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on Innovation |
| By: | James Bergin (Geary Institute & School of Economics, University College Dublin) |
| Abstract: | The intent of the patent system is to encourage innovation by granting the innovator exclusive rights to a discovery for a limited period of time: with monopoly power, the innovator can recover the costs of creating the innovation which otherwise might not have existed. And, over time, the resulting innovation makes everyone better off. This presumption of improved social welfare is considered here. The paper examines the impact of patents on welfare in an environment where there are large numbers of (small) innovators — such as the software industry. With patents, because there is monopoly for a limited time the outcome is necessarily not socially optimal, although social welfare may be higher than in the no-patent state. Patent acquisition and ownership creates two opposing incentives at the same time: the incentive to acquire monopoly rights conferred by the patent spurs innovation, but subsequent ownership of those rights inhibits innovation (both own innovation and that of others). On balance, which effect will dominate? In the framework of this paper separate circumstances are identified under which patents are either beneficial or detrimental to innovation and welfare; and comparisons are drawn with the socially optimal level of investment in innovation. |
| Date: | 2008–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:ucd:wpaper:200808&r=ino |
| By: | Ivan Ledezma |
| Abstract: | This paper studies theoretically and empirically the consequences of defensive strategies in R&D races. Using a quality ladders model we allow for endogeneous incumbent R&D advantages explained by strategies seeking to limit knowledge diffusion. Market institutions appear to be crucial to foster aggregate R&D intensity and to determine who innovates. Regulatory provisions reducing the possibilites of defensive strategies in the process of production may indeed increase the incentives to carry out R&D. This effect is more likely to be observed when the size of innovation is high. Using time-series cross-section data of manufacturing industries among 17 OECD countries we test the relationship between regulation and R&D expenditure over value added. We allow for a differentiated effect of regulation for industries producing and using ICT. The evidence is consistent with the model's predictions. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pse:psecon:2008-29&r=ino |
| By: | Dario Sacco (Socioeconomic Institute, University of Zurich); Armin Schmutzler (Socioeconomic Institute, University of Zurich) |
| Abstract: | The paper analyzes the effects of more intense competition on firms’ incentives to invest in process innovations. We carry out experiments based on two-stage games, where R&D investment choices are followed by product market competition. As predicted by theory, an increase in the number of firms from two to four reduces investments. However, a positive effect is observed for a switch from Cournot to Bertrand, even though theory predicts a negative effect in the four-player case. |
| Keywords: | R&D investment, intensity of competition, experiment |
| JEL: | C92 L13 O31 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:soz:wpaper:0807&r=ino |
| By: | Aschhoff, Birgit |
| Abstract: | The question of the allocation of public R&D funding is becoming particularly important when it comes to identifying the effects of state subsidies, in terms of input or output additionality. This analysis goes one important step further than the existing literature by including the time dimension. Using firm-level data on German manufacturing and knowledge-intensive service firms, this paper sheds light on the structure of the subsidy recipients over time. It turns out that participation in the funding scheme is quite stable. This is also confirmed by applying a multivariate approach. Firms having received funding in the past are more likely to be selected for public funding again. It is also important to control for the overall supply of subsidies. Besides, a firm’s size and knowledge capabilities increase the probability of entering the scheme. |
| Keywords: | R&D, Public Subsidies, Program Participation, Germany |
| JEL: | C20 H32 O38 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:7227&r=ino |
| By: | Kesidou, Effie (Nottingham University Business School); Szirmai, Adam (UNU-MERIT) |
| Abstract: | This paper examines the importance of local knowledge spillovers for the innovative and economic performance of firms in a developing country context. Theoretical and empirical studies in advanced economies underline the significance of local knowledge spillovers for innovation. However, not much is known about whether local knowledge spillovers work similarly in developing countries. This analysis is based on an original innovation survey in the software industry in Uruguay. The survey focuses on the direct identification and measurement of local knowledge spillovers; pure knowledge spillovers are distinguished from commercial knowledge transactions. Both knowledge spillovers and knowledge transactions are measured at the local and at the international level. The study concludes that local knowledge spillovers play a crucial role in enhancing the innovative performance of software firms in Uruguay. However, for the economic performance of the firms, international knowledge transactions turn out to be more important than local knowledge spillovers. Local Knowledge Spillovers may be essential for innovation, but not sufficient for economic success. Firms in developing countries need to be connected to both the local and the international economy. |
| Keywords: | local knowledge spillovers, innovation, economic performance, developing economies |
| JEL: | L86 O31 O33 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:unumer:2008033&r=ino |
| By: | Jutta Günther; Björn Jindra; Johannes Stephan |
| Abstract: | This paper analyses the extent of technological capability of foreign subsidiaries located in East Germany, and looks at the determinants of foreign subsidiaries’ technological sourcing behaviour. The theory of international production underlines the importance of strategic and regional level variables. However, existing empirical approaches omit by and large regional level factors. We employ survey evidence from the “FDI micro data- base” of the IWH, that was only recently made available, to conduct our analyses. We find that foreign subsidiaries are above average technologically active in comparison to the whole East German manufacturing. This can be partially explained by the industrial structure of foreign direct investment. However, only a limited share of foreign subsidiaries with R&D and/or innovation activity source technological knowledge from the East German innovation system. If a subsidiary follows a competence augmenting strategy or does local trade, it is more likely to source technological knowledge locally. The endowment of a region with human capital and a scientific infrastructure has a positive effect too. The findings suggest that foreign subsidiaries in East Germany are only partially linked with the regional innovation system. Policy implications are discussed. |
| Keywords: | East Germany, Regional Innovation System, Foreign Direct Investment |
| JEL: | O30 O38 F20 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:iwh:dispap:4-08&r=ino |
| By: | Shih-tse Lo; Dhanoos Sutthiphisal |
| Abstract: | Scholars have long noted the significant impact of general purpose technologies (GPTs) on the economy. However, limited attention has been paid to exploring how they are employed to generate inventions in downstream sectors (crossover inventions), and what factors may facilitate such diffusion. We study these issues by examining the introduction of one of the widely regarded GPTs -- electrical technology -- in the late 19th century U.S. We find that knowledge spillovers between industries (inter-industry spillovers and learning-by-using) had little influence on the geography of crossover inventions as well as the speed and productivity of inventors at making them. Instead, appropriate human capital and an environment promoting inventions in general played a more important role. |
| JEL: | N0 O3 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14043&r=ino |