nep-ino New Economics Papers
on Innovation
Issue of 2007‒03‒31
fourteen papers chosen by
Koen Frenken
Utrecht University

  1. An Empirical Analysis of the Effects of Patents and Secrecy on Knowledge Spillovers By Schmidt, Tobias
  2. Location and R&D alliances in the European ICT industry By Narula, Rajneesh; Santangelo, Grazia D.
  3. Economics and the design of patent systems By Robert M. Hunt
  4. On Backstops and Boomerangs: Environmental R&D under Technological Uncertainty By Timo Goeschl; Grischa Perino
  5. Innovation Without Magic Bullets: Stock Pollution and R&D Sequences By Timo Goeschl; Grischa Perino
  6. Stagnation in the Drug Development Process: Are Patents the Problem? By Dean Baker
  7. Harnessing Success: Determinants of University Technology Licensing Performance By Sharon Belenzon; Mark Schankerman
  8. Exclusive versus Non-exclusive Licensing Strategies and Moral Hazard By Schmitz, Patrick W.
  9. Information Technology and the Ambidexterity Hypotheses: An Analysis in Product Development By ELENA REVILLA
  10. North-South Technology Diffusion: How Important Are Trade, FDI and International Telecommunications? By Yanling Wang
  11. Random walk to innovation: why productivity follows a power law By Christian Ghiglino
  12. Simulating the Adoption of Fuel Cell Vehicles By Malte Schwoon
  13. Internal versus external labour flexibility: The role of knowledge codification By Eve Caroli
  14. Long-Run Growth and the Evolution of Technological Knowledge By Hendrik Hakenes; Andreas Irmen

  1. By: Schmidt, Tobias
    Abstract: Theoretical considerations suggest that secrecy reduces spillovers almost completely through non-disclosure, while the disclosure requirement of patents generates some spillover and at the same time allows firms to appropriate knowledge. In this paper we empirically analyze whether protection by secrecy or protection by patents is associated with lower knowledge spillovers. Since the amount of knowledge spillovers is hard to measure directly, we look at the impact of the usage of protection methods in an industry on the innovation activities of firms using external knowledge. One goal is to assess if firms have moved to a more open innovation business model, i.e. allow more knowledge spillovers to occur despite using protection methods. Our estimations show that the usage of both, patents and secrecy, hinders the innovation activities of firms through the reduction of spillovers to firms in their own industry. We conclude that the appropriability effect of patents outweighs the disclosure effect. We also find some evidence that the open innovation business model has not been implemented widely.
    Keywords: Knowledge Spillovers, patents, secrecy, open innovation, ordered probit
    Date: 2006
  2. By: Narula, Rajneesh (University of Reading Business School); Santangelo, Grazia D. (Facoltà di Scienze Politiche, Università degli Studi di Catania)
    Abstract: This paper shows empirically that in an intra-industry oligopolistic scenario the location of a firm's innovative activities plays an important role in determining its partner selection in R&D alliances. Such a role is mainly attributed to a strategic use of R&D alliances as a means to limit knowledge flows and protect competences, rather than to promote knowledge flows. By drawing on a novel dataset matching alliances and patent data for the European ICT industry, the econometric analysis shows that partners' prior co-location (at both national and sub-national regional level), previous ties and technological overlap matter in the choice of partner, while common nationality has a negative impact on alliance formation.
    Keywords: alliances, strategy, efficiency, R&D location
    JEL: D23 F23 O18 O32 R3
    Date: 2008
  3. By: Robert M. Hunt
    Abstract: The author uses intuition derived from several of his research papers to make three points. First, in the absence of a common law balancing test, application of uniform patentability criteria favors some industries over others. Policymakers must decide the optimal tradeoff across industries. Second, if patent rights are not closely related to the underlying inventions, more patenting may reduce R&D in industries that are both R&D and patent intensive. Third, for reasons largely unrelated to intellectual property, the U.S. private innovation system has become far more decentralized than it was a generation ago. It is reasonable to inquire whether a patent system that worked well in an era of more centralized innovation functions as well for the more decentralized environment of today.
    Date: 2007
  4. By: Timo Goeschl (University of Heidelberg, Department of Economics); Grischa Perino (University of Heidelberg, Department of Economics)
    Abstract: The literature on environmental R&D frequently studies innovation as a two-stage process, with a single R&D event leading from a conventional polluting technology to a perfectly clean backstop. We allow for uncertainty in innovation in that the new technology may turn out to generate a new pollution problem. R&D may therefore be optimally undertaken more than once. Using and externding recent results from multi-stage optimal control theory, we provide a full characterization of the optimal pollution and R&D policies. The optimal R&D program is strictly sequential and has an endogenous stopping point. Uncertainty drives total R&D effort and its timing.
    Keywords: stock pollution, backstop technology, multi-stage optimal control, pollution thresholds, uncertainty
    JEL: Q55 Q53 O32 C61
    Date: 2007–01
  5. By: Timo Goeschl (University of Heidelberg, Department of Economics); Grischa Perino (University of Heidelberg, Department of Economics)
    Abstract: We study the optimal R&D trajectory in a setting where new technologies are never perfect backstops in the sense that there is no perfectly clean technology that eventually solves the pollution problem once and for all. New technologies have stings attached, i.e. each emits a specific stock pollutant. Damages are convex in individual pollution stocks but additive across stocks, creating gains from diversification. The research and pollution policies are tightly linked in such a setting. We derive the optimal pollution path and R&D program. Pollution stocks overshoot and in the long run all available technologies produce. Research is sequential and the optimal portfolio of technologies is finite.
    Keywords: horizontal innovation, stock pollution, backstop technology, multistage optimal control, pollution thresholds, overshooting
    JEL: Q55 Q53 O32 C61
    Date: 2006–12
  6. By: Dean Baker
    Abstract: The rate of new drug development has stagnated, in spite of large increases in both private and public sector spending on biomedical research. The flip side of slower progress is higher drug costs. The cost of developing new drugs has been rising at an average real rate of more than 7 percent since 1987. This report considers the ways in which government patent monopolies distort incentives so that pharmaceutical companies may not opt to minimize research costs. It documents some of the perverse incentives created by patent monopolies in drugs.
    JEL: O31 O32 O34 O38 L12 I18 H21 D42
    Date: 2007–03
  7. By: Sharon Belenzon; Mark Schankerman
    Abstract: We study the impact of incentive pay, local development objectives and government constraints onuniversity licensing performance. We develop and test a simple contracting model of technologylicensing offices, using new survey information together with panel data on U.S. universities for1995-99. We find that private universities are much more likely to adopt incentive pay than publicones, but ownership does not affect licensing performance conditional on the use of incentive pay.Adopting incentive pay is associated with about 30-40 percent more income per license. Universitieswith strong local development objectives generate about 30 percent less income per license, but aremore likely to license to local (in-state) startup companies. Stronger government constraints are'costly' in terms of foregone license income and startup activity. These results are robust to controlsfor observed and unobserved heterogeneity.
    Keywords: incentives, performance pay, universities, technology transfer, licensing, localdevelopment
    JEL: O31 O32 O33 F23
    Date: 2007–02
  8. By: Schmitz, Patrick W.
    Abstract: An upstream firm can license its innovation to downstream firms that have to exert further development effort. There are situations in which more licenses are sold if effort is a hidden action. Moral hazard may thus increase the probability that the product will be developed.
    Keywords: Innovation; Licences; Monopoly; Private information
    JEL: D45 D82 L12
    Date: 2007–03
  9. By: ELENA REVILLA (Instituto de Empresa)
    Abstract: We investigated ambidexterity, defined as the capacity to simultaneously achieve exploration and exploitation activities at a product development level. Building on the knowledge management literature, we argue that information technology -defined by a combination of the convergent and divergent dimension- facilitate ambidexterity. Further, ambidexterity mediates the relationship between IT and performance. We found strong evidence that ambidexterity mediates the relationship between the IT that encourage these activities and subsequent performance in product development. Data collected from 80 product developments supported our hypotheses.
    Keywords: Information technology, Ambidexterity, Product development , Performance Knowledge Management
    Date: 2007–03
  10. By: Yanling Wang (The Norman Paterson School of International Affairs, Carleton University)
    Abstract: There is an influential literature studying the impact on total factor productivity (TFP) of foreign technology obtained through imports (trade). This paper builds on that literature and is a first attempt to examine the effects on TFP in the South of technology developed in the North that is diffused not only through international trade, but also through foreign direct investment (FDI) and international telecommunications (ITC) measured in call traffic. For developing countries in the South, we construct trade-related, FDI-related and ITC-related North foreign R&D indices, using country specific R&D stocks in the North, and respectively with North-South bilateral trade patterns, FDI patterns and ITC volumes. We find: (i) trade and ITC both significantly promote North- South technology diffusion, while FDI seems to generate North-South technology diffusion, though not always significantly; (ii) the effects on TFP through ITC-related foreign R&D are the largest, followed in order by those through trade-related, and then by those through FDI-related foreign R&D indices; and (iii) the effects on TFP of traderelated North foreign R&D are primarily driven by the growth in developing countries’ trade-to-GDP ratios, while the effects from ITC-related North foreign R&D are largely due to the growth in the Northern R&D stocks.
    Keywords: Technology Diffusion, Trade, FDI, International telecommunications
    JEL: F1
    Date: 2006–03–15
  11. By: Christian Ghiglino
    Abstract: In this paper we propose a mechanism generating innovations with productivity distributed according to a power law. We assume that knowledge creation occurs as new ideas are produced from combinations of existing ideas. The productivity of an innovation is determined by an unobservable intrinsic component as well as by the productivity of the parent ideas and their parents, thus generating a network of spillovers. The second important feature is that the innovator has no global information on the network of parenthood links across ideas but has acces to local knowledge, as for example the list of cited references in a patent. The optimal behaviour of the innovator is to "walk randomly" through the network of "citations" as this algorithm leads to selecting highly connected parent nodes. We show that the distribution of productivity resulting from this optimal behaviour follows a power law. The intuition behind the result is that the innovator focuses his efforts on strengthening local spillovers because he has no command on the other sources of productivity. When this process of innovation is imbedded in a model a la Kortum (1997) balanced growth of output is generated.
    Date: 2007–03–27
  12. By: Malte Schwoon
    Abstract: Supply security and environmental concerns associated with oil call for an introduction of hydrogen as a transport fuel. To date, scenario studies of infrastructure build up and sales of fuel cell vehicles (FCVs) are driven by cost estimates and technological feasibility assumptions, indicating that there is a "chicken and egg problem": Car producers do not offer FCVs as long as there are no hydrogen filling stations, and infrastructure will not be set up unless there is a significant number of FCVs on the road. This diffusion barrier is often used as an argument for a major (public) infrastructure program, neglecting that the automobile market is highly competitive and car producers, consumers, and filling station operators form an interdependent dynamic system, where taxes influence technology choice. In this paper, an agent-based model is used that captures the main interdependencies to simulate possible diffusion paths of FCVs. The results suggest that a tax on conventional cars can successfully promote diffusion even without a major infrastructure program. However, consumers and individual producers are affected differently by the tax, indicating that differently strong resistance towards such a policy can be anticipated. Moreover, there is evidence that some producers might benefit from cooperation with filling station operators to generate a faster build up of infrastructure.
    Keywords: Diffusion Process, Agent Based Modeling, Hydrogen Economy, Alternative Fuel Vehicles
    JEL: O33 D11 D21
    Date: 2005–08
  13. By: Eve Caroli
    Abstract: This article uses a competence-based approach to the firm in order to analyse the recent destabilisation of internal labour markets. We argue that increasing knowledge codification made possible by the diffusion of information and communication technologies has made competences less dependent upon individuals. Knowledge has been increasingly embodied in firms themselves which has played an important role in lowering the relative cost of human resource management strategies based on external labour flexibility. As a consequence, recourse to external labour markets has developed, which may harm firms' innovative capabilities in the long run.
    Date: 2007
  14. By: Hendrik Hakenes (Max Planck Institute for Research on Collective Goods, Bonn); Andreas Irmen (University of Heidelberg, Department of Economics)
    Abstract: The long-run evolution of per-capita income exhibits a structural break often associated with the Industrial Revolution. We follow Mokyr (2002) and embed the idea that this structural break reflects a regime switch in the evolution of technological knowledge into a dynamic framework, using Airy differential equations to describe this evolution. We show that under a non-monotonous income-population equation, the economy evolves from a Malthusian to a Post-Malthusian Regime, with rising per-capita income and a growing population. The switch is brought about by an acceleration in the growth of technological knowledge. The demographic transition marks the switch into the Modern Growth Regime, with higher levels of per-capita income and declining population growth.
    Keywords: crisis Industrial Revolution, Technological Change, Malthus, Demographic Transition
    JEL: J11 O11 O33 O40
    Date: 2007–03

This nep-ino issue is ©2007 by Koen Frenken. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.