nep-ino New Economics Papers
on Innovation
Issue of 2008‒06‒13
twelve papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. International R&D Spillovers and Institutions By David T. Coe; Elhanan Helpman; Alexander W. Hoffmaister
  2. Competition, R&D and the cost of innovation By Philippe Askenazy; Christophe Cahny; Delphine Irac
  3. Radical versus Non-Radical Inventions By Schoenmakers, Wilfred; Duysters, Geert; Vanhaverbeke, Wim
  4. Enabling and Sustaining Collaborative Innovation By Blecker, Thorsten; Abdelkafi, Nizar; Raasch, Christina
  5. A Multilevel Analysis of Innovation in Developing Countries By Srholec, Martin
  6. Culture, Creativity and Innovation in the Internet Age By Freeman, Alan
  7. Characteristics of Foreign R&D Strategies of Swiss Firms. Implications for Policy By Heinz Hollenstein
  8. The Impact of Competition on Macroeconomic Performance By Karl Aiginger
  9. In Defence of the Linear Model: An Essay. By Margherita Balconi; Stefano Brusoni; Luigi Orsenigo
  10. Bringing Science to Market: Commercializing from NIH SBIR Awards By Albert N. Link; Christopher J. Ruhm
  11. Localized Innovation, Localized Diffusion and the Environment: An Analysis of CO2 Emission Reductions by Passenger Cars, 2000-2007 By Los, Bart; Verspagen, Bart
  12. The Economics of Scientific Misconduct. By Nicola Lacetera; Lorenzo Zirulia

  1. By: David T. Coe; Elhanan Helpman; Alexander W. Hoffmaister
    Abstract: The empirical analysis in "International R&D Spillovers" (Coe and Helpman, 1995) is first revisited by applying modern panel cointegration estimation techniques to an expanded data set that we have constructed for the purpose of this study. The new estimates confirm the key results reported in Coe and Helpman about the impact of domestic and foreign R&D capital stocks on TFP. In addition, we show that domestic and foreign R&D capital stocks have measurable impacts on TFP even after controlling for the impact of human capital. Furthermore, we extend the analysis to include institutional variables, such as legal origin and patent protection, in order to allow for parameter heterogeneity based on a country’s institutional characteristics. The results suggest that institutional differences are important determinants of total factor productivity and that they impact the degree of R&D spillovers.
    JEL: O31 O40 O43
    Date: 2008–06
  2. By: Philippe Askenazy; Christophe Cahny; Delphine Irac
    Abstract: This paper proposes a model in the spirit of Aghion and al. (2005) that relates the magnitude of the impact of competition on R&D to the cost of innovation. The effect of competition on R&D is an inverted U-shape. However, the shape is flatter and competition policy is therefore less relevant for innovation when innovations are relatively costly. Intuitively, if innovations are costly for a firm, competitive shocks have to be significant to alter its innovation decisions. Empirical investigations using a unique panel dataset from the Banque de France show that an inverted U-shaped relationship can be clearly evidenced for the largest firms, but the curve becomes flatter when the relative cost of R&D increases. For large costs, the relationship even vanishes.
    Date: 2008
  3. By: Schoenmakers, Wilfred (Hasselt University); Duysters, Geert (UNU-MERIT); Vanhaverbeke, Wim (Hasselt University)
    Abstract: This paper looks at the special characteristics of radical inventions. It tries to identify those variables that differentiate radical inventions from non-radical inventions. Since radical inventions are very important for the economy as a whole and for the individual firm performances, understanding what makes radical inventions differ from non-radical inventions is very important. For our research we made use of the EPO (European Patent Office) database on patents. We used the number of forward patent citations per patent to identify radical from non-radical inventions. For our analysis we used the backward patent citations per patent. In order to test if the two groups we are considering are truly different and to see on what factors they differ we made use of discriminant function analysis. Some of our main conclusions are that radical inventions are to a higher degree based on existing knowledge than non-radical inventions. Also the combination of emergent and mature knowledge is more important for radical inventions. A further result that follows from our analysis is that radical inventions are induced by the recombination over more knowledge domains as compared to non-radical inventions. Our research hints also on the importance of alliances and an open innovation system for the development of radical inventions.
    Keywords: radical inventions, patents, organizational learning, alliances
    JEL: O30 O31 O32 O33 O34 D83
    Date: 2008
  4. By: Blecker, Thorsten; Abdelkafi, Nizar; Raasch, Christina
    Abstract: This paper extends the principles of open source software development to a non-industry-specific level by introducing the Open Source Innovation (OSI) model. OSI exhibits main differences to other related models and concepts such as the private-collective model, commons-based peer production, R&D networks and is therefore an innovation model in its own right. In order for OSI projects to be successful, numerous factors need to be fulfilled. We make the distinction between four categories of factors: economic, technical, legal, and social. In each category, we differentiate between enabling and sustaining factors. The enabling factors must be met at the beginning of the project, whereas the sustaining factors must be satisfied as the project progresses.
    Keywords: OSI; open source innovation; R&D
    JEL: O32 L17 O3 O31
    Date: 2008
  5. By: Srholec, Martin (TIK, and CAS, Norwegian Academy of Science and Letters)
    Abstract: Innovation is a multilevel phenomenon. Not only characteristics of firms but also environment within which firms operate matter. Although this has been for long recognized in the literature, a quantitative test that explicitly concerns the hypothesis that framework conditions affect innovativeness of firms remains lacking. Using a large sample of firms from many developing countries, we estimate a multilevel model of innovation that integrates explanatory factors at different levels of the analysis. Apart from various firm’s characteristics, national economic, technological and institutional conditions directly predict the likelihood of firms to innovate.
    Keywords: Innovation, Technological Capability, Multilevel Modeling, Institutions, Developing Countries
    JEL: C30 E11 O30
    Date: 2008
  6. By: Freeman, Alan
    Abstract: bstract This unpublished paper was submitted to the May 22-23 conference on IPR at Birkbeck College, London. It analyses the distinct economic roles of culture, creation, and innovation in the Creative Industries by assessing the fitness for purpose of their statistical definitions. On this basis it proposes a method for studying the relation between creative labour and innovation. Lax usage has made the term ‘Creative Industries’ a synonym for three distinct things: creativity, culture and intellectual alienability. I use the term Cultural and Creative Sector (CCS). My aim is to distinguish Creative Labour, of which the sector is a specialist user, from Cultural Outputs, which the sector produces. These are found combined in the CCS in an advanced form, but they also exist separately outside it. In order to understand their wider economic impact – in particular, their relation to innovation and Intellectual Property – it is necessary to distinguish them. I begin from the empirical reality of the Creative Industries as currently defined which, I argue, establishes it as an ‘industrial sector’, in the economically meaningful sense that it is a specialised branch of the division of labour. Its definition, however, has yet to be aligned with this reality. This sector’s specialism is that it employs creative labour to produce cultural products. Its emergence is the outcome of two processes: a separation of mechanical from creative labour, which we inherit from the age of machines, and a revolution in service sector productivity, arising from the age of the internet. Creative labour is a general economic resource, employed both inside and outside the CCS. The CCS is the starting point of an adequate definition, because in it, creative labour is found in its most advanced and specialised form, and because in it, this kind of labour has applied to maximum effect the new service technologies which have emerged with the internet age. However, in order properly to assess its wider impact, creative labour has to be defined independent of the assumption that it only produces cultural products. This paper proposes such a definition. It outlines, on the basis of this definition, how the economic contribution of creative labour to service sector growth might be assessed.
    Keywords: cultural economics; creative industries; innovation; internet
    JEL: Z1 O3 J2
    Date: 2008–05–23
  7. By: Heinz Hollenstein (WIFO)
    Abstract: The aim of the paper is, firstly, to identify a number of strategies Swiss firms pursue by performing foreign R&D, expecting that firms, in many instances, are driven by a combination of several motives ("mixed strategies"). Secondly, we ask whether foreign and domestic R&D are substitutes or complements. Thirdly, we draw some policy conclusions based on results for direct and indirect home-country effects of foreign R&D. By applying cluster analysis, we identified four specific patterns of motives of foreign R&D. In a second step, we investigated whether these clusters effectively may be interpreted as specific types of R&D strategies. To this end, the clusters were characterised in terms of a large number of variables, which, according to the OLI paradigm of FDI, determine foreign R&D. We found that the patterns of the four clusters systematically differ with respect to these theory-related variables. Some clusters represent, in terms of motives, broad-based mixed strategies, whereas others are strongly focused. It turns out that foreign R&D strategies that primarily aim at exploiting capabilities of the domestic headquarters dominate, whereas cost-reducing strategies are of very minor importance. In case of the other two strategies knowledge sourcing is a constituent element, in the first one, knowledge sourcing is at the core, in the second case it is an important element in the frame of a broad-based strategy. The relative importance of the four strategies implies that, on balance, foreign and domestic R&D are complements. Notwithstanding this positive result, it is sensible to take policy actions supporting the economy to capitalise even more on outward FDI in R&D. Policy basically should aim at securing the attractiveness of Switzerland as a location for R&D-intensive headquarters of firms performing foreign R&D, and at enhancing knowledge spill-overs from headquarter companies to other domestic firms. The five categories of measures we recommend are part of a framework-oriented policy design rather than of a more interventionist concept.
    Keywords: Internationalisation of R&D Motives of foreign R&D Foreign R&D strategies Knowledge spillovers Home-country effects of outward FDI in R&D
    Date: 2008–03–31
  8. By: Karl Aiginger (WIFO)
    Abstract: This paper investigates the impact of the toughness of competition on the macroeconomic performance of countries. The relation between competition and innovation has been investigated intensely in industrial economics. It started with Schumpeter's hypotheses that monopoly profits were necessary for innovation, leading then to U-curve relationships where innovation was the highest for medium-range of competition, but lower for very tough competition as well as for a very lax competitive regime. Empirical studies on the growth differences between countries increasingly stress – apart from the usual suspects like investment, R&D, human capital – the role of institutions. They include indicators on regulation, government size, corruption and rule of law, but usually not the degree of competition. Conventional growth theory did not model the impact of competition, but assumed perfect competition. In New Growth Theory, economic growth depends on purposeful and maximising innovation activities, where market structure plays an important role. But this did not result in the inclusion of competition variables into empirical growth equations. We have attempted to bridge this gap a bit by relating 13 indicators on the toughness of competition to macroeconomic performance. We then added these competition indicators to an equation relating macro performance to the standard explanatory variables for economic growth (like investment and R&D). The results indicate that competition plus innovation is a good recipe at the macro level, too, probably with similar tensions and non-linearity as at the company level.
    Keywords: Competition Macroeconomic Performance Innovation
    Date: 2008–05–20
  9. By: Margherita Balconi (University of Pavia, Pavia - Italy); Stefano Brusoni (CESPRI Bocconi University, Milan, Italy); Luigi Orsenigo (University of Brescia, Brescia - Italy; CESPRI Bocconi University, Milan - Italy and Open University, U.K.)
    Abstract: This paper has been prompted by an increasing sense of dissatisfaction with the current fashion of criticising the so-called “Linear Model” of innovation. LM). The frequency and hostility of remarks against the linear model raises the suspicion that something is wrong indeed. Why so much hostility to a concept that is unanimously recognised to be false and discredited? Is it only a (repetitive and abused) rhetorical device? Or does the LM still maintain a credibility in scientific research and policy-making that makes it useful or even necessary to constantly remind its deep shortcomings? If this is the case, why is it that despite all the evidence, the LM continues to be so influential in the policy debate? The sense of uneasiness and dissatisfaction is compounded by the recognition that it is quite hard to find in the critical literature a precise definition of the so called linear model. To a considerable extent, the LM is just a straw man around which a set of arguments is constructed concerning the process of technological innovation and the implied policy prescriptions. In this paper, we seek to probe the deep reasons of our dissatisfaction with undisciplined critiques to the “infamous” linear model and to clarify what are the main and most relevant problems that indeed the LM suffers from. Moreover, we ask whether at least some features of the linear model retain some interpretative and normative validity and if a complete and outright rejection of the LM would amount to throw the baby away with the dirty water
    Keywords: linear model, innovation, chain model, life sciences, sciences of the artificial
    JEL: O31 O32 O33
    Date: 2008–01
  10. By: Albert N. Link; Christopher J. Ruhm
    Abstract: We offer empirical information on the correlates of commercialization activity for research projects funded through the U.S. National Institutes of Health's (NIH's) Small Business Innovation Research (SBIR) award program. Based on this analysis we suggest possible recommendations for improving this aspect of the performance of NIH's SBIR program. Specifically, we estimate a model of the probability of commercialization as a function of the project's ability to attract additional developmental funding, along with other control variables. We find that additional developmental funding from non-SBIR federal sources and from own internal sources are important predictors of commercialization success, relatively more so than additional developmental funding from venture capitalists. We also find, among other things, that university involvement in the underlying research increases the probability of commercialization. Thus, these factors should be considered by NIH when making awards, if increased commercialization is an objective.
    JEL: I28 O38
    Date: 2008–06
  11. By: Los, Bart (Groningen Growth and Development Centre, and University of Groningen); Verspagen, Bart (UNU-MERIT, and Maastricht University)
    Abstract: We investigate technological change with regard to CO2 emissions by passenger cars, using a Free Disposal Hull methodology to estimate technological frontiers. We have a sample of cars available in the UK market in the period 2000 – 2007. Our results show that the rates of technological change (frontier movement) and diffusion (distance to frontier at the car brand level) differ substantial between segments of the car market. We conclude that successful policies should be aimed at diffusion of best-practice technology, and take account of the different potential for further progress between different segments of the market (e.g., diesel and gasoline engines, and small vs. large engines).
    Keywords: CO2 emissions by cars, technological change, diffusion of innovations
    JEL: Q55 O31 O33
    Date: 2008
  12. By: Nicola Lacetera (Department of Economics, Weatherhead School of Management, Case Western University, Cleveland, OH, USA); Lorenzo Zirulia (Department of Economics, University of Bologna, Italy; CESPRI, Bocconi University, Milano, Italy; and Rimini Centre for Economic Analysis)
    Abstract: Scientific fraud is a pervasive phenomenon with deleterious consequences, as it leads to false scientific knowledge being published, therefore a¤ecting major individual and public decisions. In this paper we build a game-theoretic model of the research and publication process that ana- lyzes why scientists commit fraud and how fraud can be detected and prevented. In the model, authors are asymmetrically informed about the success of their projects, and can fraudulently manipulate their results. We show four main results. First, the types of scientific frauds that are observed are unlikely to be representative of the overall amount of malfeasance in science; also, star scientists are more likely to misbehave, but are less likely to be caught than average scientists. Second, a reduction in the costs of checking for frauds may not lead to a reduction of misconduct episodes, but rather to a change in the type of research that is performed. Third, an increase in competition between scientists may in fact reduce, and not increase, scientific misconduct. Finally, a more active role of editors in checking for misconduct does not always provide additional deterrence.
    Keywords: Research and publication process, peer review, fraud.
    JEL: A14 D82 K42 O31 Z13
    Date: 2008–03

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