nep-ino New Economics Papers
on Innovation
Issue of 2007‒12‒01
nine papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. Public Policies and Changing Boundaries of Firms in a "History Friendly" Model of the Co-evolution of the Computer and Semiconductor Industries. By Franco Malerba; Richard Nelson; Luigi Orsenigo; Sidney Winter
  2. Knowledge disclosure as intellectual property rights By Carlos J. Ponce
  3. R&D collaboration networks in the European FrameworkProgrammes: Data processing, network construction and selected results By Roediger-Schluga, Thomas; Barber, Michael J.
  4. Determinants of alliance portfolio complexity and its effect on innovative performance of companies By Duysters, Geert; Lokshin, Boris
  5. Firm Growth and R&D Expenditure By Alexander Coad; Rekha Rao
  6. Do Multinationals' R&D Activities Stimulate Indigenous Entrepreneurship? Evidence from China's "Silicon Valley" By Hongbin Cai; Yasuyuki Todo; Li-An Zhou
  7. The Effect of Venture Capital on Innovation Strategies By Marco Da Rin; María Fabiana Penas
  8. Patents, Thickets, and the Financing of Early-Stage Firms: Evidence from the Software Industry By Iain M. Cockburn; Megan MacGarvie
  9. Pitfalls in estimating the returns to corporate R&D using accounting data By Dominique Foray; Bronwyn H. Hall; Jacques Mairesse

  1. By: Franco Malerba (Cespri - Bocconi University, Milano, Italy.); Richard Nelson (Columbia University, New York, USA.); Luigi Orsenigo (University of Brescia, Brescia and CESPRI - Bocconi University, Milan, Italy.); Sidney Winter (The Wharton School, University of Pennsylvania, Philadelphia, USA.)
    Abstract: In this paper, we explore the effects of alternative policies, ranging from antitrust to public procurement, open standards, information diffusion and basic research support on the dynamics of two vertically related industries in changing and uncertain technological and market environments. The two industries are a system industry and a component industry, and the evolution of these industries is characterized by periods of technological revolutions punctuating periods of relative technological stability and smooth technical progress. We have been inspired by the co-evolution of the computer and component industries from their inceptions to the 1980s. On the basis of that evolution, we have developed a history friendly-model this co-evolution. In sum, this paper has stressed that various types of policies may sometimes have contrasting effects on the industry, mainly on concentration and technical change and innovation. It has also shown that the consequences of policies may spillover from one industry to another, and from one type of firms to another. Policies that aim at a specific industry may provoke major changes in a related industry through the product market, the changing boundaries of firms or knowledge and technological interdependencies. The policy maker has to be aware of that. Finally, a major point of the paper regards the unintended consequences of policies.
    Keywords: Industrial dynamics, Public Policy, Technology, Innovation.
    JEL: O30 L10 L60
    Date: 2007–06
  2. By: Carlos J. Ponce
    Abstract: We study a model in which an inventor discloses knowledge about its innovation and then a rival chooses the probability of attaining a competing invention. Disclosures, by creating prior art, diminish the probability that the rival has of receiving a patent for its invention (legal externality), but, by revealing knowledge, they decrease the marginal cost of R&D (knowledge externality). We stress the following result. If the knowledge externality is large compared to the legal externality, decreasing the patentability standards leads to fewer disclosures and may hinder R&D. We also determine the impact of changes in market payoffs on the equilibrium level of disclosures and R&D.
    Date: 2007–10
  3. By: Roediger-Schluga, Thomas (Oesterreichische Kontrollbank); Barber, Michael J. (Department of Technology Policy, Austrian Research Centers)
    Abstract: We describe the construction of a large and novel data set on R&D collaboration networks in the first five EU Framework Programmes (FPs), examine key features and provide economic interpretations for our findings. The data set is based on publicly available raw data that pre-sents numerous challenges. We critically examine the different problems and detail how we have dealt with them. We describe how we construct networks from the processed data. The resulting networks display properties typical for large complex networks, including scale-free degree distributions and the small-world property. The former indicates the presence of net-work hubs, which we identify. Theoretical work shows the latter to be beneficial for knowl-edge creation and diffusion. Structural features are remarkably similar across FPs, indicating similar network formation mechanisms despite changes in governance rules. Several findings point towards the existence of a stable core of interlinked actors since the early FPs with inte-gration increasing over time. This core consists mainly of universities and research organisa-tions. The paper concludes with an agenda for future research.
    Keywords: R&D collaboration, EU Framework Programmes, complex networks, small world effect, knowledge creation, knowledge diffusion, European Research Area
    JEL: L14 O38 Z13
    Date: 2007
  4. By: Duysters, Geert (UNU-MERIT); Lokshin, Boris (UNU-MERIT)
    Abstract: Alliance formation is often described as a mechanism used by firms to increase voluntary knowledge transfers. Access to external knowledge has been increasingly recognized as a main source of a firm's innovativeness. In this paper we examine decisions to form alliance portfolios of foreign and domestic partners by three groups of firms: innovators (firms that are successful in introducing new products to the market), imitators (firms that are successful at introducing new products, which are not new to the market) and product non-innovators. We consider an alliance portfolio that includes different partnership types (competitor, customer, supplier, university/research center). We develop a measure of portfolio complexity which we define as the number and diversity of elements of the alliance portfolio with which a firm must interact. We then estimate models that explain portfolio complexity and its impact on firm's innovative performance. Using panel data on more than 1800 firms in the Netherlands we find that foremost innovators have a strong propensity to form portfolios consisting of international alliances. Being an innovator or imitator also increases the propensity to form a portfolio of domestic alliances, relative to non-innovators; but this propensity is not stronger for innovators. Innovators appear to derive benefit from both intensive (exploitative) and broad (explorative) use of external information sources. The former sourcing is more important for innovators, while the latter for imitators. Finally, alliance complexity is found to have an inverse U-shape relationship to innovative performance.
    Keywords: Innovation, R&D cooperation, Alliance portfolio
    JEL: O31 D74 P13 O32
    Date: 2007
  5. By: Alexander Coad; Rekha Rao
    Abstract: We apply a panel vector autoregression model to a firm-level longitudinal database to observe the co-evolution of sales growth, employment growth, profits growth and growth of R&D expenditure. Contrary to expectations, profit growth seems to have little detectable effect on R&D investment. Instead, firms appear to increase their total R&D expenditure following growth in sales and growth of employment. In a sense, firms behave ‘as if’ they aim for a roughly constant ratio of R&D to employment (or sales). We observe heterogeneous effects for growing or shrinking firms however, suggesting that firms are less willing to reduce their R&D levels following a negative growth shock than they are willing to increase R&D after a positive shock.
    Keywords: Firm Growth, Panel VAR, R&D expenditure, Industrial Dynamics Length 32 pages
    JEL: L10 L20 O32
    Date: 2007–11
  6. By: Hongbin Cai; Yasuyuki Todo; Li-An Zhou
    Abstract: Using a unique firm-level dataset from China's "Silicon Valley," we investigate how multinational enterprises (MNEs) affect local entrepreneurship and R&D activities upon entry. We find that R&D activities of MNEs in an industry stimulate entry of domestic firms into the same industry and enhance R&D activities of newly entering domestic firms. By contrast, MNEs' production activities or domestic firms' R&D activities do not have such effect. Since MNEs are technologically more advanced than domestic firms, our findings suggest that diffusion of MNEs' advanced knowledge to potential indigenous entrepreneurs through MNEs' R&D stimulates entry of domestic firms.
    JEL: F23 L26 O33
    Date: 2007–11
  7. By: Marco Da Rin; María Fabiana Penas
    Abstract: We examine a unique dataset of Dutch companies, some of which have received venture financing. The data include detailed information on innovation activities and other company characteristics. We analyse the role of venture finance in influencing innovation strategies. We find that venture capitalists push portfolio companies towards building absorptive capacity and towards more permanent in-house R&D efforts. By contrast, we find that public funding relaxes financial constraints, but does not lead to a build-up of absorptive capacity. Our results thus highlight the special role of venture capital in shaping companies' innovation strategies.
    JEL: G24 O32 O38
    Date: 2007–11
  8. By: Iain M. Cockburn; Megan MacGarvie
    Abstract: The impact of stronger intellectual property rights in the software industry is controversial. One means by which patents can affect technical change, industry dynamics, and ultimately welfare, is through their role in stimulating or stifling entry by new ventures. Patents can block entry, or raise entrants' costs in variety of ways, while at the same time they may stimulate entry by improving the bargaining position of entrants vis-à-vis incumbents, and supporting a "market for technology" which enables new ventures to license their way into the market, or realize value through trade in their intangible assets. One important impact of patents may be their influence on capital markets, and here we find evidence that the extraordinary growth in patenting of software during the 1990s is associated with significant effects on the financing of software companies. Start-up software companies operating in markets characterized by denser patent thickets see their initial acquisition of VC funding delayed relative to firms in markets less affected by patents. The relationship between patents and the probability of IPO or acquisition is more complex, but there is some evidence that firms without patents are less likely to go public if they operate in a market characterized by patent thickets.
    JEL: L1 O34
    Date: 2007–11
  9. By: Dominique Foray (Chaire en Economie et Management de l'Innovation, Collège du Management de la Technologie, Ecole Polytechnique Fédérale de Lausanne); Bronwyn H. Hall (U.C. Berkeley & University of Maastricht & NBER & IFS); Jacques Mairesse (CREST-ENSAE & University of Maastricht & NBER)
    Abstract: Does R&D have an impact on firm growth, profits, and value? To most observers, the obvious answer is yes. However, the recent report by Booz-Allen-Hamilton (BAH 2006) seems to conclude that the share of spending devoted to research has no relationship to the economic performance of an enterprise, and offers support to the view that it is possible to compete successfully in the modern economy without investing in R&D. This issue is an important one because the large corporations they considered are responsible for the vast majority of private R&D spending in developed economies, and are therefore important actors in achieving the Lisbon agenda. Challenged by the results and recommendations of the BAH report, in this paper we assess some of the pitfalls to be avoided in using accounting data to estimate corporate R&D returns and illustrate a proper use of such data. We first offer a critique of important aspects of the methodology and of some of the main conclusions in the BAH report. Using similar data and a comparable approach, we then present our own estimates of the impact of R&D on the growth, profitability, and market value of public corporations, and contrast our interpretations and conclusions with that of the report.
    Date: 2007–09

This nep-ino issue is ©2007 by Steffen Lippert. 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.
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