nep-ino New Economics Papers
on Innovation
Issue of 2008‒05‒05
eight papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. Stimulating Renewable Energy Technologies by Innovation policy By Simona O. Negro; Marko P. Hekkert; Ruud Smits
  2. The EU Framework Programs: Are they worth doing? By Dekker, Ronald; kleinknecht, A.H.
  3. The IPR System, Venture Capital and Capital Markets – Contributions and Distortions of Small Firm Innovation? By Jesper Lindgaard Christensen
  4. Varieties of Systems of Innovation: A Survey of their Evolution in Growth Theory and Economic Geography By Julian Christ
  5. A resource-based view on the interactions of university researchers By Frank J. van Rijnsoever; Laurens K. Hessels; Rens L.J. Vandeberg
  6. The R&D Investment-Uncertainty Relationship: Do Competition and Firm Size Matter? By Czarnitzki, Dirk; Toole, Andrew A.
  7. Judicial Errors and Innovative Activity By Giovanni Immordino; Michele Polo
  8. Field-of-use restrictions in licensing agreements By Schuett, Florian

  1. By: Simona O. Negro; Marko P. Hekkert; Ruud Smits
    Abstract: In this paper we analyse the dynamics of three emerging innovation systems by using the system functions approach in which the underlying key activities that contribute to the build up of an innovation system are identified. The insights gained with respect to the dynamic functional patterns specific for each emerging innovation system will allow us to identify system failures and develop policy and policy measures that start out from an innovation systems’ perspective. We will present initial ideas on the building blocks for a more systemic policy aiming to support the development of new emerging innovation systems (and in doing so break down parts of the old innovation systems).
    Keywords: Innovation policy, Technological Innovation Systems, Emerging technologies, Renewable Energy System Functions
    Date: 2008–04
  2. By: Dekker, Ronald; kleinknecht, A.H.
    Abstract: Using CIS data from the Netherlands, Germany and France we test whether EU Framework programs do have effects on their participants' R&D input and innovative output. From our Heckman selection equations, we conclude that the FPs attract the "elite" of European innovators. The question is whether, after correction for self-selection, the programs have positive effects on innovative behaviour. This is hard to test meaningfully among large firms as EU funding is likely to cover only a minor share of their innovative activities. Analysing changes in R&D input we find that smaller firms increase their R&D input quite substantially after entering an EU FP program. Estimating equations that explain sales of innovative products, we find that firms that collaborate on R&D with clients, suppliers, competitors or public research institutes do not have increased sales of innovative products. We try to provide explanations for this counter-intuitive finding. Moreover, participation in an EU FP neither increases sales of innovative products. This result holds after numerous robustness checks. We argue that our insignificant outcomes do not necessarily imply that the FP programs are worthless. There is independent evidence that innovative projects funded by the EU FPs do, on average, involve more technical and scientific risks, they are more complex, and involve longer time horizons. Obviously, they are farer from market introduction which is not surprising, given the regulatory demand that EU FPs should be "pre-competitive". Against this background, we cannot exclude the possibility that an insignificant coefficient of FP participation in our equation on innovative output may still have a positive meaning.
    Keywords: innovation; R&D subsidies; collaborative R&D; CIS data; Netherlands; Germany; France
    JEL: O38 O57 O32 O31
    Date: 2008–05–22
  3. By: Jesper Lindgaard Christensen
    Abstract: This study explores how capital markets, exemplified by venture capital, and recent trends in the patent system may influence innovation activity and the financing of small businesses. Specifically it is evaluated if there are costs and distortions of incentives related hereto. Additionally, the positive contribution of venture capital in the patenting process is investigated. It is found that trends at a macro economic level is nowadays of major importance for the patenting and innovation behaviour and financing of firms. Patenting has increased in scale, scope and trade volume, patents have become a strategic asset to an extent that may de-link it from innovation activities. The IPR-system may render distortions of innovation activities facilitated by these trends. These distortions may impose costs on the overall function of the innovation system, costs that are unequally distributed among firms as small firms are bearing most of the burdens. The results points to new perspectives on strategy that are important to management of firms and investment funds.
    Keywords: Small firms; venture capital; IPR
    JEL: O34 G24
    Date: 2008
  4. By: Julian Christ (Universität Hohenheim)
    Abstract: The systems of innovation (SI) approach has been established and extended during the last two decades. Although elementary goals and progress have been reached through seminal contributions by Freeman (1987), Lundvall (1992) or Nelson (1993), in designing a generic approach, displaying the dynamics of collaboration, networking and interactive learning, criticism has been raised that systems of innovation are still “undertheorized”. The objective of this paper is to describe briefly the historical evolution of the SI concept within the academic literature and the policy sphere. This review primarily attempts to highlight some of the most important contributions that strongly assisted to the framework, by providing more consistency and a more theory- oriented perspective. Consequently, the system concept itself seems to be a kind of “boundary object”. Within both, the academic and the policy field, different levels of conceptualization have been challenged and advanced in the course of time. These conceptualizations basically differ in their scale of analysis, taking geographical perspectives, technologies or sectoral classifications as foci for theorizing and empirical research. Despite these substantial levels of research, the SI framework is increasingly challenged, analyzed and extended in the context of globalization. As a result, regarding the openness and flexibility of the SI approach, this paper particularly tries to focus on the difficulties of contemporary research in defining functional and spatial boundaries in theory and empirical research. Agglomeration tendencies, knowledge externalities and localized learning are primarily based upon the concepts of knowledge diffusion, tacit knowledge and proximity. In spite of that, ICT and global business linkages foster inter-regional and trans-border knowledge flows. Thus, knowledge diffusion is also related to international and global “pipelines” that could support, strengthen and reinforce localized learning.
    Keywords: National, Sectoral, Technological and Regional Systems of Innovation, Geography of Innovation, Knowledge Externalities, Localized Knowledge Spillovers, Knowledge Diffusion, Tacit Knowledge
    JEL: O1 O3 R0 R1 D8 B5
    Date: 2007–11
  5. By: Frank J. van Rijnsoever; Laurens K. Hessels; Rens L.J. Vandeberg
    Abstract: The high value of collaboration among scientists and of interactions of university researchers with industry is generally acknowledged. In this study we explain the use of different knowledge networks at the individual level from a resource-based perspective. This involves viewing networks as a resource that offers competitive advantages to an individual university researcher in terms of career development. Our results show that networking and career development are strongly related, but it is important to distinguish between different types of networks. Although networks on various levels (faculty, university, scientific, industrial) show strong correlations, we found three significant differences. First, networking within one’s own faculty and with researchers from other universities stimulates careers, while interactions with industry do not. Second, during the course of an academic career a researcher’s scientific network activity first rises, but then declines after about 20 years. Science-industry collaboration, however, continuously increases. Third, the personality trait ‘global innovativeness’ positively influences science-science interactions, but not science-industry interactions.
    Keywords: research collaboration, science-industry interaction, individual researcher, resource-based view
    Date: 2008–04
  6. By: Czarnitzki, Dirk; Toole, Andrew A.
    Abstract: This paper investigates how competition and firm size affect the relationship between market uncertainty and R&D investment. We use an intuitively appealing measure of firm-specific uncertainty along with panel data to show that firms invest less in current R&D as uncertainty about market returns increases. The effect of firm-specific uncertainty on R&D investment is smaller in concentrated markets – those where market power is higher and strategic rivalry is more intense. Further, the effect of uncertainty on R&D investment is attenuated for large firms which may be the result greater economies of scope. Unsicherheit ist ein immanenter Faktor von Forschungs- und Entwicklung (FuE) und hat einen grundlegenden Einfluss auf Investitionsentscheidungen. Die Literatur zu „Real Options“ Modellen bildet eine Basis für empirische Analysen von Investitionsentscheidungen, insbesondere wenn es sich um größtenteils irreversible Ausgaben wie FuE-Aktivitäten handelt. Wenn Profite solcher Investitionsprojekte ungewiss sind und Unternehmen diese Investition verzögern können, zeigen ökonomische Theorien, dass bei höherer Unsicherheit weniger investiert wird. Jedoch gibt es auch Modelle, die beschreiben, dass die Option die Investition zu verzögern, nicht profitabel sein muss, wenn Unternehmen einem hohen Konkurrenzdruck ausgesetzt sind, oder wenn diese FuE-Aktivitäten hinreichende Wachstumsmöglichkeiten versprechen. Durch solche gegensätzlichen Anreize ist der Effekt von Unsicherheit auf das Investitionsverhalten nicht eindeutig. In dieser Studie analysieren wir empirisch, wie Wettbewerb und Unternehmensgröße einen möglichen negativen Zusammenhang zwischen Investitionen und Unsicherheit beeinflussen. Mit Hilfe von Paneldaten können wir zeigen, dass Unternehmen bei höherer Unsicherheit über die erwarteten Profite tatsächlich weniger investieren. Jedoch ist der Effekt der firmenspezifischen Unsicherheit kleiner in konzentrierten Märkten sowie in Großunternehmen. Wir führen dies auf zwei Gründe zurück. In konzentrierten Märkten kann die strategische Interaktion zwischen Unternehmen intensiver sein als in anderen Märkten. Durch Innovationsaktivitäten kann ein Konkurrenzkampf in Produktmärkten vorweggenommen werden, sodass der negative Effekt von Unsicherheit reduziert wird. Ferner können Großunternehmen Erkenntnisse aus FuE-Aktivitäten besser in alternative Verwendungen transferieren als kleine Unternehmen („economies of scope“), was auch zur Reduktion der negativen Investitionsanreize unter Unsicherheit führt.
    Keywords: Real Options Theory, Uncertainty, R&D, Competition, Firm Size
    JEL: G31 L11 O31
    Date: 2008
  7. By: Giovanni Immordino (Università di Salerno and CSEF); Michele Polo (Università Bocconi, IGIER and CSEF)
    Abstract: We analyze the effect of errors in law enforcement on the innovative activity of firms. If successful, the innovative effort allows to take new actions that may be ex-post welfare enhancing (legal) or decreasing (illegal). Deterrence in this setting works by affecting the incentives to invest in innovation, what we call average deterrence. Type-I errors, through over-enforcement, discourage innovative effort while type-II errors (under-enforcement) spur it. The ex-ante expected welfare effect of innovations shapes the optimal policy design. Accuracy, in this setting may be undesirable, when it would influence the innovative effort in the wrong way. This result is in contrast with the traditional model, where accuracy is always welcome since it enhances marginal deterrence. When innovations are ex-ante welfare enhancing, they can be sustained by laissez-faire or, if the enforcement effort is exogenous, through better (type-I) accuracy. When instead the innovative effort is ex-ante welfare decreasing, it is discouraged through positive enforcement and (type-II) accuracy. Finally, when the enforcer can selectively reduce type-I and type-II errors, he will always concentrate accuracy on one of them only, depending on the expected impact of innovations on welfare, adopting asymmetric protocols of investigation.
    Keywords: norm design, innovative activity, enforcement, Type I and Type II error
    JEL: D73 K21 K42 L51
    Date: 2008–02–20
  8. By: Schuett, Florian
    Abstract: A widely used clause in license contracts -- the field-of-use restriction (FOUR) -- precludes licensees from operating outside of the specified technical field. When a technology has several distinct applications, FOUR allow the licensor to slice up his rights and attribute them to the lowest-cost producer in each field of use. This can improve production efficiency. However, with complex technologies, the boundaries of fields of use may be difficult to codify, entailing a risk of overlap of licensees' rights. We explore how this affects the optimal license contract in a moral hazard framework where the licensor's effort determines the probability of overlap. We show that depending on the contracting environment, the license agreement may include output restrictions and nonlinear royalty schemes.
    JEL: L24
    Date: 2007–07–15

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