nep-ino New Economics Papers
on Innovation
Issue of 2008‒02‒23
seven papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. Agglomeration, Innovation and Regional Development: Theoretical Perspectives and Meta-Analysis By Henri L.F. de Groot; Jacques Poot; Martijn J. Smit
  2. Technology Adoption Subsidies: An Experiment with Managers By Rob Aalbers; Eline van der Heijden; Jan Potters; Daan van Soest; Herman Vollebergh
  3. A Real Options Perspective on R&D Portfolio Diversification By Sjoerd van Bekkum; Enrico Pennings; Han Smit
  4. Can Social Norms Affect the International Allocation of Innovation? By Guido Cozzi
  5. Product innovation and imitation in a duopoly with differentiation by attributes By Reynald-Alexandre Laurent
  6. Open Source Licensing in Mixed Markets, or "Why Open Source Software Does Not Succeed" By Alexia Gaudeul
  7. Ethnic Scientific Communities and International Technology Diffusion By William R. Kerr

  1. By: Henri L.F. de Groot (Vrije Universiteit Amsterdam); Jacques Poot (University of Waikato, Hamilton, NZ); Martijn J. Smit (Vrije Universiteit Amsterdam)
    Abstract: Innovation and technological change are central to the quest for regional development. In the globally-connected knowledge-driven economy, the relevance of agglomeration forces that rely on proximity continues to increase, paradoxically despite declining real costs of information, communication and transportation. Globally, the proportion of the population living in cities continues to grow and sprawling cities remain the engines of regional economic transformation. The growth of cities results from a complex chain that starts with scale, density and geography, which then combines with industrial structure characterised by its extent of specialisation, competition and diversity, to yield innovation and productivity growth that encourages employment expansion, and further urban growth through inward migration. This paper revisits the central part of this virtuous circle, namely the Marshall-Arrow-Romer externalities (specialisation), Jacobs externalities (diversity) and Porter externalities (competition) that have provided alternative explanations for innovation and urban growth. The paper evaluates the statistical robustness of evidence for such externalities presented in 31 scientific articles, all building on the seminal work of Glaeser et al. (1992). These articles yield 393 estimates of those externalities, which are characterized by their sign and statistical significance. We aim to explain variation in estimation results using study characteristics by means of ordered probit analysis. The evidence in the literature on the role of the specific externalities is rather mixed, although for each type of externality we can identify how various aspects of primary study design, such as the adopted proxy for growth, the data used, and the choice of covariates influence the outcomes.
    Keywords: innovation; regional development; agglomeration; urban externalities; meta-analysis
    JEL: C52 O18 O31 R11
    Date: 2007–10–10
  2. By: Rob Aalbers (SEO Economic Research, Amsterdam); Eline van der Heijden (Tilburg University); Jan Potters (Tilburg University); Daan van Soest (Tilburg University); Herman Vollebergh (Erasmus University Rotterdam)
    Abstract: We evaluate the impact of technology adoption subsidies on in- vestment behavior in an individual choice experiment. In a laboratory setting professional managers are confronted with an intertemporal decision problem in which they have to decide whether or not to search for, and possibly adopt, a new technology. Technologies differ in the per-period benefits they yield, and their purchase price increases with the per-period benefits provided. We introduce a subsidy on the more expensive technologies (that also yield the larger per-period benefits), and find that the subsidy scheme induces agents to search for and adopt these more expensive technologies even though the subsidy itself is too small to render these technologies profitable. We speculate that the result is driven by the positive connotation (affect) that the concept 'subsidy' invokes.
    Keywords: framed field experiment; search model; technology subsidies
    JEL: C9 D8 H2
    Date: 2007–10–25
  3. By: Sjoerd van Bekkum (Erasmus University Rotterdam); Enrico Pennings (Erasmus University Rotterdam); Han Smit (Erasmus University Rotterdam)
    Abstract: This paper shows that the presence of conditional staging in R&D (Research & Development) has a critical impact on portfolio risk, and changes diversification arguments when a portfolio is constructed. When R&D projects exhibit option-like characteristics, correlation between projects plays a more complicated role than traditional portfolio diversification would suggest. Real option theory argues that research projects with conditional phases have option-like risk and return properties, and are different from unconditional projects. We show that although the risk of a portfolio always depends on the correlation between projects, a portfolio of conditional R&D projects with real option characteristics has fundamentally different risk than a portfolio of unconditional projects. When conditional R&D projects are negatively correlated, portfolio risk is hardly reduced by diversification. When projects are positively correlated, however, diversification is more effective than these tools predict.
    Keywords: Real Options; Research & Development (R&D); Risk Management; Monte Carlo Simulation
    JEL: G31 G32 O30 O32
    Date: 2007–01–15
  4. By: Guido Cozzi
    Abstract: If economic agents coordinate on social norms more oriented towards the protection of national industries, an asymmetric in- ternational specialization in the research and development (R&D) arises even in a tariff free world with no a priori differences across countries in endowments, demography or technology. This paper exploits the indifference in the composition of R&D expenditure across sectors of the typical multi-sector Schumpeterian framework (forward-looking decisions, CRS R&D technology and free entry) to construct a theory of the international allocation of innovation and education based on sunspot equilibrium. A role for industrial policies as mere coordination devices emerges in an international Schumpeterian framework. The implications for the relationships between inequality and growth are examined.
    Keywords: Schumpeterian Growth Theory, Inequality, International Trade, Social Norms, Indeterminacy, Sunspots.
    JEL: O41 O32 D33 F43
  5. By: Reynald-Alexandre Laurent
    Abstract: This paper considers a probabilistic duopoly in which products are described by their specific attributes, this form of differentiation embodying the horizontal and vertical dimensions. Consumers make discrete choices and follow a random decision rule based on these attributes. A three-stage game is studied in which firms develop new attributes for their products (innovation), then may imitate the attributes of the competing product and finally compete in price. At the equilibrium, the firm selling the less appreciated product is generally incited to imitate its rival. Confronted to a threat of imitation, the benchmark firm sometimes decreases strategically its attribute index in order to diminish its unit cost of innovation and the differentiation on the market, deterring the imitation in this way. This strategy is efficient when imitation costs are sufficiently concave. In the opposite case, it is preferable for the benchmark firm to accept the imitation. Thus, according to the shape of imitation costs, equilibria with "deterrence" or with "accommodation" occur, completing the current typology of strategic responses to a threat of imitation.
    Date: 2008
  6. By: Alexia Gaudeul (School of Economics and Centre for Competition Policy, University of East Anglia)
    Abstract: The rivalry between developers of open source and proprietary software encourages open source developers to court users and respond to their needs. The open source developer who wants to promote her code (intrinsic motivations) may choose liberal license terms such as those of the Berkeley Software Distribution as they allow the proprietary developer to use her code in his product and thus broaden its appeal. If she wants to promote her own implementation of her software (extrinsic motivations), she may use more restrictive license terms such as the General Public License to discourage proprietary exploitation of her code. An open source developer who is a latecomer to the market will be less likely than an early entrant to make her product compatible with that of the proprietary developer, but she is also more likely to orient her software towards the end user.
    Keywords: open source, software, standards, compatibility, network effects, duopoly, mixed markets, production systems, non profits, volunteer organizations, information goods, intellectual property, copyright, licensing
    JEL: D23 H41 L13 L22 L31 L86 O34 O38
    Date: 2008–02
  7. By: William R. Kerr (Harvard Business School, Entrepreneurial Management Unit)
    Abstract: This study explores the importance of knowledge transfer for international technology diffusion by examining ethnic scientific and entrepreneurial communities in the US and their ties to their home countries. US ethnic research communities are quantified by applying an ethnic-name database to individual patent records. International patent citations con.rm knowledge diffuses through ethnic networks, and manufacturing output in foreign countries increases with an elasticity of 0.1-0.3 to stronger scientific integration with the US frontier. To address reverse-causality concerns, reduced-form specifications exploit exogenous changes in US immigration quotas. Consistent with a model of sector reallocation, output growth in less developed economies is facilitated by employment gains, while more advanced economies experience sharper increases in labor productivity. The ethnic transfer mechanism is especially strong in high-tech industries and among Chinese economies. The findings suggest channels for transferring codified and tacit knowledge partly shape the effective technology frontiers of developing and emerging economies.
    Keywords: Technology Transfer, Tacit Knowledge, Productivity, Patents, Innovation, Research and Development, Entrepreneurship, Immigration, Networks.
    JEL: F22 J44 J61 O31 O32 O33 O41 O57
    Date: 2005–11

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