nep-ino New Economics Papers
on Innovation
Issue of 2008‒08‒31
fourteen papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. The challenge of measuring innovation in emerging economies' firms: A proposal of a new set of indicators on innovation By Marins, Luciana
  2. Public R&D Subsidies and Employment Growth - Microeconomic Evidence from Finnish Firms By Heli Koski
  3. Is Service Innovation Different? By Aija Leiponen
  4. "Domestic Innovation and Chinese Regional Growth, 1991-2004" By William Latham; Hong Yin
  5. Renewal of Patents and Government Financing By Svensson, Roger
  6. Habakkuk revisited: A history friendly model of "American and British technology in the nineteenth century" By Roberto Fontana; Marco Guerzoni; Alessandro Nuvolari
  7. Technological Innovation and Monopolization By Scherer, F. M.
  8. Markets and Uncertainty in Pharmaceutical Development By Scherer, F. M.
  9. Cooperation networks and innovation: A complex system perspective to the analysis and evaluation of a EU regional innovation policy programme By Russo, Margherita; Rossi, Federica
  10. Intra-firm Technology Transfer and R&D in Foreign Affiliates: Substitutes or Complements? Evidence from Japanese Multinational Firms By Belderbos, René; Ito, Banri; Wakasugi, Ryuhei
  11. Entrepreneurship, Spillovers and Productivity Growth in the Small Firm Sector of UK Manufacturing By Hany El Shamy; Paul Temple
  12. Building and Blocking: The Two Faces of Technology Acquisition By Grimpe, Christoph; Hussinger, Katrin
  13. Patenting, Commercialization, and US Academic Research in the 21st Century: The Resilience of Basic, Federally-Funded Open Science By Barham, Bradford L.; Foltz, Jeremy D.
  14. Effects of Patent Policy on Income and Consumption Inequality in an R&D-Growth Model By Chu, Angus C.

  1. By: Marins, Luciana (UNU-MERIT)
    Abstract: The traditional indicators on innovation rely on the linear assumption that research leads to development, centring on the measurement of inputs and outputs. Based on the traditional innovation indicators, recent studies focused on the industrial innovation process at Latin America state that nowadays Latin American firms display a passive role at world’s innovative activities, characterised by the lack of firms’ innovative skills. However, these indicators do not seem to be the most appropriate for measuring innovation, especially in emerging economies’ firms. The focus of this paper is to theoretically propose a set of new indicators on innovation that might be more adequate to the reality of firms located in emerging economies, centring on the way innovation activities process takes place within the firms. In order to do so, the paper searches for support from five approaches of the economic theory. The validation of the suggested set of new indicators could shed some light on the understanding of the innovative performance of emerging economies’ firms.
    Keywords: innovation, indicators, economic theory, emerging economies, firms, industrial innovation, enterprises, Latin America
    JEL: L20 M10 M21 O30
    Date: 2008
  2. By: Heli Koski
    Abstract: ABSTRACT : This study empirically explores whether the public financial support for entrepreneurial R&D affects employment growth at the firm level. The data from the Finnish companies suggests that the firms that have received public R&D funding have not generally witnessed any greater employment growth than other companies. However, we find that the public R&D support targeted to the certain types of R&D activities notably contribute to the creation of new jobs : employment in those firms that have received public funding for the R&D projects targeted to the new business areas has clearly grown relatively more than in other companies. The relationship between the firm’s total innovation and employment growth is not statistically significant.
    Keywords: Public R&D subsidies, technology policy, employment growth
    JEL: J23 L10 O33 O38
    Date: 2008–08–20
  3. By: Aija Leiponen
    Abstract: ABSTRACT : This exploratory empirical study compares the determinants of innovation in manufacturing and services through descriptive and regression analyses of sales from innovative products and services. The results suggest that, contrary to earlier research, R&D investments play a positive and significant role in both services and manufacturing. Service firms also benefit from broad strategies of sourcing external information. In contrast, strategic breadth in terms of pursuing multiple different innovation objectives or cooperating with different types of partners appears to have detrimental effects on service innovation. We interpret the latter results through reference to service firms’ R&D and alliance management capabilities : Managing multiple innovation projects or multiple cooperative arrangements is challenging, and some service firms may not have accumulated the requisite managerial capabilities to benefit from these strategies. The available data provide partial support for this conjecture.
    JEL: O31 O32 L8
    Date: 2008–08–22
  4. By: William Latham (Department of Economics,University of Delaware); Hong Yin (Department of Economics,University of Delaware)
    Abstract: We examine the return to innovation in terms of economic growth at the provincial level to assess whether or not policies that promote R&D, such as China’s Science and Technology Policy, have been productive for all of China’s regions. The return to innovation at the provincial level is estimated using a value-added Cobb-Douglas production function. The measure of the effect of innovation (patenting activity) is valued-added industrial output. The data are a balanced panel for 30 provinces for the period 1991-2004. We find that the production function including innovation fits the Chinese provincial level data well. These estimates indicate that technology plays a positive role in industrial growth at the provincial level; however, the contribution of technology is far too small, which indicates that China’s economic growth is largely driven by the factor inputs. The results support the views that the linkages between innovation activity and commercialization of new technology are weak within Chinese domestic firms which have difficulties in exploiting and adopting the new technologies. The results also indicate that the inter-regional technology spillovers are positive but relatively small and weak, compared to the European regions and the states in the US. The estimated results further confirm that the impact of industrial reforms during the period of 1994-99 on China’s technological development is negative, as there seems to be neither exogenous technical progress nor technology’s contribution to the value-added industrial output during those years.
    Keywords: China, patents, productivity, innovation, regions
    JEL: O33 R11 O47 O55
  5. By: Svensson, Roger (Research Institute of Industrial Economics (IFN))
    Abstract: I apply a survival model to a detailed dataset of Swedish patents to estimate how different factors affect the likelihood of patent renewal. Since the owners know more about the patents than potential external financiers, there is a problem of asymmetric information. To overcome this, Sweden has for a long time relied on government support rather than private venture capital. The empirical results show that patents which have received soft government financing in the R&D-phase have a higher probability of expiring than patents without such financing. But patents that have received more market-oriented government loans during the commercialization phase are renewed for as long as other commercialized patents. This finding indicates that it is the financing terms rather than bad choices of projects that explain the low renewal of patents with government financing.
    Keywords: Patents; Renewal; Government Financing; Survival Model
    JEL: G30 O34 O38
    Date: 2008–08–06
  6. By: Roberto Fontana (Universita degli Studi di Pavia and CESPRI - Bocconi University, Italy); Marco Guerzoni (GSBC-EIC, Friedrich Schiller Unviersität, Germany); Alessandro Nuvolari (ECIS - Eindhoven University of Technology, The Netherlands)
    Abstract: This paper presents a History Friendly Model which addresses the issue of the bifurcation in "technological styles" between US and Britain during the nineteenth century. The model aims at gaining a better understanding of the micro-dynamics that gave rise to different patterns of innovation in the two countries. In particular, we suggest that different demand patterns might be an explanation for the faster diffusion of capital intensive technologies in the US. Simulation results confirm this hypothesis, although only when we jointly control for the role of technological opportunities.
    Keywords: Innovation, Demand, History Friendly Model
    JEL: O3 N0 L6
    Date: 2008–08–22
  7. By: Scherer, F. M. (Harvard U)
    Abstract: This paper, written for an American Bar Association compendium on competition policy, reviews seven of the most important U.S. antitrust cases charging firms in high-technology industries with violations of Sherman Act Section II -- i.e., with monopolization. The principal target firms were Standard Oil of New Jersey, General Electric (in lamps), AT&T, du Pont (for cellophane), Xerox, IBM, and Microsoft (both in the United States and Europe). From an analysis of the historical records, it is clear that in most instances, the legal system took far too long to deal with the contested issues. In the interim, firms that had achieved dominant positions through innovation often embraced new technologies slowly, sometimes pursuing an explicit "fast second" strategy -- that is, waiting to innovate until their positions were threatened by outsiders. The stimulating effect of outside challenges suggests that entry should be kept open, among other things by combating the extension over time of blocking patent positions. Procedural reforms for accelerating the adjudication of complaints are proposed.
    Date: 2007–10
  8. By: Scherer, F. M. (Harvard U)
    Abstract: This paper, written for a conference on biomedical innovation at the University of Kiel, examines the theory of induced innovation, with science-push and demand-pull variants, in the context of pharmaceutical R&D. It explores how the theory applies under varying market structure, uncertainty, and behavioral (i.e., rent-seeking vs. secure profit maximization) conditions. The paradox of high gross margins but only mildly supra-normal returns on investment in the pharmaceutical industry is consistent with the pursuit of parallel research paths under uncertainty, rent-seeking, and cannibalization hypotheses. Parallel paths strategies carried implicitly to near-zero profit equilibria by firms competing for monopoly positions may approach social optimality, given plausible differences between private and social returns. But evidence on whether this outcome is actually approximated remains scarce.
    Date: 2007–09
  9. By: Russo, Margherita; Rossi, Federica
    Abstract: Recent developments in innovation theory and policy have led policymakers to assign particular importance to supporting networks of cooperation among heterogeneous economic actors, especially in production systems composed of small and medium enterprises. Such innovative policies call for parallel innovations in policy analysis, monitoring and assessment. Our analysis of a policy experiment aimed at supporting innovation networks in the Italian region of Tuscany intends to address some issues connected with the design, monitoring and evaluation of such interventions. Combining tools from ethnographic research and social networks analysis, we explore the structural elements of the policy programme, its macroscopic impact on the regional innovation system, and the success of individual networks in attaining their specific objectives. This innovative approach allows us to derive some general methodological suggestions for the design and evaluation of similar programmes.
    Keywords: Innovation policy; cooperation networks; evaluation; regional development; SMEs production systems; complex systems
    JEL: R58 O38 D78 O32 O31
    Date: 2008–06–26
  10. By: Belderbos, René (Katholieke Universiteit Leuven, UNU-MERIT, and University of Maastricht); Ito, Banri (Research Institute of Economy Trade and Industry (RIETI)); Wakasugi, Ryuhei (Kyoto University, Institute of Economic Research)
    Abstract: R&D in foreign affiliates and technology transferred from their parent firms are important potential drivers of productivity in host countries. In this paper we examine the simultaneous impact of local R&D and intra-firm international technology transfer on productivity growth in foreign affiliates. We estimate a dynamic productivity model on a large sample of Japanese manufacturing affiliates worldwide in 1996-1997 and 1999-2000. We find that both affiliate R&D and intra-firm technology transfer contribute to productivity growth, while technology transfer exhibits decreasing marginal returns. The two sources of technology are complements: use of one source of technology increases the marginal impact of the other.
    Keywords: R&D, technology transfer, multinational firms
    JEL: F23 O32 O33
    Date: 2008
  11. By: Hany El Shamy (University of Surrey); Paul Temple (University of Surrey)
    Abstract: This paper considers the sources of technological change and productivity growth in the small firm sector of UK manufacturing over the period 1973- 2002, focusing on the mechanisms by which spillovers occur between the large firms which perform the bulk of R&D and smaller firms which are the recipients. It is argued that the current volume of domestic R&D generates profitable and high productivity opportunities for smaller firms. However this mechanism ignores the ways in which R&D also contributes to the more general knowledge base available to small firms as codified information which frequently takes the measurable form of industrial standards. A simple model of labour demand among small manufacturing is developed which employs two measures of technological activity intended to capture both these channels. A co-integrating relationship based upon an augmented labour demand equation is established for UK manufacturing, showing the relevance of both channels for the explanation of productivity growth in the small firm sector.
    Keywords: Key Words: Small firms; productivity; technological change; R&D; standards.
    JEL: J23 L25 L26 O32
    Date: 2008–08
  12. By: Grimpe, Christoph; Hussinger, Katrin
    Abstract: Gaining access to technological assets and patents, in particular, has long been a major motive and objective for firm acquisitions. On the one hand, patents are used as a building instrument for the acquirer’s technology portfolio. On the other hand, patents can be attractive because of their strategic value as a bargaining chip, e.g. in licensing negotiations. This is especially the case if patents have the potential to block competitors. Drawing on transaction cost economics and the resource-based view of the firm, we analyze the importance of these two faces of technology acquisition for the valuation of a target firm. Empirical evidence for European firm acquisitions in the period from 1999 to 2003 indicates that the price paid by an acquirer for a target increases with the patent stock, the relatedness, the value and the blocking potential of the target’s patents, especially if blocking patents are in technology fields related to the acquiring firm’s patent portfolio. Our results have implications for competition authorities, in that M&A transactions may considerably impact technology markets. This would also need to be reflected in the management’s technology strategy.
    Keywords: Firm acquisitions, technology, patents, blocking patents
    JEL: G34 L20 O34
    Date: 2008
  13. By: Barham, Bradford L. (U of Wisconsin); Foltz, Jeremy D.
    Abstract: The life sciences have been the most dynamic area of US university research and commercialization efforts over the past twenty-five years. Using unique data from a large representative sample of life scientists this work examines whether academic patenting and commercialization complement, substitute for, or “hold-up” other research activities. The results highlight the resilience of the basic, federally-funded open scientific research model. Our findings, in turn, underscore the fundamental importance of maintaining the public funding and commitment to the academic, scientific enterprise.
    Date: 2007–09
  14. By: Chu, Angus C.
    Abstract: What are the effects of strengthening patent protection on income and consumption inequality? To analyze this question, this paper incorporates heterogeneity in the initial wealth of households into a canonical quality-ladder growth model with endogenous labor supply. In this model, I firstly show that the aggregate economy always jumps immediately to a unique and stable balanced-growth path. Given the balanced-growth behavior of the aggregate economy and an exogenous distribution of initial wealth, I then show that the endogenous distribution of assets in subsequent periods is stationary and equal to its initial distribution. The model predicts that strengthening patent protection increases (a) economic growth by stimulating R&D investment and (b) income inequality by raising the return on assets. However, whether it also increases consumption inequality depends on the elasticity of intertemporal substitution. If and only if this elasticity is less (greater) than unity, strengthening patent protection increases (decreases) consumption inequality. For standard parameter values, strengthening patent protection leads to a larger increase in income inequality than consumption inequality.
    Keywords: endogenous growth; heterogeneity; income inequality; patent policy
    JEL: D31 O41 O34
    Date: 2008–08

This nep-ino issue is ©2008 by Steffen Lippert. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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