nep-ino New Economics Papers
on Innovation
Issue of 2008‒08‒21
seven papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. Technology sourcing by large incumbents through acquisition of small firms By Marcus Wagner
  2. A multilevel analysis of innovation in developing countries By Martin Srholec
  3. Does Innovation Stimulate Employment? A Firm-Level Analysis Using Comparable Micro-Data from Four European Countries By Rupert Harrison; Jordi Jaumandreu; Jacques Mairesse; Bettina Peters
  4. Who Has a Better Idea? Innovation, Shared Capitalism, and HR Policies By Erika Harden; Douglas L. Kruse; Joseph R. Blasi
  5. Diffusion Processes and Inter-firm Cooperation: An Extended Nelson-Winter Model By Brunner, Daniuel; Voigt, Tim
  6. Inventor Moral Hazard in University Licensing: The Role of Contracts By Emmanuel Dechenaux; Jerry Thursby; Marie C. Thursby
  7. The Impact of FDI on Innovation in Target Firms By Joel Stiebale; Frank Reize

  1. By: Marcus Wagner
    Abstract: Innovation activities in high technology industries provide considerable challenges for technology and innovation management. In particular, since these industries have a long history of radical innovations taking place through distinct industry cycles of higher and lower demand, firms frequently consider the option to use acquisitions as a means for technology sourcing. The paper investigates this behaviour for three high technology industries, namely semiconductor manufacturing, biotechnology and electronic design automation which is a specific sub-segment of the semiconductor industry. It analyses the association of firm characteristics with different aspects of acquisition behaviour with a particular focus being put on innovation-related firm characteristics. The paper confirms a substitutive relationship between acquisitions and own research activities as well as between own and acquired firm patenting, but also finds that firm size, financial conditions and geographical origin of the firm matter for acquisition behaviour.
    Keywords: Acquisition, innovation, high technology, quantitative methods, research, R&D
    JEL: L10 L86 M20
    Date: 2008
  2. By: Martin Srholec (Centre for Technology, Innovation and Culture, University of Oslo)
    Abstract: Innovation is a multilevel phenomenon. Not only characteristics of firms but also the environment within which firms operate matter. Although this has been recognized in the literature for a long time, a quantitative test that explicitly considers the hypothesis that framework conditions affect innovativeness of firms has been 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 are demonstrated to directly predict the likelihood of firms to innovate.
    Keywords: Innovation, technological capability, multilevel modeling, institutions, developing countries.
    Date: 2008–08
  3. By: Rupert Harrison; Jordi Jaumandreu; Jacques Mairesse; Bettina Peters
    Abstract: This paper studies the impact of process and product innovations introduced by firms on employment growth in these firms. A simple model that relates employment growth to process innovations and to the growth of sales separately due to innovative and unchanged products is developed and estimated using comparable firm-level data from France, Germany, Spain and the UK. Results show that displacement effects induced by productivity growth in the production of old products are large, while those associated with process innovations, which are likely to be compensated by price decreases, appear to be small. The effects related to product innovations are, however, strong enough to overcompensate these displacement effects.
    JEL: D2 J23 L1 O31 O33
    Date: 2008–08
  4. By: Erika Harden; Douglas L. Kruse; Joseph R. Blasi
    Abstract: We investigate the relationship of "shared capitalist" compensation systems - profit/gainsharing, employee ownership, and stock options - to the culture for innovation and employees' ability and willingness to engage in innovative activity. Using a large dataset with over 25,000 employee surveys in over 200 worksites of a large multinational organization, we find that both shared capitalism compensation and high performance work policies contribute to these innovation outcomes. Owning company stock is the most consistently positive compensation variable in predicting both an innovation culture and willingness to engage in innovative activity. We also find that shared capitalism and high performance work policies have stronger effects in predicting an innovation culture when they are combined, and that the effects of shared capitalism and high performance work policies are partially, but not wholly, mediated through greater employee alignment with company strategy. The findings are consistent with agency theories predicting that the principal agent problem can be addressed by a combination of shared incentives and cooperative culture which encourages mutual monitoring and opportunities to share information.
    JEL: J33 J54 L23 L25
    Date: 2008–08
  5. By: Brunner, Daniuel; Voigt, Tim
    Abstract: The simulation studies presented by Nelsen and Winter (1982) examine the modelling of industry dynamics. These studies are a prominent and unique approach visualizing innovation and imitation processes. Assuming the standard model envisages firms acting individually, this paper treats the question concerning how the dynamic of the market changes in the case of inter-firm cooperation. Thereby we refer to one of our case studies (Brunner / Voigt 2008) and reconstruct interactions between the cooperation participants. On the one hand, we extend the Nelson-Winter-model by a factor market where the cooperation is able to bundle its demand. On the other hand, the model is enlarged by interactions of the cooperation actors in terms of innovation and imitation processes. A fundamental result of the simulation studies is that the cooperation participants improve their market position due to the cooperation. In particular, this study shows how the cooperation supports and simultaneously accelerates the dissemination of innovation.
    Keywords: Nelson-Winter; diffusion proccesses; knowledge communication; simulation study
    JEL: O33 D4 M13
    Date: 2008–08
  6. By: Emmanuel Dechenaux; Jerry Thursby; Marie C. Thursby
    Abstract: We examine commonly observed forms of payment, such as milestones, royalties, or consulting contracts as ways of engaging inventors in the development of licensed inventions. Our theoretical model shows that when milestones are feasible, royalties are not optimal unless the licensing firm is risk averse. The model also predicts the use of consulting contracts which improve the firm's ability to monitor inventor effort. Because these contracts increase the firm's expected profits, the upfront fee that the university can charge is higher than otherwise. These results therefore support the commonly observed university policy of allowing faculty to consult with licensing firms outside of their university contracts. They also support firm policies of including milestones. An empirical analysis based on a survey of 112 businesses that license-in university inventions supports the complementarity of milestones and consulting suggested by the theory.
    JEL: D82 L14 O3
    Date: 2008–08
  7. By: Joel Stiebale; Frank Reize
    Abstract: This paper contributes to the ongoing debate on the welfare effects of foreign direct investment by investigating the effects of cross-border mergers and acquisitions on innovation activities in target firms. The empirical analysis is based on survey and ownership data for a large sample of small- and mediumsized German firms. After controlling for endogeneity and selection bias, it is found that foreign takeovers have a large negative impact on the propensity to perform innovation activities and a negative impact on average R&D expenditures in innovative firms. Furthermore, innovation output, measured as the share of sales from product innovations is not significantly affected by a foreign takeover for a given amount of innovation efforts. Hence, the estimation results do not show any evidence of significant technology spillovers through foreign direct investment in form of a higher innovation success.
    Keywords: Multinational enterprises, mergers and acquisitions, innovation
    JEL: D21 F23 G34 C31 O31 O33
    Date: 2008–07

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