nep-ino New Economics Papers
on Innovation
Issue of 2007‒06‒11
twenty-one papers chosen by
Koen Frenken
Utrecht University

  1. Are Firms That Received R&D Subsidies More Innovative? By Mohnen, Pierre; Bérubé, Charles
  2. Industry Specialization, Diversity and the Efficiency of Regional Innovation Systems By Michael Fritsch; Viktor Slavtchev
  3. Radical Innovation and Network Evolution By Sandra Phlippen; Massimo Riccaboni
  4. The Adoption and Diffusion of Organizational Innovation: Evidence for the U.S. Economy By Lisa M. Lynch
  5. Technology Supply Chain or Innovation Capacity?: Contrasting Experiences of Promoting Small Scale Irrigation Technology in South Asia By Hall, Andy; Clark, Norman; Naik, Guru
  6. Pioneers, Submariners, or Thicket-builders: Which Firms Use Continuations in Patenting? By Deepak Hegde; David C. Mowery; Stuart Graham
  7. The impact of ICT on the growth of the service industries By Koson Sapprasert
  8. Innovation and Market Structure in Presence of Spillover Effects By Khazabi, Massoud
  9. Patent Reform: Aligning Reward and Contribution By Carl Shapiro
  10. Innovation and the export-productivity link By Cassiman, Bruno; Golovko, Elena
  11. The origins and implications of using innovation systems perspectives in the design and implementation of agricultural research projects: Some personal observations By Hall, Andy
  12. The Spatial Hierarchy of Technological Change and Economic Development in Europe By Verspagen, Bart
  13. The Determinants of Patent Applications Outcomes - Does Experience Matter? By Schneider, Cédric
  14. A Brief History of Space and Time: the Scope-Year Index as a Patent Value Indicator Based on Families and Renewals By van Pottelsberghe, Bruno; van Zeebroeck, Nicolas
  15. Patents and the Survival of Internet-related IPOs By Iain M. Cockburn; Stefan Wagner
  16. Why Should Governments Support Broadband Adoption? By Kolko, Jed
  17. Diffusion and appropriation of knowledge in different organizational structures By Gabriel Yoguel; Analia Erbes; Veronica Robert; Jose Borello
  18. Technological Innovation in the Airline Industry: The Impact of Regional Jets By Jan K. Brueckner; Vivek Pai
  19. R&D Cooperation and economic growth: A dynamic panel data analysis By Sadraoui, Tarek; Ben-Zina, Naceur
  20. From Industrial Policy to Innovative Policy: Japan's Pursuit of Competitive Advantage By Marcus Noland
  21. High-tech exports from developing countries: A symptom of technology spurts or statistical illusion? By Martin Srholec

  1. By: Mohnen, Pierre (UNU-MERIT and Maastricht University); Bérubé, Charles (Industry Canada)
    Abstract: This paper looks at the effectiveness of R&D grants for Canadian plants that already benefit from R&D tax credits. Using a non-parametric matching estimator, we find that firms that benefited from both policy measures introduced more new products than their counterparts that only benefited from R&D tax incentives. They also made more world-first product innovations and were more successful in commercializing their innovations.
    Keywords: Innovations, R&D, Matching Estimators, Mahalanobis, Innovation Survey, Tax Credits, Grants
    JEL: O31 O32 O38 C13 H25
    Date: 2007
  2. By: Michael Fritsch (University of Jena, School of Busniess and Economics, Max Planck Institute of Economics Jena, and Institute for Economic Research (DIW Berlin)); Viktor Slavtchev (University of Jena, School of Busniess and Economics)
    Abstract: Innovation processes are characterized by a pronounced division of labor between actors. Two types of externality may arise from such interactions. On the one hand, a close location of actors affiliated to the same industry may stimulate innovation (MAR externalities). On the other hand, new ideas may be born by the exchange of heterogeneous and complementary knowledge between actors, which belong to different industries (Jacobs' externalities). We test the impact of both MAR as well as Jacobs' externalities on innovative performance at the regional level. The results suggest an inverted u-shaped relationship between regional specialization in certain industries and innovative performance. Further key determinants of the regional innovative performance are private sector R&D and university-industry collaboration.
    Keywords: Innovation, technical efficiency, patents, agglomeration concentration, specialization, diversity, regional analysis.
    JEL: O31 O18 R12
    Date: 2007–06–05
  3. By: Sandra Phlippen (Erasmus Universiteit Rotterdam); Massimo Riccaboni (University of Florida)
    Abstract: This paper examines how a radical technological innovation affects alliance formation of firms and subsequent network structures. We use longitudinal data of interfirm R&D collaborations in the biopharmaceutical industry in which a new technological regime is established. Our findings suggest that it requires radical technological change for firms to leave their embedded path of existing alliances and form new alliances with new partners. While new partners are mostly found through the firms’ existing network, we provide some insight into distant link formation with unknown partners, which contributes to our understanding of how ‘small-worlds’ might emerge.
    Keywords: Pharmaceutical industry; Biotechnology industry; R&D; Technological change; Alliances; Networks
    JEL: O32 O31 L14 L24 M13 M21
    Date: 2007–05–10
  4. By: Lisa M. Lynch
    Abstract: Using a unique longitudinal representative survey of both manufacturing and non-manufacturing businesses in the United States during the 1990's, I examine the incidence and intensity of organizational innovation and the factors associated with investments in organizational innovation. Past profits tend to be positively associated with organizational innovation. Employers with a more external focus and broader networks to learn about best practices (as proxied by exports, benchmarking, and being part of a multi-establishment firm) are more likely to invest in organizational innovation. Investments in human capital, information technology, R&D, and physical capital appear to be complementary with investments in organizational innovation. In addition, non-unionized manufacturing plants are more likely to have invested more broadly and intensely in organizational innovation.
    JEL: D2 J24 M5 O3
    Date: 2007–06
  5. By: Hall, Andy (UNU-MERIT); Clark, Norman (CGIAR, ACTS and Open University UK); Naik, Guru (Livelihood Solutions)
    Abstract: The most effective approach to agricultural technology promotion and innovation is still a source of considerable debate, and nowhere more so than in the context of agricultural engineering hardware. Contemporary perspective on agricultural innovation stress the importance of institutional change and give emphasis to the need to develop innovation capacity in systems terms rather address limitations of technology transfer mechanisms. This paper illustrates using the case of manual irrigation technology - treadle pumps -- in Bangladesh and India. It identifies 5 elements of this capacity: (i) A sector coordination mechanism; (ii) a developmental rather than technical organising principle for sector development; (iii) habits and practices (institutions) of key organisations; (iv) Interaction as a learning and knowledge transmission mechanism (v) Market demand as key an incentive for innovation; and (vi) Policies and institutional innovations to ensure adequate stakeholder participation. The paper concludes by suggesting that identifying new sources of institutional innovation is the most presses task for initiatives that seek to make more effective use of knowledge and technology in development.
    Keywords: Agricultural Technology, Innovation Systems, Innovation Capacity, Agricultural Research, Poverty Reduction, Small Scale Irrigation, Supply Chains
    JEL: Q16 O31 I38 Q21 O32
    Date: 2007
  6. By: Deepak Hegde; David C. Mowery; Stuart Graham
    Abstract: The continuations procedure within the U.S. patent system has been criticized for enabling firms to manipulate the patent review process for strategic purposes. Changes during the 1990s in patent procedures affected the incentives of applicants to exploit the continuations process, and additional reforms in continuations currently are being considered. Nonetheless, little is known about applicants' use of the three major types of continuations -- the Continuation Application (CAP), the Continuations-In-Part (CIP), and Divisions -- to alter the term and scope of patents. This paper analyzes patents issued from the three types of continuations to U.S. firms during 1981 - 2004 (with priority years 1981 - 2000), and links their frequency to the characteristics of patents, assignees and industries. We find that CIPs are disproportionately filed by R&D-intensive, small firms that patent heavily, and are more common in chemical and biological technologies. Patents resulting from CIP filings contain more claims and backward citations per patent on average, and cover relatively "valuable" inventions. In contrast, CAPs cover less valuable patents from large, capital-intensive firms that patent intensively, particularly in computer and semiconductor patents. We also analyze the effects of the 1995 change in patent term on continuation applications and find that the Act reduced the use of continuations overall, while shifting the output of CAPs toward "less important" patents.
    JEL: O3 O31 O32 O34
    Date: 2007–06
  7. By: Koson Sapprasert (Centre for Technology, Innovation and Culture, University of Oslo)
    Abstract: This paper explores the productive relationship between Information and Communication Technology (ICT) and services. The firm-level data is pursued to examine how ICT as a technological innovation combined with non-technological factors affect the firm’s economic performance. The study develops an argument that ICT is one of the key economic success factors in this techno-economic paradigm, particularly for service firms. The results demonstrate that the presence and intensity of ICT may be used to explain the higher growth experienced by the service industries in the last few decades. Both productivity and profitability growth are found to be significantly linked to the level of ICT intensity in service firms especially when undertaken jointly with non-technological innovations. The impact of ICT on the service sector is assessed in detail while manufacturing and other innovation activities serve as a benchmark.
    Keywords: Information and Communication Technology (ICT), Innovation in Services, Techno-economic paradigm, Productivity and Profitability Growth, Non-technological Innovation, Firm-level Analysis.
    JEL: O32
    Date: 2007–05
  8. By: Khazabi, Massoud
    Abstract: The paper proposes a theory of innovation and market structure. The model incorporates n firms with horizontal spillovers all interacting within a hypothetical industry. In a two-stage sequential game framework, four types of cooperation are studied: full non-cooperation; cooperation in both stages; cooperation only in the R&D stage; and simultaneous cooperation and non-cooperation in the R&D stage. It is shown that the effect of competition on total innovation investment varies among all four cases and mostly depends on the level of spillover.
    Keywords: R&D; Innovation; competition; cooperation; spillover; market structure
    JEL: L1
    Date: 2007
  9. By: Carl Shapiro
    Abstract: Economists and policy makers have long recognized that innovators must be able to appropriate a reasonable portion of the social benefits of their innovations if innovation is to be suitably rewarded and encouraged. However, this paper identifies a number of specific fact patterns under which the current U.S. patent system allows patent holders to capture private rewards that exceed their social contributions. Such excessive patentee rewards are socially costly, since they raise the deadweight loss associated with the patent system and discourage innovation by others. Economic efficiency is promoted if rewards to patent holders are aligned with and do not exceed their social contributions. This paper analyzes two major reforms to the patent system designed to spur innovation by better aligning the rewards and contributions of patent holders: establishing an independent invention defense in patent infringement cases, and strengthening the procedures by which patents are re-examined after they are issued. Three additional reforms relating to patent litigation are also studied: limiting the use of injunctions, clarifying the way in which "reasonable royalties" are calculated, and narrowing the definition of "willful infringement."
    JEL: O3 O30 O31 O34 O38
    Date: 2007–05
  10. By: Cassiman, Bruno (IESE Business School); Golovko, Elena (IESE Business School)
    Abstract: In this paper, we explore the relationship between innovation activity, productivity, and exports, using a panel of Spanish manufacturing firms for 1990-1998. Our results -based on non-parametric tests- suggest that firm innovation status is critical in explaining the positive export-productivity association documented in prior research. For the sample of small innovating firms, we find no significant differences in productivity levels between exporters and non-exporters. Especially product innovation seems to explain this positive association between exports and productivity. For small non-innovating firms with the low and medium productivity levels, however, exporting firms continue to exhibit higher productivity than non-exporting firms.
    Keywords: Innovation; productivity; exports; industry dynamics;
    Date: 2007–04–05
  11. By: Hall, Andy (UNU-MERIT)
    Abstract: In recent years the there has been an increasing recognition of the potential of the innovation systems concept to provide new ways of making more effective use of agricultural research and improve its impact on socially desirable outcomes. This paper documents the experiences of a group of researchers in India who experimented with this framework and tried to operationalise its principles in project design. The paper comments on some of the implications of using this approach and the challenges it presents for implementers of agricultural research projects in developing countries.
    Keywords: Innovation Systems, Agricultural Research, Development Practice, Poverty Reduction, Research Projects, Project Design
    JEL: I38 O2 O31 O32 Q16
    Date: 2007
  12. By: Verspagen, Bart (Eindhoven University of Technology, UNU-MERIT)
    Abstract: This paper discusses the possibility of a spatial hierarchy of innovation and growth dynamics in Europe. A spatial hierarchy is understood as a geographical clustering of regions, where important differences exist in terms of innovation and growth dynamics between the clusters. The literature on regional growth and innovation is briefly scanned. After this, a database on European regional growth and innovation dynamics is presented. Spatial correlation analysis and spatial principal components analysis are used to explore the possibility of a spatial hier-archy in Europe. The results point to a hierarchy consisting of four groups: South Europe, East Europe, and two groups in West and North Europe. Growth and innovation performance in these clusters is discussed, and some policy conclusions are drawn.
    Keywords: Technological Change, Economic Development, Europe, Geographical Distribution, Government Policy
    JEL: O31 O18 O52 O38
    Date: 2007
  13. By: Schneider, Cédric
    Abstract: The aim of this paper is to study the determinants of the outcomes of patent applications (withdrawal, refusal or grant). The application process at the European Patent Office is modelled in three stages, using a Trivariate Probit model with double selectivity correction in order to test whether the applicants ?patenting history has an effect on the outcome of the current application. I investigate the behavior of the applicant after the patent office has established the "state of the art", a precondition to an invention being patentable. The main results are (i) firms with large patents portfolios act following a "trial and error" strategy, by applying for large numbers of patents and thereafter waiting for the patent office?s final decision when the expected probability of grant is high, (ii) the technological importance of a patent is a crucial determinant of a successful application grant, (iii) a withdrawal is to be regarded as an expected refusal, since applicants tend to withdraw their applications when there is evidence that the inventions cannot be considered to be novel or to involve an inventive step.
    Keywords: European Patent Office; Intellectual Property Rights
    JEL: O34
    Date: 2007
  14. By: van Pottelsberghe, Bruno; van Zeebroeck, Nicolas
    Abstract: The renewal of patents and their geographical scope for protection constitute two essential dimensions in a patent’s life, and probably the most frequently used patent value indicators. The intertwining of these dimensions (the geographical scope of protection may vary over time) makes their analysis complex, as any measure along one dimension requires an arbitrary choice on the second. This paper proposes a new indicator of patent value, the Scope-Year index, combining the two dimensions. The index is computed for patents filed at the EPO from 1980 to 1996 and validated in its member states. It shows that the average value of patent filings has increased in the early eighties but has constantly decreased from the mid-eighties until the mid nineties, despite the institutional expansion of the EPO. This result sheds a new and worrying light on the worldwide boom in patent filings.
    Keywords: geographical scope; patent families; patent statistics; Patent value; renewals
    JEL: K1 L1 O34 O38
    Date: 2007–06
  15. By: Iain M. Cockburn; Stefan Wagner
    Abstract: We examine the effect of patenting on the survival prospects of 356 internet-related firms that IPO'd at the height of the stock market bubble of the late 1990s. By March 2005, nearly 2/3 of these firms had delisted from the NASDAQ exchange. Although changes in the legal environment in the US in the 1990s made it much easier to obtain patents on software and, ultimately, on business methods, less than half of the firms in this sample obtained, or attempted to obtain, patents. For those that did, we hypothesize that patents conferred competitive advantages that translate into higher probability of survival, though they may also simply be a signal of firm quality. Controlling for age, venture-capital backing, financial characteristics, and stock market conditions, patenting is positively associated with survival. Quite different processes appear to govern exit via acquisition compared to exit via delisting from the exchange due to business failure. Firms that applied for more patents were less likely to be acquired, though obtaining unusually highly cited patents may make them more attractive acquisition target. These findings do not hold for business method patents, which do not appear to confer a survival advantage.
    JEL: L0 L26 L86 O34
    Date: 2007–06
  16. By: Kolko, Jed
    Abstract: Governments justify support of Internet diffusion on two grounds: (1) to overcome a persistent digital divide in broadband availability and (2) to facilitate online activities that are socially or economically desirable. This paper assesses both these claims. Using individual-level data from Forrester Research, the analysis finds significantly lower residential broadband adoption in lower-income and lower-density zip codes, controlling for individual characteristics. Further tests show that lower adoption in these areas is evidence of a persistent digital divide in availability. The analysis then assesses how broadband adoption changes individuals’ usage of online activities. Broadband adoption increases individuals’ frequency of researching health information online, but there is no evidence that broadband adoption increases usage of online job sites or online government services. Localities currently considering municipal wireless (Wi-Fi) initiatives should focus on digital divide justifications rather than expecting to raise usage of a wide range of online activities perceived to be socially desirable.
    Keywords: broadband; Internet; digital divide; online; consumer behavior
    JEL: L96 D12 O33
    Date: 2006–11
  17. By: Gabriel Yoguel; Analia Erbes; Veronica Robert; Jose Borello
    Abstract: The central question of this paper is: what are the forces that determine the continuum negative relationship between knowledge diffusion and appropriation in the context of the new techno-productive paradigm? In connection to this question we will make reference to the following issues: [i] How does new knowledge spread in a capitalist economy and how is this issue related to a collusive or classical spread of the benefits of technical progress?; [ii] Does the underlying logic specific to tacit and codified forms of knowledge have a bearing on diffusion and appropriation dynamics?; [iii] Can the creation of cognitive capacities at the organizational level be understood as a relevant form of protection in the economy of the knowledge era?
    Date: 2007–05
  18. By: Jan K. Brueckner (Department of Economics, University of California-Irvine); Vivek Pai (Department of Economics, University of California-Irvine)
    Abstract: This paper explores the impact of the regional jet (RJ), an important new technological innovation in the airline industry, on service patterns and service quality. The evidence shows that RJs were used to provide service on a large number of new hub-and-spoke (HS) and point-to-point (PP) routes. In addition, they replaced discontinued jet and turboprop service on many HS routes, as well as supplementing continuing jet service on such routes. When replacement or supplementation by RJs occurred, passengers benefited from better service quality via higher flight frequencies. The paper's theoretical analysis predicts that the frequency advantage of RJs over jets, a consequence of their small size, should have led to the emergence of PP service in thin markets where such service was previously uneconomical. However, the evidence contradicts this prediction, showing that markets attracting new PP service by RJs had demographic characteristics similar to those of markets that already had jet PP service or attracted it after 1996.
    Keywords: Regional jet; Airlines; Network
    JEL: L93
    Date: 2007–02
  19. By: Sadraoui, Tarek; Ben-Zina, Naceur
    Abstract: Dans ce papier, on se propose d’étudier la relation entre la coopération en R&D et la croissance économique. Nous essayerons d’apporter quelques éclairages théoriques sur les relations de coopération technologique en s’intéressant à l’émergence de la coopération entant que nouveau mode de coordination des activités économiques. Notre étude empirique se base sur différentes méthodes d’estimations développées récemment dans le cadre des panels dynamiques pour un échantillon de 23 pays sur la période 1992-2004. Nous utiliserons la méthode des GMM d’Arellano et Bond (1992), les tests de causalité et de racine unitaire appliqués sur donnée de panel. Les conclusions totales suggèrent une relation positive et significative.
    Keywords: Coopération en R&D; Croissance économique; Données de panel dynamique; Externalités technologiques.
    JEL: O33 C33 O3
    Date: 2007–05–25
  20. By: Marcus Noland (Peterson Institute for International Economics)
    Abstract: Japan faces significant challenges in encouraging innovation and entrepreneurship. Attempts to formally model past industrial policy interventions uniformly uncover little, if any, positive impact on productivity, growth, or welfare. The evidence indicates that most resource flows went to large, politically influential “backward” sectors, suggesting that political economy considerations may be central to the apparent ineffectiveness of Japanese industrial policy. Rather than traditional industrial or science and technology policy, financial and labor market reforms appear more promising. As a group, Japan’s industrial firms are competitive relative to their foreign counterparts. Japan falls behind in the heavily regulated service sector. The problems are due less to a lack of industrial policy than to an excess of regulation. Japan may have more to gain through restructuring the lagging service sector than by expending resources in pursuit of marginal gains in the industrial sector.
    Keywords: Japan, industrial policy, innovation policy
    JEL: O3 L52 F13
    Date: 2007–05
  21. By: Martin Srholec (Centre for Technology, Innovation and Culture, University of Oslo)
    Abstract: Specialization in high-tech products is frequently used to capture technology intensity of exports. The literature suggests that developing countries are increasingly becoming exporters of high-tech products, and some may even be among the most deeply specialized countries in the field of high-tech exports. The paper scrutinizes the relevance of the taxonomies that classify exports by technological intensity in this context. It is shown that specialization in high-tech exports typically does not appear in tandem with indigenous technological capabilities in developing countries. The analysis of intra-product imports suggests that the bulk of high-tech exports can actually be attributed to the effect of increasingly international fragmentation of production systems in electronics on trade statistics. It is confirmed in an econometric framework that while domestic technological capabilities have some influence on export performance in electronics, it is the propensity to import electronics components that accounts for by far the largest proportion of cross-country differences in specialization in electronics exports. The paper concludes with some implications for policy and future research.
    JEL: F10 O10 O30
    Date: 2005–12

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.