chris
  8. International Competition, Growth and Optimal R&D Subsidies By Giammario Impullitti
  9. Market Structure and the Direction of Technological Change By Matthew Mitchell; Andy Skrzypacz
  10. Adoption Lags, Implementation Gaps, and Economic Growth By Diego Comin; Bart Hobijn
  11. Urbanization, Productivity and Innovation: Evidence from Investment in Higher Education By Roland Andersson; John Quigley; Mats Wilhelmsson
  12. Restructuring Research: Communication Costs and the Democratization of University Innovation By Ajay K. Agrawal; Avi Goldfarb
  13. The Value of Certainty in Intellectual Property Rights: Stock Market Reactions to Patent Litigation By Marco, Alan C.
  14. The Evolution of the Literature on Technological Change over time: A Survey By Andrea Conte
  15. Patent protection, creative destruction, and generic entry in pharmaceuticals: Evidence from patent and pricing data By Marco, Alan C.
  16. Entrepreneurial Risk, Investment and Innovation By Andrea Caggese
  17. Backstop Technology Adoption By Matti Liski; Pauli Murto
  18. International Medical Technology Diffsion By Chris Papageorgiou; Andreas Savvides; Marios Zachariadis
  19. Public Policy and Venture Capital Financed Innovation: A Contract Design Approach By Julia Hirsch
  20. Learning about Oneself: Technology Financing in a Tamil Fishing By Xavier Gine; Stefan Klonner
  21. The dynamics of patent citations By Marco, Alan C.
  22. A Dynamic Analysis of Cooperative Research in the Semiconductor Industry By Minjae Song
  23. Market Size, Trade, and the Resistance to the Adoption of Better Technology By Klaus Desmet; Stephen L. Parente
  24. Agglomeration and the Spatial Distribution of Creativity By Roland Andersson; John Quigley; Mats Wilhelmsson
  25. "The U.S. Information Technology Revolution and Its Impact on U.S. Economy and Beyond" By John Riew
  26. European Debates on the Knowledge Institution:The Modernization of the University at the European Level By Johan P. Olsen; Peter Maassen
  27. Nurturing and Growing Innovative Start-ups: The Role of Policy as Integrator By B. CLARYSSE; J. BRUNEEL
  28. A Theory of Entry and Exit with Embodied Rate of Technical Change By Roberto M Samaniego
  29. The Role of the University in Attracting High Tech Entrepreneurship: A Silicon Valley Tale By David Huffman; John Quigley
  30. Divide to conquer? The Silicon Valley - Boston 128 case revisited By Kerstin Press
  31. New Industries in Southeast Asia’s Late Industrialization: Evolution versus Creation - The Automation Industry in Penang (Malaysia) considered By Leo van Grunsven
  32. "Increasing Complexity of Artifacts and the Role of Product Architecture"(in Japanese) By Masahiro Okuno; Hirokazu Takizawa; Yasunori Watanabe

  1. By: Fernando Leiva B. (Economics University of Iowa)
    Abstract: This paper provides formal treatment to the idea of patenting as a form of market stealing between R&D firms. It extends the creative destruction literature by allowing innovations to build off each other forming a network of ideas. Patent citations keep track of this network. The theory maps the distribution of productivities in the development of new ideas onto the distribution of patent values through patent citations. If productivities are drawn from a Pareto-Levy distribution then the distribution of patent values also falls within this class. The theory is then applied to data on US patent citations. Model-based valuations support the assumption of Pareto-distributed productivities. As an added feature, model-based valuations outperform citation counts (the traditional measure) as a proxy for patent values
    Keywords: Patents, Innovation, R&D, Networks
    JEL: O31 O33 D85
    Date: 2006–12–03
  2. By: Zhu Wang (Payments System Research Federal Reserve Bank of Kansas City)
    Abstract: This paper explains market turbulence, such as the recent dotcom boom/bust cycle, as equilibrium industry dynamics triggered by technology innovation. When a major technology innovation arrives, a wave of new firms implement the innovation and enter the market. However, if the innovation complements existing technology, some new entrants will later be forced out as more and more incumbent firms succeed in adopting the innovation. It is shown that the diffusion of Internet technology among traditional brick-and-mortar firms is indeed the driving force behind the rise and fall of dotcoms as well as the sustained growth of e-commerce. Systematic empirical evidence from retail and banking industries supports the theoretical findings
    Keywords: Technology Diffusion, Industry Dynamics, Shakeout
    JEL: E30 L10 O30
    Date: 2006–12–03
  3. By: Andrea Bonaccorsi; Lucia Piscitello; Cristina Rossi
    Abstract: In the framework of analyses on the relationship between geography and technological innovation, the role of universities has received considerable attention. Both theoretical and empirical literature has shown that university research positively influences the capacity for innovation of the surrounding firms (Jaffe, 1989; Feldman, 1994; Acs et al, 2002). Universities play a central role in innovation processes both as the main responsible for basic research and also as forgers of human capital’s skills. Empirical work has highlighted that such effects radiate from major university centres crossing borders and administrative boundaries (Anselin et al., 1997). This paper focuses on the relationship between universities and the innovative capacity at the territorial level. Specifically, our empirical analysis investigates whether university research spillovers are highly localised or they rather flow across borders. Empirical literature has widely investigated intensity and directions of such spillovers, mainly within the theoretical framework of Griliches-Jaffe. However, we extend the empirical evidence exploring whether intensity and directions of spillovers depend on universities’ specificities (e.g. size, fields of specialization, fund rising capacity) and on the local absorptive capacity. The analysis is developed at the Italian NUTS3 level, using an explicit spatial econometric approach applied to a knowledge production function. References Acs, Z., Anselin, L., and Varga, A. (2002): “Patents and innovation counts as measures of regional production of new knowledgeâ€, Research Policy 31, pp. 1069-1085. Anselin, L., Varga, A., and Acs, Z. (1997): “Local geographic spillovers between University research and high technology innovationsâ€, Journal of Urban Economics 42, pp. 422-448. Feldman, M. (1994): The Geography of innovation, Kluwer Academic Publishers. Dordrecht. Jaffe, A. (1989): “Real effects of academic researchâ€, The American Economic Review, vol 79, n. 5, pp. 957-970.
    Date: 2006–08
  4. By: Sebastien Lechevalier (EHESS and Maison franco-japonaise); Yukio Ikeda (Graduate School of Social Sciences, Yokohama National University and Maison franco-japonaise); Junichi Nishimura (Graduate School of Economics, Hitotsubashi University and Maison franco-japonaise)
    Abstract: The growing trend of collaborative R&D has been well documented recently, both at a global level and through national and industry case studies. However, there is no general agreement on its causes as well as on the motives of the firms collaborating in R&D with other players. The Japanese innovation system (JIS) is no exception. Furthermore, in this case, it is particularly important, because the JIS has been described since the 1970s as dominated by "in-house" R&D by large firms and this feature has been considered as one reason of the limits that the JIS reached at the end of the 1980s. By contrast to the existing literature on collaborative R&D in Japan, this paper focus on the case of the robot technology (RT), by using patent data applied in Japan between 1991 and 2004. The questions we address in this paper are as follows: Did the R&D collaboration in RT increase since the beginning of the 1990s? Did the R&D collaborations lead to higher quality of the outcomes? Is it possible to categorize different forms of collaborations and different types of players (depending on their degree of collaboration)? How to explain the evolution of R&D collaboration, if any? Our results are as follows. First, the level of R&D collaboration in the RT in Japan is overall low and dominated by inter-firm collaborations; but it has increased between 1991 and 2004, especially in the case of collaboration between firms and universities. Second, R&D collaboration has apparently a positive impact on the quality of the patents, but should be more carefully investigated. Third, we find a significant heterogeneity across firms in the practices of collaborations (number of collaborations, choice of partners and "fidelity" with the partners). Fourth, these patterns are tentatively explained by the structural characteristics of the RT (by reference to a transaction cost argument and to the role of science-based technologies) and by firms' capabilities hypothesis; however, it is not possible to clearly identify if one theoretical hypothesis is better supported by the facts.
    Date: 2006–12
  5. By: Deng, Yi (Department of Economics, Southern Methodist University)
    Abstract: The economic implications of international patent harmonization have attracted little empirical scrutiny. Based on patent application and renewal data in major European countries since the early 1980s, this paper examines the empirical relationship between international patenting, R&D, and the "trade flows" of patent rights across national borders. The analysis reveals substantial patent "trade imbalance" among European countries, with size comparable to regular trade balance. Differences among countries' ability in rent appropriation through international patent harmonization are primarily related to their differences in R&D intensity and efficiency, as well as institutional differences in enforcing patent rights.
    Keywords: International Patent Harmonization, Patent Trade Imbalance, Implicit R&D subsidy
    JEL: O31 O34 O38
    Date: 2006–04
  6. By: Robert M. Hunt (Research Department Federal Reserve Bank of Philadelphia); Leonard I. Nakamura
    Abstract: Using Compustat data, we document that prior to 1980, large R&D per-forming firms had higher R&D intensity (R&D/Sales) than small firms in the same industries. Over the course of the next two decades, in these same in-dustries, small firms came to rival and even surpass large firms in terms of R&D intensity. During this period, corporate R&D intensity nearly doubled and most of the aggregate increase is due to the substantial increase in R&D intensity among small firms. Little of the change in composition is explained by changes in the industrial distribution of R&D. Why did small firms increase their R&D after 1980 and not before? We argue that, after 1980, small firms were able to compete on better terms in industries already dominated by large firms. We show that the patterns we observe in the data are consistent with a straightforward dynamic model of R&D with falling barriers to entry. But what barriers fell? We argue the shift in R&D intensity by small firms was largely due to the electronics revolution. Prior to the 1980s, a large corporate sales and clerical force was an essential factor for the rapid and widespread distribution of new products. This technology clearly favored large, established firms. But the electronics revolution obviated the need for these factors, making entry easier.
    Keywords: R&D, barriers to entry, innovation
    JEL: O3
    Date: 2006–12–03
  7. By: Soete, Luc (UNU-MERIT and University of Maastricht); Freeman, Chris (SPRU, University of Sussex)
    Abstract: The science-technology-innovation system is one that is continuously and rapidly evolving. The dramatic growth over the last twenty years in the use of science, technology and innovation (STI) indicators appears first and foremost the result of a combination between on the one hand the easiness of computerized access to an increasing number of measures of STI and on the other hand the interest in a growing number of public policy and private business circles in such indicators as might be expected in societies which increasingly use organised science and technology to achieve a wide variety of social and economic objectives and in which business competition is increasingly based on innovation. As highlighted on the basis of 40 years of indicators work, frontiers and characteristics that were important last century may well no longer be so relevant today and indeed may even be positively misleading.
    Keywords: Technological Change, Science and Technology, Innovation, Statistical Indicators, Measurement of Economic Growth, Policy Making
    JEL: O31 O33 C8
    Date: 2007
  8. By: Giammario Impullitti (Economics NYU)
    Abstract: In this paper I examine the effects of international technological competition on innovation, growth, and optimal R&D subsidies. I focus on a particular dimension of competition: the share of industries where domestic and foreign research firms compete for innovation. In a version of the fully-endogenous quality-ladder growth model I show that the effect of competition on innovation and growth depends on the specification of the research technology. Secondly, I find that increases in foreign competition trigger a business-stealing effect that reduces income and welfare and, regardless of the innovation effect, raises the optimal domestic R&D subsidy. Intuitively, the higher the threat of international competition the more instrumental innovation subsidies will be in helping domestic incumbent firms to retain their shares of the global market. Thirdly, I perform a quantitative exercise: I first build an empirical index of international technological competition and find that in the OECD countries the share of competitive sectors increased from 35 percent in 1973 to 70 percent in 1989. Then, I use this evidence to evaluate the optimality of the U.S. R&D subsidy response to observed competition in that period. I find a welfare loss of the observed policy, relative to the optimal, ranging between 0.2 and 0.5 percentage points of quality-adjusted per-capita consumption. Finally, I extend the model to account for strategic policy complementarities and show that the positive effect of competition on the optimal subsidy is robust to this set up. In addition, I find that competition increases the benefits from R&D policy cooperation.
    Keywords: international competition, trade and gowth, endogenous technical change, strategic industrial policy
    JEL: F12 F43 O31
    Date: 2006–12–03
  9. By: Matthew Mitchell (Department of Economics University of Iowa); Andy Skrzypacz
    Abstract: We study a model where innovation comes in two varieties: improvements on existing products, and new products that expand the scope of a technology. We make this distinction in order to highlight how market structure can determine not only the quantity of innovation but also its direction. We study two market structures. The first is the canonical one from the endogenous growth literature, where innovations can be developed by anyone, and developers market their own innovations. We then consider a more concentrated industry, where all innovation and pricing for a given technology is monopolized. We study the implications of the different market structures for both types of innovation, focusing on differences they induce in the direction of technological change. We apply our model model to the case of a hardware/software technology and analyze which market structure offers greater profits to a monopolist who can monopolize either hardware or software. We compare social welfare across the market structures, and discuss whether one type of innovation should be subsidized over another
    Keywords: Market Strucuture, Innovation
    JEL: L16
    Date: 2006–12–03
  10. By: Diego Comin; Bart Hobijn (Microeconomic and Regional Studies Fnct Federal Reserve Bank of New York)
    Abstract: We introduce a model of endogenous growth in which the returns to innovation are determined by the technology adoption decisions of the users of the new innovative technologies. The technology adoption decisions in our model consist of two dimensions. The first is when to adopt a new technology. The second is at what initial productivity level to adopt it and which part of its productivity potential to learn by doing. Our model economy is one with realistic adoption curves for each technology, the shape of which are an important determinant of the return to innovations and thus of economic growth
    Keywords: endogenous growth, learning by doing, technology adoption
    JEL: E13
    Date: 2006–12–03
  11. By: Roland Andersson (Royal Institute of Technology, Sweden); John Quigley (University of California, Berkeley); Mats Wilhelmsson (Royal Institute of Technology, Sweden)
    Abstract: During the past fifteen years, Swedish government policy has decentralized post-secondary education throughout the country. We investigate the economic effects of this decentralization policy on the level of productivity and innovation and their spatial distribution in the Swedish economy. We analyze productivity, measured as output per worker at the level of the locality, for 284 Swedish communities during a 14 year period, and innovation, measured by commercial patents awarded in 100 Swedish labor market areas during an 8 year period. These economic outcomes, together with data documenting the decentralization of university-based researchers, permit us to estimate the effects of exogenous changes in educational policy upon increases in productivity and the locus of innovative activity. We find important and significant effects of this policy upon economic output and the locus of knowledge production, suggesting that the decentralization has affected regional development through local innovation and increased creativity. Moreover, our evidence suggests that aggregate productivity was increased by the deliberate policy of decentralization.
    Date: 2006–07–13
  12. By: Ajay K. Agrawal; Avi Goldfarb
    Abstract: We report evidence indicating that Bitnet adoption facilitated increased research collaboration between US universities. However, not all institutions benefited equally. Using panel data from seven top engineering journals, Bitnet connection records, and a variety of institution ranking data, we find that medium-ranked universities were the primary beneficiaries; they benefited largely by increasing their collaboration with top-ranked schools. Furthermore, we find that the magnitude of this effect was greatest for co-located pairs. These results suggest that the most salient effect of lowering communication costs may have been to facilitate gains from trade through the specialization of research tasks. Thus, the advent of Bitnet -- and likely subsequent versions, including the Internet -- seems to have increased the role of second-tier universities in the national innovation system as producers of new, high-quality knowledge.
    JEL: O33 R11 Z13
    Date: 2006–12
  13. By: Marco, Alan C. (Vassar College Department of Economics)
    Abstract: Using a sample of patents litigated between 1977 and 1997, I estimate stock market reactions to patent litigation decisions and to patent grants. I find that the resolution of uncertainty over validity and infringement is worth as much to the firm as the initial patent right. Each is worth about 1 to 1.5% excess returns. Additionally, I find that there are significant differences pre and post-1982 with the establishment of the Court of Appeals for the Federal Circuit. I also find that there are significant differences in reactions for plaintiff patent-holders and defendant patent-holders. Interestingly, there is no similar effect for appellate court decisions relative to the district court. To my knowledge, this is the first study that measures the stock market reactions to legal outcomes of patent cases.
    Date: 2006–11
  14. By: Andrea Conte
    Abstract: This paper reviews the emergence and evolution of major topics in economics of innovation. Throughout the paper, particular attention is devoted to the analysis of the cumulative aspects and complementarities between di_erent paths of research over time. Moreover, this survey highlights the crucial relationship between technological change (TC) and economic growth, and the way in which economics literature has dealt with this issue over time. The structure of this survey distinguishes between different decades and it identifies the key debates in the economics literature in each period. Although relevant steps have been made over time, a systematic and satisfactory integration of di_erent theoretical perspectives appears still to be found. In recent years, there have been more sophisticated empirical and theoretical attempts to deal with TC at several, and more disaggregated, levels of analysis. Notwithstanding such advancements, further research is needed to ensure the development of a more general theory of the determinants and the effects of TC. In turn, such theory has to deal primarily with an assessment of both the complementarities between the economic incentives and the internal mechanisms of the so-called "black box" (Rosenberg, 1994), and the heterogeneity which characterises the innovative process of firms across different sectors, countries and over time.
    Keywords: Technological change, economic growth, induced innovation, diffusion, evolutionary economics, path dependence
    JEL: O30 O40
    Date: 2006–12
  15. By: Marco, Alan C. (Vassar College Department of Economics)
    Abstract: This paper merges patent citation data with data on pharmaceutical patent expirations, generic entry, and pricing to explore the effects of observable patent characteristics on off-patent and on-patnet pharmaceutical pricing. Using a sample of drug patents facing generic entry in the 1990s, I find that the price of branded drugs increased on average in the face of generic entry. Importantly, I find that the number of patent citations that a drug receives from other firms is correlated with a decrease in markup and a decrease in the duration of the markup. Conversely, self-citations are correlated with higher prices and slower decay in prices. The results indicate that patent citations may signal the degree of inter-molecule substitution. And, importantly, self-citations may indicate a degree of cumulative patenting that enables a firm to effectively extend or strengthen the original patent protection. This research takes a step forward in understanding the distinction between “positive” citations and “negative” citations related to creative destruction.
    Date: 2006–11
  16. By: Andrea Caggese (Economics and Business Pompeu Fabra University)
    Abstract: A number of studies show that entrepreneurial households face a large amount of unvidersifiable risk. This paper studies the effects of this risk on the relationship between uncertainty, innovation and investment dynamics. In the first part of the paper we develop a simple model of a risk averse entrepreneurial household that can invest in a risky technology or in a risk free asset. The idiosyncratic risk of the technology is not insurable. We calibrate the model so that a simulated industry of entrepreneurial households matches the cross sectional volatility of profits and the distribution of the concentration of wealth (the percentage of net worth that each entrepreneurial household invests in their own business) across US entrepreneurial households. We show that, due to the lack of diversification, a small increase in uncertainty has a large negative effect on the investment decisions of entrepreneurial firms. Given that entrepreneurial firms are on average much smaller than publicly owned firms, this result provides a plausible explanation of the findings of Ghosal and Loungani (2000), who show that the negative impact of uncertainty on investment is much greater in US industries dominated by small firms than in those dominated by large firms. In the second part of the paper we study a unique dataset of italian manufacturing firms with both information about the property structure and about the type of investment performed by the firms. We show that an increase in uncertainty negatively affects the investment in innovation of entrepreneurial firms, while it does not affect the investment in innovation of non entrepreneurial firms
    Keywords: Entrepreneurial Risk, Investment, Innovation
    JEL: G1 O31
    Date: 2006–12–03
  17. By: Matti Liski; Pauli Murto
    Abstract: We consider how efficient markets adopt technologies that reduce dependence on volatile factors such as oil. We find a relationship between volatility and technology overlap: new technology entry rate exceeds old technology exit rate under sufficient uncertainty. From this follows that efficient adoption is characterized by prolonged coexistence of alternative technologies and that uncertainty increasingly propagates from input to output market despite the declining use of the volatile factor in production. The properties depend on (i) the option to remain idle rather than exit, (ii) heterogeneity in factor supply, and (iii) factor market volatility
    Keywords: technology adoption, factor markets, uncertainty, irreversible investment, energy
    JEL: D9 O30 Q40
    Date: 2006–12–03
  18. By: Chris Papageorgiou (Department of Economics Lousiana State University); Andreas Savvides; Marios Zachariadis
    Abstract: Does medical technology originating in countries close to the technology frontier have a significant impact on health outcomes in countries distant from this frontier? This paper considers a framework where lagging countries may benefit from medical technology (a result of research and development by countries close to the frontier) that is embodied in medical imports or diffuses in the form of ideas. Using a novel dataset from a cross-section of 73 technology-importing countries, we show that medical technology diffusion is an important contributor to improved health status, as measured by life expectancy and mortality rates
    Keywords: International Technology Diffusion, Health Status
    JEL: O30 O40
    Date: 2006–12–03
  19. By: Julia Hirsch (Universidad Iberoamerica and CFS)
    Abstract: The effects of public policy programs which aim at internalizing spill-overs due to successful innovation are analyzed in a sequential double-sided moral hazard doublesided adverse selection framework. The central focus lies in analyzing their impact on contract design. We show that in our framework only ex post grants are a robust instrument for implementing the first-best situation, whereas the success of guarantee programs, ex ante grants and some types of investment grants depends strongly on the characteristics of the project: in certain cases they not only give no further incentives but even destroy contract mechanisms and so worsen the outcome.
    Keywords: Public Policy, Contract Design, Venture Capital, Moral Hazard, Asymmetric Information
    JEL: D82 G24 G32 H25 H81
    Date: 2006–12–08
  20. By: Xavier Gine (DECRG The World Bank); Stefan Klonner
    Abstract: We study adoption of a costly new technology when the profitability of the new technique differs over individuals and there is uncertainty about these individual-specific differences. We establish that such individual-specific uncertainty results in a financing constraint when debt contracts are characterized by limited liability and limited commitment on the side of the borrower. In data from a Tamil coastal village, in which a new fishing boat became available in 2001, we find significant evidence for individual-specific uncertainty about the profitability of the new technology. Results suggest that this uncertainty reduces the amount of external finance available for the technology switch by 20 percent. The resulting need for complementary self-finance creates a wealth threshold, below which adoption, even if profitable, is not feasible. Kuznets-type inequality dynamics result on the middle run.
    Keywords: Learning, Competition, Credit Constraints
    JEL: O33 D83 D92
    Date: 2006–12–03
  21. By: Marco, Alan C. (Vassar College Department of Economics)
    Abstract: The use of patent citations as a measure of patent "quality" increased dramatically in recent years. I estimate the hazard of patent citation, and find evidence of unobserved heterogeneity. Hazard estimation provides a means to separate patent quality from citation "inflation."
    Date: 2006–11
  22. By: Minjae Song (School of Economics Georgia Institute of Technology)
    Abstract: The paper has two objectives. The first is to construct a dynamic model of research joint ventures (RJVs) in which firms competing in the product market cooperate in investing to improve generic manufacturing technology. The second objective is to analyze cooperative research led by SEMATECH in the semiconductor industry using the dynamic model. The estimation consists of two stages. In the first stage, consumer demand is estimated using product level data, and state variables are constructed to reflect a technological advance and an evolution of firms' competitiveness in the product market. In the second stage, research expenditure level and firms' value functions are computed for every combination of the state variables as solutions to the dynamic model. I also compute firms' research expenditures for competitive research by making firms unilaterally invest in research. The results show that in RJVs firms' research expenditures go down to one fifth of what they would spend in competitive research. Lower research expenditure results in higher net profits in RJVs, although variable profits are similar in all regimes. RJVs are also more likely to generate higher consumer surplus than competitive research. This is because, while consumers benefit from more frequent introductions of higher quality products in competitive research, they occasionally pay higher prices than they do in RJVs for the same quality products. The net effect is that consumers are hurt more by higher price in competitive research than by less frequent introductions of new products in RJVs. Firms also make different research decisions for the same changes in the product market conditions, depending on whether they cooperate or compete in research
    Keywords: Research Joint Venture, Dynamic Model of Oligopoly Market, Product Innovation
    JEL: C73 D92 L63
    Date: 2006–12–03
  23. By: Klaus Desmet (Department of Economics Universidad Carlos III); Stephen L. Parente
    Abstract: Why is the adoption of more productive technologies more fiercely resisted in some societies than in others? This paper examines the role of market size and free trade in determining whether firms or workers resist the adoption of more advanced technologies. It puts forth a model whereby the price elasticity of demand for each industry's product is an increasing function of the economy's population size. A more elastic demand lowers the resistance to technology adoption because the drop in the price of the industry's output that follows the adoption of a cost-saving technology is associated with a larger increase in industry's revenue. We demonstrate this mechanism numerically and provide empirical support for this theory.
    Keywords: Technology Adoption, Resistance, Trade, Ideal Varieties
    JEL: O14 F16
    Date: 2006–12–03
  24. By: Roland Andersson (Royal Institute of Technology); John Quigley (University of California, Berkeley); Mats Wilhelmsson (Royal Institute of Technology, Sweden)
    Abstract: This paper analyzes the spatial distribution of "creativity" -- the production of new knowledge. We analyze commercial patents granted in Sweden during 1994-2001 using a panel of one hundred labor market areas which encompass the entire country. We relate patent activity to measures of localization and urbanization, to the industrial composition and size distribution of firms, and to the regional distribution of human capital. Our analysis confirms the importance of human capital and research facilities in stimulating regional patent output. Importantly, our results document the importance of agglomeration and spatial factors in influencing creativity: Patent activity is increased in larger and more dense labor markets and in regions in which a larger fraction of the labor force is employed in medium-sized firms. Our results also indicate that creativity is greater in labor markets with more diverse employment bases and in those which contain a larger share of national employment in certain industries, confirming the importance of urbanization and localization economies in stimulating creativity. Our quantitative results suggest that the urbanization of Sweden during the 1990s had an important effect upon the aggregate level of patent activity in the country, leading to increases of up to five percent in aggregate patents.
    Keywords: Agglomeration,
    Date: 2006–07–13
  25. By: John Riew (Faculty of Economics, University of Tokyo)
    Abstract: Phenomenal advances, which many would call a "revolution," in U.S. information technology (IT) sectors of the 1990s gave rise to dramatic productivity gains. They had profound effects on economies of the U.S. and other nations. We begin with an overview of the IT industries of the nineties and examine their impact on U.S. economy, at large, and by industry. To see the development in perspective, we discuss the perceived catalysts to the revolution. Then we explore how the remarkable sequence of events of the decade affected the rest of the world, developed and developing, more focus placed on the latter. The paper ends with a review of Korea and Taiwan, with specific references to the impact on their industrial structures during and after the deepening U.S. IT revolution.
    Date: 2006–10
  26. By: Johan P. Olsen; Peter Maassen
    Date: 2007–01–03
    Abstract: Nurturing and growing innovative start-ups has become an important point on the political agenda. However, many financial schemes and incubation initiatives that were started up in the mid-nineties were cancelled or down scaled after the dot com bubble. There was a consensus that innovative start-ups need more than just money. Networking and coaching were identified as additional needs. Moreover, the intensity and nature of these needs change over along the different stages of the early life cycle. In this paper we make an in depth study of three approaches to nurture and grow innovative start-ups. Each of these initiatives is also embedded in a totally different national innovation system: Sitra in Finland, Chalmers in Sweden and Anvar/Banque de Développement des PMEs in France. A comparison is made of each approach in terms of its financing, networking and coaching support, along the different stages of the start-up life cycle.
    Date: 2006–11
  28. By: Roberto M Samaniego (Department of Economics George Washington University)
    Abstract: The paper presents a vintage capital model that is consistent with the the relationship between the rate of embodied technical change and the rate of entry and exit across industries. In the model, the costs imposed by the regulation of entry may bias the sectoral composition of an economy towards industries in which the rate of technical change is low -- an effect termed technological skew. This prediction matches the empirical relationship between institutional entry costs and several indicators of sectoral composition across industrialized economies
    Keywords: Entry, exit, embodied technical change, regulation of entry, sectoral composition, technological skew, information technology, services.
    JEL: H25 L63 O33 O38
    Date: 2006–12–03
  29. By: David Huffman (University of California, Berkeley); John Quigley (University of California, Berkeley)
    Abstract: Among the many sorting functions provided by institutions of higher education, there is a geographic dimension. During the years spent as students and residents of local communities, students develop specific networks and contacts, and perhaps their tastes change as well. After graduation, these students may be more likely to reside in the locality or region in which they have been educated.This paper presents evidence which suggests that the university is important in attracting human capital to the local area and in stimulating entrepreneurial talent in the region.We also measure the strength of the impact of the university on geographical location in one specific instance. For post-graduate professional business and engineering students at Berkeley, we compare the spatial distribution of residences before attending the university and again after graduation.The results are suggestive of the importance of academic institutions in the geographic pattern of agglomerations of footloose scientific firms, such as those in the Silicon Valley just south of San Francisco. The results also reinforce the self-interested reasons for government investment in high-quality educational institutions, as measured by the return on the augmented human capital stock in the region.
    Date: 2006–06–27
  30. By: Kerstin Press
    Abstract: The present paper investigates the role of decentralisation for the adaptability of production networks in clusters. It develops a simulation model able to test to what extent decentralised, networked clusters with many small firms (Silicon Valley) can be more adjustable than those composed of fewer, large companies (Boston 128). The model finds that for limited degrees of product complexity, decentralisation increases cluster adaptability at the expense of greater instability. This increases the risk of firm failure. Moreover, it is shown that agent numbers matter greatly for the competitiveness of decentralised clusters. Only if they host more firms than integrated cluster types is their lead in performance maintained. As a result, an additional condition had to be met to allow the Silicon Valley type to outperform the Boston 128 one: Greater firm numbers and strong startup dynamics.
    Keywords: Clusters, Adjustment, N/K model, Simulation, Decentralisation
    JEL: L22 C63 R11
    Date: 2006–12
  31. By: Leo van Grunsven
    Date: 2006–12
  32. By: Masahiro Okuno (Faculty of Economics, University of Tokyo and RIETI); Hirokazu Takizawa (RIETI); Yasunori Watanabe (Manufacturing Management Research Center, University of Tokyo)
    Abstract: This paper explains the concept of product architecture in the context of increasing complexity of artifacts. We first explore the process where artifacts have gained complexity. Historically, during the development of human-artifact interaction, it was critical to effectively combine mechanical information processing of artifacts and contextual information processing of humans. Dramatic decreases in mechanical information processing cost due to IT development induced hierarchical subdivision of artifacts. As a result, artifacts now have a modular structure consisting of numerous parts. This brought to the fore the question of how to solve the complicated coordination/integration problem between development of whole product system and that of individual parts. There are two ways of classifying solutions to this problem. On the one hand, there is a distinction between coordination by humans and coordination by product architecture. On the other hand, there is distinction between decentralized coordination through markets and cooperative coordination via organizations or networks.
    Date: 2006–04

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