nep-ino New Economics Papers
on Innovation
Issue of 2007‒12‒15
sixteen papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. Is Distance Dying at Last? Falling Home Bias in Fixed Effects Models of Patent Citations By Rachel Griffith; Sokbae Lee; John Van Reenen
  2. Innovation in Business Groups By Sharon Belenzon; Tomer Berkovitz
  3. Innovation Theories : Relevance and Implications for Developing Country Innovation By Andréanne Léger; Sushmita Swaminathan
  4. Academic Entrepreneurship - social norms, university culture and policies By Braunerhjelm, Pontus
  5. The knowledge filter, Entrepreneurship and Economic Growth By Carlsson, Bo; Acs, Zoltan; Audretsch, David; Braunerhjelm, Pontus
  6. R&D Accessibility and Comparative Advantages in Quality Differentiated Goods By Johansson, Sara
  8. HARD AND SOFT LOCATIONAL FACTORS,INNOVATIVENESS AND FIRM PERFORMANCE - an empirical test of Porter’s diamond model at the micro-level By Eickelpasch, Alexander; Lejpras, Anna; Stephan, Andreas
  9. Innovation Success and Structural Change: An Abstract Agent Based Study By Tanya Araújo; Rui Vilela Mendes
  10. Does Patenting negatively impact on R&D investment?An international panel data assessment By Alexandre Almeida; Aurora A.C. Teixeira
  11. What Makes Foreign Knowledge Attractive to Domestic Innovation Managers? By Sofka, Wolfgang
  12. International Cooperation on Innovation: Empirical Evidence for German and Portuguese Firms By Faria, Pedro; Schmidt, Tobias
  13. Review of the Literature on the Impact of Mergers on Innovation By Schulz, Norbert
  14. Innovation and Market Concentration in Europe's Mobile Phone Industries. Evidence from the Transition from 2G to 3G By Klaus S. Friesenbichler
  15. Taxation and R&D: An Investigation of Push and Pull Effects By Kenneth James McKenzie; Natalia Sershun
  16. Heterogeneity of innovation strategies and firms’ performance By Poti' Bianca; Cerulli Giovanni

  1. By: Rachel Griffith; Sokbae Lee; John Van Reenen
    Abstract: We examine the "home bias" of international knowledge spillovers as measured by the speedof patent citations (i.e. knowledge spreads slowly over international boundaries). We presentthe first compelling econometric evidence that the geographical localization of knowledgespillovers has fallen over time, as we would expect from the dramatic fall in communicationand travel costs. Our proposed estimator controls for correlated fixed effects and censoring induration models and we apply it to data on over two million citations between 1975 and1999. Home bias declines substantially when we control for fixed effects: there is practicallyno home bias for the more "modern" sectors such as pharmaceuticals andinformation/communication technologies.
    Keywords: Fixed effects, home bias, patent citations, knowledge spillovers
    JEL: O32 O33 F23
    Date: 2007–08
  2. By: Sharon Belenzon; Tomer Berkovitz
    Abstract: Using novel data on European firms, this paper examines the effect of business group affiliation oninnovation. We find that business groups foster the scale and novelty of corporate innovation. Groupaffiliation is particularly important in industries that rely more on external finance and have a higherdegree of information asymmetry. We also find that the innovation of affiliates is less sensitive tooperating cash flows. We interpret our results as supporting the 'bright side' of business groupinternal capital markets and explain how legal boundaries between group affiliates mitigate theinefficiencies found in internal capital markets of US conglomerates.
    Keywords: business groups, innovation, internal capital markets
    JEL: G34 L22 L26 O32
    Date: 2007–11
  3. By: Andréanne Léger; Sushmita Swaminathan
    Abstract: Innovation is at the basis of economic development and as such, it is instrumental for developing countries. We review the literature on innovation from the perspectives of four select branches of economics to build a conceptual framework of innovation applicable to developing countries. The conceptual framework includes insights from the surveyed literature and identifies areas of further research. Finally, we conclude with policy recommendations for innovation policies in developing countries highlighting the fact that intellectual property protection is not likely to be at the basis of innovation in these countries.
    Keywords: Innovation, Development, Absorptive Capacity
    JEL: O31 B41 P20
    Date: 2007
  4. By: Braunerhjelm, Pontus (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Is a shift in intellectual property rights to universities the key instrument in increasing com-mercialization of publicly funded research? How much can actually be learned from the U.S. system, disregarding the ongoing debate as to whether the U.S. do actually outperform Europe in terms of commercializing university based research? Taking Sweden as a role model I claim that this policy will not work. This allegation stems from the analysis of a unique data-base giving individual university researchers view on participation in commercialization of public research, their commercialization experiences, and the obstacles researchers claim exist to increase academic entrepreneurship. Despite researchers positive attitudes towards engag-ing in commercial activities, the university culture, weak incentive structures and badly man-aged support facilities impede the creation of efficient links to markets. I conclude that meas-ures must be taken at primarily the national level, but also at the university level, to enhance commercialization activities.
    Keywords: academic entrepreneurship; commercialization; links; policies
    JEL: J24 O31 O57
    Date: 2007–12–11
  5. By: Carlsson, Bo (Case Western Reserve University); Acs, Zoltan (University of Baltimore); Audretsch, David (Max-Planck Institute); Braunerhjelm, Pontus (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper explores the relationship between knowledge creation, entrepreneurship, and economic growth in the United States over the last 150 years. According to the “new growth theory,” investments in knowledge and human capital generate economic growth via spillovers of knowledge. But the theory does not explain how or why spillovers occur, or why large investments in R&D do not always result in economic growth. What is missing is “the knowledge filter” - the distinction between general knowledge and economically useful knowledge. Also missing is a mechanism (such as entrepreneurship) converting economically relevant knowledge into economic activity. This paper shows that the unprecedented increase in R&D spending in the United States during and after World War II was converted into economic activity via incumbent firms in the early postwar period and increasingly via new ventures in the last few decades.
    Keywords: knowledge; economic growth; entrepreneurship; spillovers; history
    JEL: N90 O14 O17 O30
    Date: 2007–12–11
  6. By: Johansson, Sara (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper analyzes the influences of human capital and technology transfers from R&D activities on regional export specialization along the range of product quality. Previous literature on specialization and trade in quality differentiated goods concludes that the production of high quality product varieties is intensive in knowledge and R&D. This study contributes to previous research by addressing the influence of spatial knowledge flows on the observed patterns of regional quality specialization. A theoretical model of endogenous quality choice derives regional comparative advantages to the presence of external knowledge flows from R&D activities. These knowledge transfers are modeled by accessibility variables, which deduce the presence of technology transfers from R&D activities to the geographical distribution of R&D activities and the observed patterns of spatial interaction. The impacts of regional R&D accessibility on regions’ revealed comparative advantages in high quality segments are subsequently examined in a two-dimensional cross-regional regression analysis. The results of this empirical work show significant positive effects of human capital and R&D accessibility on the revealed comparative advantages in production of high quality goods in Swedish regions. The empirical analysis also provides evidences of technology spillovers from abroad, as the presence of multinational firms increases the region’s specialization in high-quality segments. These results are robust over four different specifications of above-average product qualities. However, the sizes of estimated coefficients for R&D accessibility rises slightly with the quality level considered. This suggests that technological advantages becomes of larger importance the more superior are the levels of product quality considered.
    Keywords: Product quality; vertical differentiation; Knowledge; Accessibility; Spatial dependence; comparative advantage; technology
    JEL: F12 F14 R12 R32
    Date: 2007–12–11
  7. By: Wilhelmsson, Mats (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Accumulation of human capital is essential for economic growth. An important question is how knowledge spillover into innovations and production. One way of knowledge diffusion is within innovation networks. We investigate innovative networks in patent data in Sweden from 1994-2001. We define research networks with the help of direct and indirect ties among inventors. The main result clearly indicates that those researchers that collaborating, in innovation networks, improves the efficiency of the innovation process by getting more patents applications approved. The odds getting a patent application approved are in the range 1.1 to 1.5 times better if an application is a result from research collaboration. Moreover, the result suggests that collaboration is more important in the IT sector than in the mechanical engineering sector. Finally, the empirical outcomes indicate that networking is more important in less dense areas compared to the denser labor markets. Thus, networks in such areas might be a substitute for agglomeration advantages.
    Keywords: Innovation network analysis; patents; success and failure in innovation
    JEL: N34 O31 R11
    Date: 2007–12–11
  8. By: Eickelpasch, Alexander (DIW Berlin); Lejpras, Anna (European University Viadrina Frankfurt/Oder); Stephan, Andreas (JIBS and CESIS)
    Abstract: This paper investigates predictions of Porter’s Diamond model regarding the impact of locational factors on innovativeness and performance at the firm level. We formulate a structural equation model based on the relationships between locational conditions, e.g., transportation infrastructure, proximity to universities and research institutes, qualified labour, on the one hand, and innovativeness measured by new product or process development, number of patents, and firm performance in terms of market growth or profit assessment, on the other hand. Based on a sample of about 2,100 East German firms, we apply the partial least squares path modelling approach to test the proposed relationships. We find that particularly cooperation intensity at the local level spurs the innovativeness of firms; whereas in contrast to Porter’s predictions, our results indicate that strong local competition and a locally focused market appear to impede the innovativeness and performance of firms.
    Keywords: Hard and Soft Locational Factors; Innovativeness; Firm Performance; East German Firms; Structural Equation Modelling; Partial Least Squares Approach
    JEL: L25 O31 R30
    Date: 2007–12–11
  9. By: Tanya Araújo; Rui Vilela Mendes
    Keywords: Innovation; Agent based models; Artificial societies.
    Date: 2007
  10. By: Alexandre Almeida (Faculdade de Economia, Universidade do Porto); Aurora A.C. Teixeira (INESC Porto; CEMPRE, Faculdade de Economia, Universidade do Porto)
    Abstract: Although the conventional R&D-patents relationship is a long stand and relatively undisputed issue within the innovation literature, the reverse causality, in particular, the potential for a negative impact of patents over R&D has only recently received wide attention boosting interesting (mainly) theoretical debates. The macroeconomic perspective on this issue, however, remains largely unexplored. In fact, no evidence exists that ruled out the possibility of asymmetric effects of patents on R&D in accordance to the level of GDP in general, and to ‘convergence clubs’ in particular. Using panel data estimation methods on a sample of 88 countries, over an eight-year period (1996-2003), and controlling for clubs of convergence to account for differences on countries’ stages of economic development, we found mix support to the negativity of patent on R&D investment. The accumulated patents positively impact on R&D intensity for the set of less developed countries whereas no statistically significant effect emerges in the case of higher developed converge clubs; restricting the highest developed convergence club down to countries with a R&D intensity above 3%, the negativity reverse causality arises, corroborating the asymmetric impact of patents on R&D investment. We further demonstrate that albeit causality appears to be stronger in the most intuitive appealing traditional direction, evidence supports the theoretical conveyed double causality between R&D and Patent.
    Keywords: Patents; R&D; panel data; convergence clubs
    JEL: O31 O34
    Date: 2007–12
  11. By: Sofka, Wolfgang
    Abstract: This study focuses on the early stages of international innovation activities, i.e. the organizational processes through which promising ideas from around the globe are collected and evaluated. We ask: What characteristics make foreign knowledge interesting to domestic R&D managers? We envision this process as a balancing act between direct transaction costs for communication and coordination and indirect transaction costs from overlooking or misinterpreting important global trends. These hypotheses are tested through a conjoint analysis among 158 heads of R&D departments of German high-tech firms. We find that uncertainty avoidance is the most important driver. Radically new ideas from dynamic markets are most attractive and must not be overlooked. Complementarities with existing knowledge stocks and low language barriers are also important but to a lesser degree. Interestingly, we find no distinction between market and technological impulses.
    Keywords: Globalization, sensing, innovation impulses, conjoint analysis
    JEL: F23 O31 O32
    Date: 2007
  12. By: Faria, Pedro; Schmidt, Tobias
    Abstract: In this paper we investigate the factors that lead firms to cooperate with partners from foreign countries on innovation activities. Portuguese and German data from the harmonised Community Innovation Survey (CIS III) allow us to compare innovation cooperation behaviour of private firms in the two countries. Using a bivariate probit model, we show that the characteristics of firms cooperating with foreigners in both countries are quite similar. International activities other than cooperation, firm size and the importance of protection methods for knowledge have a positive influence in both countries on the decision to cooperate with foreign partners. Some differences remain, however: In Germany, exporters are more likely to cooperate with foreign partners than non-exporters, whereas in Portugal this is not the case.
    Keywords: International cooperation, Innovation, CIS III, Germany, Portugal
    Date: 2007
  13. By: Schulz, Norbert
    Abstract: Both M&A and innovation are instruments for growth and competitive advantage. Therefore they are fundamental to each firm’s competitive strategy. Usually, both instruments have been studied separately, but much less in conjunction. This is unfortunate as both processes - the process of innovation and the process of mergers and acquisitions - are intimately connected. The impact of mergers on innovation can only be rigorously assessed, if the converse direction of influence - mergers caused by innovation - is accounted for. Therefore this review tries to take a balanced view on both processes and to point out links between them. Nevertheless, the focus is on the impact of mergers on innovation. This discussion paper is identical with an older version with the title ‘Review on the Literature of Mergers on Innovation’.
    Keywords: innovation incentives, market structure, merger incentives
    JEL: L10 L25 O31
    Date: 2007
  14. By: Klaus S. Friesenbichler (WIFO)
    Abstract: Aiming at both low prices and innovation, policy makers and economists have long argued about the optimal intensity of competition. While the current discussion in telecommunication regulation points out that competition can be detrimental to innovation due to the low appropriability of rents established economic approaches advocate competition to be conducive to innovation. This reflects the dispute in economics between Schumpeterian and neoclassical theories. Aghion et al. (2005) offered reconciliation by modelling an inverted U relationship, which in this paper I test for European mobile phone providers. Innovation is measured by a service launch indicator and R&D investments, and competition is approximated by market concentration. As markets are clearly defined, problems of market definition which usually blur concentration indices are avoided. I find robust and statistically significant support for the tested quadratic relationship for both innovation indicators. The innovation optimising Herfindahl-Hirschman laid around 5,500 between 2001 and 2003, but may however vary over time. This finding points at a conflict in the realisation of the regulatory objectives of low prices and innovation at the same time.
    Keywords: Innovation, R&D, market concentration, inverted U, mobile telecommunication research and Development
    Date: 2007–11–20
  15. By: Kenneth James McKenzie; Natalia Sershun
    Abstract: We investigate the extent to which direct tax subsidies that lower the user cost of undertaking R&D (the "push" effect) and the overall competitiveness of the production tax system (the "pull" effect) independently impact upon aggregate R&D intensity across countries. The "push" effect of direct tax subsidies is measured by the after-tax user cost of R&D capital, and the "pull" effect of the production tax regime is measured by the effective tax rate on marginal production costs (ETRMC), which aggregates the marginal effective tax rates on production inputs (labour and capital) into an effective excise tax rate. A panel data set of nine countries over nineteen years is used to estimate a dynamic fixed effects model of aggregate R&D intensity. The short-run elasticity of the ratio of R&D to output with respect to the "push" effect of direct tax subsidies is significant, ranging from -0.15 to -0.22, while the long-run elasticity ranges from -0.46 to -0.77, depending upon the specification. The "pull" effect of the overall production tax system, as measured by the ETRMC, is significant as well, with the short-run elasticity ranging from -0.19 to -0.31 and the long-run elasticity from -0.58 to -0.93.
    Date: 2007–12–01
  16. By: Poti' Bianca (Ceris - Institute for Economic Research on Firms and Growth, Rome, Italy); Cerulli Giovanni (Ceris - Institute for Economic Research on Firms and Growth, Rome, Italy)
    Abstract: This work deals with two main issues: first, the possibility of identifying differences in firm economic returns (operating profit margins) for different groups of innovation strategy and second, the possibility of checking for factors explaining the probability of being within the best performers for each group of innovation strategy. It is an empirically based analysis using descriptive statistics (first part) and a probit econometric analysis (second part) where data are collected at firm level from two CIS surveys matched with economic accountability data for 902 Italian manufacturing firms for the period 1998-2000. The distribution analysis of profit margins by different populations of firms shows a better economic performance for groups characterized by more complex innovation strategies. Unexpectedly, the risk associated to economic returns is lower for groups where returns’ mean is higher. In this case skewness is higher too suggesting that reaching “excellence” is more difficult. The probit regressions account for the role played by different (market and firm) factors on the probability of being the best positioned for each firm population. This work gives two main messages: first, when studying the impact of R&D activity (both on firm productivity or competitiveness) it is worth to distinguish among different kinds of innovation strategy rather than limiting the analysis to aggregated results and second, it appears quite clear that competition awards more complex innovation strategies than simple R&D intra-muros activity.
    Keywords: profitability, strategic heterogeneity, R&D and innovation, probit regression
    JEL: L60 L10 O30 C25
    Date: 2007–06

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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