nep-ino New Economics Papers
on Innovation
Issue of 2008‒04‒21
fifteen papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. A Portrait of the Innovative Firm as a Small Patenting Entrepreneur By Andersson, Martin; Lööf, Hans
  2. Patent Protection, Market Uncertainty, and R&D Investment By Czarnitzki, Dirk; Toole, Andrew A.
  3. From innovation to exporting or vice versa? Causal link between innovation activity and exporting in Slovenian microdata By Joze P. Damijan; Crt Kostevc; Saso Polanec
  4. Input Pricing in a Model with Upstream and Downstream Product Innovation By EL ELJ, Moez
  5. Firm heterogeneity within industries: How important is “industry” to innovation? By Tommy Clausen
  6. The Dynamics of the Transfer and Renewal of Patents By Carlos J. Serrano
  7. Understanding Perpetual R&D Races By Yves Breitmoser; Jonathan H. W. Tan; Daniel John Zizzo
  8. ICT Diffusion, Innovation Systems, Globalisation and Regional Economic Dynamics: Theory and Empirical Evidence By Charlie Karlsson; Gunther Maier; Michaela Trippl; Iulia Siedschlag; Robert Owen; Gavin Murphy
  9. Innovation,Flexibility, Change-Premises of Organizational Development By Todorut, Amalia Venera
  10. Facing the Trial of Internationalizing Clinical Trials to Developing Countries: Some Evidence from Mexico By Santiago-Rodriguez, Fernando
  11. A percolation model of eco-innovation diffusion: the relationship between diffusion, learning economies and subsidies By Simona Cantono; Gerald Silverberg
  12. New Europe's Promise for Life Sciences By Filippov, Sergey; Kalotay, Kalman
  13. Lifelong learning – an essential premise for building a society and economy based on knowledge By Todorut, Amalia Venera
  14. R&D, Market Structure and Trade: A General Equilibrium Analysis By Leopoldo Yanes
  15. International R&D Spillovers in Transition Countries: The Impact of Trade and Foreign Direct Investment By Marius Sorin Krammer

  1. By: Andersson, Martin (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper examines small innovative entrepreneurs by contrasting patenting firms against non-patenting firms. The empirical analysis is based on new and unique data on internal attributes, location and international trade characteristics for over 20 000 manufacturing firms in Sweden with 1-25 employees. Our main findings are that firms’ access to financial means, human capital and trade with R&D-intensive economies correlate highly significant with their propensity to be engaged in innovation activities, as evidenced by patent applications. Interestingly, when controlling for firm attributes we do not find any significant effect of the local milieu on innovativeness among micro and very small firms.
    Keywords: Entrepreneurship; Innovation and Invention; Intellectual Property Rights; SMEs; Technology Transfer; Location; Agglomeration
    JEL: F43 L26 M13 O31 O34
    Date: 2008–04–09
  2. By: Czarnitzki, Dirk; Toole, Andrew A.
    Abstract: Real options investment theory predicts current investment falls as uncertainty about market returns increases. In the case of R&D investment, which is usually considered an irreversible form of investment, this effect should be quite pronounced. This paper tests the real options prediction about the R&D investment–uncertainty relationship and further considers how patent protection influences this relationship. Patent protection, by limiting the threat of market rivalry, should mitigate firm-specific uncertainty and stimulate current R&D investment. Our empirical results support both the prediction of real options theory and the mitigating effect of patent protection.
    Keywords: Real Options Theory, Uncertainty, R&D, Intellectual Property Protection, Censored Regression
    JEL: C25 O31 O33
    Date: 2008
  3. By: Joze P. Damijan; Crt Kostevc; Saso Polanec
    Abstract: Firm productivity and export decision are closely related to its innovation ac- tivity. Product innovation may play a more important role in the decision to start exporting, while the decision for process innovation may be triggered by success- ful exporting. This suggests that the causality between innovation and exporting may run from product innovation to exporting and conesequently from exporting to process innovation and reverse productivity improvements. Using detailed mi- crodata, including innovation survey, industrial production survey and information on trade, for Slovenian firms in 1996-2002 we investigate this dual causal relation- ship between firms' innovation and exporting activity. We find no evidence for the hypothesis that either product or process innovations increase the probability of becoming a first time exporter, but find consistent support both in the innovation survey as well as in the industrial production survey that exporting does lead to pro- ductivity improvements. These, however, are likely to be related to process rather than product innovations and are limited to a sample of medium and large sized first time exporters only.
    Keywords: ?rm heterogeneity, innovation, exporting, productivity, matching
    JEL: D24 F14 F21
    Date: 2008
  4. By: EL ELJ, Moez
    Abstract: In this paper, we analyze the incentives for improving-quality R&D in a two-tier marketstructure where the quality of a differentiated good depends on the specific R&D of a downstream oligopoly and the R&D of an upstream monopoly. We show that input pricing is determining for the incentives for innovation in upstream and downstream industry. Fixed price agreements promote innovation in downstream and upstream industry by eliminating the opportunistic behaviour of the input supplier and are welfare enhancing. Theses agreements are all the more effective as the weight of the quality of the input in the consumer’s perception of the total quality of the final good is significant and as the goods are strongly differentiated.
    Keywords: Product Innovation; Vertical Market - Technological Spillovers - Input pricing
    JEL: L13 D43 O31
    Date: 2008–04–11
  5. By: Tommy Clausen (Nordland Research Institute, Bodø)
    Abstract: In this paper we assess how important “industry” is to innovation. Our empirical estimates suggest that “industry factors” matter little to how firms’ search for new innovations. These results offer empirical support to recent evolutionary theory where firms have heterogeneous capabilities and pursue different approaches to innovation. Structural variables at the industry level do however have a substantial influence on the firm level propensity to innovate. This result supports “sectoral innovation system” approaches where firms are “constrained” by technological regimes underlying industry evolution. Hence, the driving forces behind technological evolution are found at both the firm and industry level.
    Date: 2008–04
  6. By: Carlos J. Serrano
    Abstract: This paper explores the dynamics of the transfer of U.S. patents and the significance of the initial missallocation of patent property rights. Here we find that the initial missallocation of patent property rights is large and differs substantially across patentees and technology fields. We also find that the probability of a patent being traded depends on a number of factors - the age of the patent, the number of citations received by a given age, the patent generality and whether the patent has been previously traded or not. We will also analyze and interpret this new evidence using a theoretical model of patent transfers and renewal.
    JEL: L1 O3
    Date: 2008–04
  7. By: Yves Breitmoser (Institute of Microeconomics, European University Viadrina); Jonathan H. W. Tan (Institute of Microeconomics, European University Viadrina); Daniel John Zizzo (Centre for Competition Policy, University of East Anglia)
    Abstract: This paper presents an experimental study of dynamic indefinite horizon R and D races with uncertainty and multiple prizes. The theoretical predictions are highly sensitive: small parameter changes determine whether technological competition is sustained, or converges into a market structure with an entrenched leadership and lower aggregate R&D. The subjects' strategies are far less sensitive. In most treatments the R&D races tend to converge to entrenched leadership. Investment is highest when rivals are close. This stylized fact, and so the usefulness of neck-to-neck competition in general, is largely unrelated to rivalry concerns but can be explained using a quantal response extension of Markov perfection.
    Keywords: R&D race, innovation, dynamics, experiment
    JEL: C72 C91 O31
    Date: 2008–03
  8. By: Charlie Karlsson (Jönköping International Business School, Jönköping University, Sweden); Gunther Maier (University of Economics and Business Administration, Vienna, Austria); Michaela Trippl (University of Economics and Business Administration, Vienna, Austria); Iulia Siedschlag (Economic and Social Research Institute (ESRI)); Robert Owen (University of Nantes, France); Gavin Murphy (Economic and Social Research Institute (ESRI))
    Abstract: The objective of this paper is to review the relevant theoretical and empirical literature to provide a conceptual and methodological background for the analysis of the consequences of ICT use and globalisation on the regional economies in the European Union. We highlight the key aspects of ICT as a general purpose technology, discuss the economic impacts of ICT diffusion from a macro as well as from a micro perspective, and examine the spatial consequences of ICT diffusion. We focus on regional innovation systems and globalisation in order to propose an organizing framework for the analysis of the impact of ICT diffusion on regional development.
    Keywords: Technology diffusion, Innovation systems, Globalisation, Regional development
    JEL: F23 O33 R11
    Date: 2008–04
  9. By: Todorut, Amalia Venera
    Abstract: The features of innovation, flexibility and change mutually influence one another. Provided that change is perceived as a feature leading to innovation, flexibility is the feature that enables it. Innovation cannot exist without change but nonetheless each and every change leads to innovation. Flexibility is a necessary condition but not sufficient for the innovation since it is influenced by change and balanced by flexibility. This fact suggests that the flexible companies lead to a more significant innovation comparatively to those inflexible. The innovations are more likely to develop when the organizational conditions allow flexibility. Concerning innovation, two types of flexibilities have been identified. The first type creates a routine allowing to companies to take advantage of opportunities leading to increasing the input capacity. The second type avoids the existent routine with the aim of creating new opportunities leading to high innovation. The type of innovation requested and that of flexibility are determined by the stability of the organization change and its environment.
    Keywords: innovation;flexibility;change; quality;strategy
    JEL: M11 D2
    Date: 2008–02
  10. By: Santiago-Rodriguez, Fernando (UNU-MERIT)
    Abstract: In pursuit of innovation, developing countries play an increasingly relevant role for multinational pharmaceutical firms. Driven partly by cost considerations but also by some host country-specific scientific and technological factors, global drug companies increasingly relocate part of their drug development activities to those countries. In particular, expansion of clinical trials performed in some of the more advanced developing countries is notable over the last years. This paper critically addresses some of these issues with particular reference to Mexico. The latter case equally illustrates some challenges developing countries face to accommodate and govern local performance of clinical trials according to strict internationally accepted regulatory and ethical principles.
    Keywords: Internationalization of R&D, Governance of clinical trials, Developing countries, Mexico
    JEL: I18 F23 L65
    Date: 2008
  11. By: Simona Cantono (Department of Economics, University of Turin); Gerald Silverberg (UNU-MERIT)
    Abstract: An obstacle to the widespread adoption of environmentally friendly energy technologies such as stationary and mobile fuel cells is their high upfront costs. While much lower prices seem to be attainable in the future due to learning curve cost reductions that increase rapidly with the scale of diffusion of the technology, there is a chicken and egg problem, even when some consumers may be willing to pay more for green technologies. Drawing on recent percolation models of diffusion by Solomon et al. [7], Frenken et al. [8] and Höhnisch et al. [9], we develop a network model of new technology diffusion that combines contagion among consumers with heterogeneity of agent characteristics. Agents adopt when the price falls below their random reservation price drawn from a lognormal distribution, but only when one of their neighbors has already adopted. Combining with a learning curve for the price as a function of the cumulative number of adopters, this may lead to delayed adoption for a certain range of initial conditions. Using agent-based simulations we explore when a limited subsidy policy can trigger diffusion that would otherwise not happen. The introduction of a subsidy policy seems to be highly effective for a given high initial price level only for learning economies in a certain range. Outside this range, the diffusion of a new technology either never takes off despite the subsidies, or the subsidies are unnecessary. Perhaps not coincidentally, this range seems to correspond to the values observed for many successful innovations.
    Keywords: Innovation diffusion, learning economies, percolation, networks, heterogeneous agents, technology subsidies, environmental technologies
    JEL: C61 H23 O32 O33
    Date: 2008
  12. By: Filippov, Sergey (UNU-MERIT); Kalotay, Kalman (UNCTAD)
    Abstract: The life sciences sector (and biotechnology in particular) has emerged as a prospective area, and attracted a lot of attention recently. Multinational companies in the life sciences seek to explore new markets, and, on the other side, governments strive to develop the life sciences sector perceiving it as a basis for long-term development. Whilst the R&D activities of global multinationals in life sciences still remain concentrated in the Triadic economies, these companies increasingly seek for new location to tap the knowledge. New EU member states emerge as such prospective locations. Notwithstanding the interest towards this sector, the body of literature on the development of life sciences in new EU member states, and particularly, the role of multinational companies, remains scant. In this explorative study we attempt to fill this gap and focus on the role of multinational companies in the Czech life sciences sector.
    Keywords: Life Sciences, Biotechnology, Pharmaceuticals, Multinational Companies, European Union
    JEL: F21 F23 L65 O32
    Date: 2008
  13. By: Todorut, Amalia Venera
    Abstract: The transformation of knowledge in an essential element of social activities, its multiple functions and economic roles – a quasi-universal starting material, a capital and essential way of work with the tendency of having a prevailing role in firms and product – is normally reflected in the permanent attempt to intensify the processes of obtaining them. Maybe the most conclusive expression of this tendency is represented, in the last decades, by the permanent lifelong learning outline or by the whole period of life as an essential component of realizing a favorable environment for the economy based on knowledge. The object of lifelong learning is to ensure and maintain the individual skills and abilities and their improvement as the content of work, the technology and the professional requirements are changing, achieving the employees’ carriers and individual development, making increases in productivity and aggregate incomes and, at the same time, the improvement of social equity. The characteristics of lifelong learning are very significant: the universality of learning, the innovation in the content and method of learning and the environment of individual learning. A fundamental change is imposed on politics and development in what concerns learning and education, thus, all the people should have access to the lifelong learning and the opportunity of using it effectively. We propose, during our work, to identify the provocations at the level of education in an economy based on knowledge.
    Keywords: knowledge lifelong education development innovation
    JEL: I2
    Date: 2008
  14. By: Leopoldo Yanes (School of Economics, The University of Queensland)
    Abstract: That many industries exhibit highly concentrated market structures, even at the global level, calls for trade theoretic analyses which can accommodate this fact. We present a two-country, general equilibrium analysis in which high concentration levels can be sustained through the interaction between R&D and market structure, whilst emphasizing the effects of trade and industrial policy on wages and welfare. The world economy is characterized by asymmetric initial conditions and populations. If initial conditions are very different, freetrade reduces wages in a backward economy, relative to autarky. However, the advanced economy always achieves higher wages through trade. Welfare gains from trade arise when economies are either very similar or very different. In the intermediate case, when initial conditions are not too different, and the advanced economy’s population is not very large, the backward economy loses from trade, while the advanced economy gains. A compensation mechanism is feasible and would ensure that no nation loses from trade. The analysis provides formal criteria for the choice of trade partners and the formation of trade blocs. Moreover, industrial policy (an R&D subsidy) is shown to be neutral or ineffective, in the sense that it does not affect any real magnitudes.
    Keywords: International trade, industrial policy, product quality, R&D, market structure, initial conditions
    Date: 2008
  15. By: Marius Sorin Krammer
    Abstract: While the economic theory predicts that developing countries will gain the most from technology spillovers, there have been only a few analyses looking at this question empirically. The present study focuses on a panel of 27 transition and 20 Western European countries between 1990 and 2006 and uses the latest developments in panel unit root and cointegration testing to disentangle the effects of international spillovers via trade and FDI. My findings show that imports remain the main channel of diffusion for both sets of countries, while FDI, although significant econometrically, has less quantitative impact on domestic productivity. The domestic R&D capital stock plays an active role in Western Europe while in the Eastern part is much less important. Human capital has an overall robust positive influence on TFP. The results confirm that transition countries seem to gain more in terms of productivity from the international diffusion process than their Western counterparts.
    Keywords: technology spillovers; trade; investment; panel cointegration
    JEL: O30 O47 O57 C23 D24
    Date: 2008–03

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