nep-ino New Economics Papers
on Innovation
Issue of 2008‒11‒25
fourteen papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. Scarcity of Ideas and Options to Invest in R&D By Nisvan Erkal; Suzanne Scotchmer
  2. Optimal Sharing Strategies in Dynamic Games of Research and Development By Nisvan Erkal; Deborah Minehart
  3. Technological Change and the Wealth of Nations By Gino Gancia; Fabrizio Zilibotti
  4. Commercial Incentives in Academia By Albert Banal-Estañol; Inés Macho-Stadler
  5. Searching for innovations ? the technological determinants of acquisitions in the pharmaceutical industry. By Gautier Duflos; Etienne Pfister
  6. Assessing the assignation of public subsidies: Do the experts choose the most efficient R&D projects? By Nestor Duch-Brown; Jose Garcia-Quevedo; Daniel Montolio
  7. Why Powerful Buyers finance Suppliers’ R&D By Werner Bönte; Lars Wiethaus
  8. The Impact of Technological and Non-Technological Innovations on Firm Growth By Jyrki Ali-Yrkkö; Olli Martikainen
  9. Formal and informal external linkages and firms' innovative strategies: A cross-country comparison By Isabel Maria Bodas Freitas; Tommy Clausen; Roberto Fontana; Bart Verspagen
  10. The contribution of innovations in total factor productivity of organic olive enterprises By Karafillis, C.C.; Papanagiotou, E.
  11. Knowledge Transfer in the Irish Food Innovation System: Industry and Researcher Perspectives By Kelly, D.; Henchion, M.; O'Reilly, P.
  12. Measures of Science & Technology in Ecuador By José Luis, Massón-Guerra
  13. Methods for innovation projects risk evaluation By Sipos, Gabriela Lucia; Ciurea, Jeanina Biliana

  1. By: Nisvan Erkal; Suzanne Scotchmer
    Abstract: We consider a model of the innovative environment where there is a distinction between ideas for R&D investments and the investments themselves. We investigate the optimal reward policy and how it depends on whether ideas are scarce or obvious. By foregoing investment in a current idea, society as a whole preserves an option to invest in a better idea for the same market niche, but with delay. Because successive ideas may occur to different people, there is a conflict between private and social optimality. We argue that private incentives to create socially valuable options can be achieved by giving higher rewards where "ideas are scarce." We then explore how rewards should be structured when the value of an innovation comes from its applications, and ideas for the innovation may be more or less scarce than ideas for the applications.
    Keywords: Ideas; patents; intellectual property, innovation; options; nonobviousness
    JEL: O34 K00 L00
    Date: 2008
  2. By: Nisvan Erkal; Deborah Minehart
    Abstract: This paper builds a theoretical foundation for the dynamics of knowledge sharing in private industry. In practice, research and development projects can take years or even decades to complete. We model an uncertain research process, where research projects consist of multiple sequential steps. We ask how the incentives to license intermediate steps to rivals change over time as the research project approaches maturity and the uncertainty that the firms face decreases. Such a dynamic approach allows us to analyze the interaction between how close the firms are to product market competition and how intense that competition is. If product market competition is relatively moderate, the lagging firm is expected never to drop out and the incentives to share intermediate research outcomes decreases monotonically with progress. However, if product market competition is relatively intense, the incentives to share may increase with progress. These results illustrate under what circumstances it is necessary to have policies aimed at encouraging cooperation in R&D and when such policies should be directed towards early vs. later stage research
    Keywords: Multi-stage R&D; innovation; knowledge sharing; licensing; dynamic games
    JEL: L24 O30 D81
    Date: 2008
  3. By: Gino Gancia; Fabrizio Zilibotti
    Abstract: We discuss a unified theory of directed technological change and technology adoption that can shed light on the causes of persistent productivity differences across countries. In our model, new technologies are designed in advanced countries and diffuse endogenously to less developed countries. Our framework is rich enough to highlight three broad reasons for productivity differences: inappropriate technologies, policy-induced barriers to technology adoption, and within-country misallocations across sectors due to policy distortions. We also discuss the effects of two aspects of globalization, trade in goods and migration, on the wealth of nations through their impact on the direction of technical progress. By doing so, we illustrate some of the equalizing and unequalizing forces of globalization.
    Keywords: Barriers to Technology Adoption, Directed Technology Adoption, Endogenous Growth, Globalization, Human Capital, Inappropriate Technologies, Market Power, Political Economy, Skill-biased Technical Chan
    JEL: F43 O11 O31 O33 O38 O41 O43 O47
    Date: 2008–10
  4. By: Albert Banal-Estañol (Department of Economics, City University, London); Inés Macho-Stadler (Universitat Autònoma de Barcelona, Departament d’Economia i d’Història Econòmica)
    Abstract: This paper investigates the effects of monetary rewards from commercialisation on the pattern of research. We build a simple repeated model of a researcher capable to obtain innovative ideas. We analyse how academic and market incentives affect the allocation of the researcher’s time between research and development. We argue, however, that technology transfer objectives also affect the choice of research projects. Although commercialisation incentives reduce the time spent in research, they might also induce researchers to conduct research that is more basic in nature, contrary to what the “skewing problem” would presage. Monetary rewards induce a more intensive search for (ex-post) path-breaking innovations, which are more likely to be generated through (ex-ante) basic research programs. These results are shown to hold even if development delays publication.
    Keywords: Faculty behaviour, basic vs. applied research
    Date: 2008–11
  5. By: Gautier Duflos (Centre d'Economie de la Sorbonne - Paris School of Economics); Etienne Pfister (BETA-Règles - Université de Nancy II)
    Abstract: This article analyzes the individual determinants of acquisition activity and target choices in the pharmaceutical industry over the period 1978-2002. The "innovation gap" hypothesis states that acquiring firms lack promising drug compounds and acquire firms with more promising drug prospects. A duration model implemented over a panel of more than 400 firms relates the probabilities of being an purchaser or a target to financial, R&D ant patent data to investigate this explanation more deeply. Results show that purchasers are firms with a lower Tobin's Q and decreasing sales, which could indicate that acquisitions are used to compensate for low internal growth prospects. Firms with a higher proportion of radical patents in their portfolio, especially in pharmaceutical and biothechnological patent classes, face a higher probability of being targeted, indicating that acquiring firms are indeed searching for innovative competencies. However, acquiring firms also present a significant absorptive capacity : their R&D investment increases in the year preceding the operation and their patent stock is larger and more diversified than for non-acquiring firms. Finally, we observe that over the last ten years of the sample period, firms have paid a greater attention to the size of the target's portfolio.
    Keywords: M&A, pharmaceutical, innovations, patent citations.
    JEL: G34 L15 L21 O3
    Date: 2008–09
  6. By: Nestor Duch-Brown; Jose Garcia-Quevedo; Daniel Montolio (Universitat de Barcelona)
    Abstract: The implementation of public programs to support business R&D projects requires the establishment of a selection process. This selection process faces various difficulties, which include the measurement of the impact of the R&D projects as well as selection process optimization among projects with multiple, and sometimes incomparable, performance indicators. To this end, public agencies generally use the peer review method,which, while presenting some advantages, also demonstrates significant drawbacks. Private firms, on the other hand, tend toward more quantitative methods, such as Data Envelopment Analysis (DEA), in their pursuit of R&D investment optimization. In this paper, the performance of a public agency peer review method of project selection is compared with an alternative DEA method.
    Keywords: peer review, dea, subsidies, r&d
    JEL: H25 O32 C61
    Date: 2008
  7. By: Werner Bönte (Schumpeter School of Business and Economics, University of Wuppertal); Lars Wiethaus (ESMT Competition Analysis)
    Abstract: It is a common concern that pricing pressure by powerful buyers discourages suppliers' R&D investments. Employing a simple monopsonist - competitive upstream industry - framework, this paper qualifies this view in two respects. First, the monopsonist has an incentive to subsidize upstream R&D which yields more upstream R&D and higher profits in both industries than the monopsonist's commitment to higher prices. Secondly, in the presence of intra-industry R&D spillovers between upstream firms, the monopsonist has an even stronger incentive to finance upstream R&D. If the monopsonist finances more than fifty percent of suppliers R&D efforts, R&D investments in upstream industry will be higher than in the case of buyer competition.
    Keywords: Vertical Relationships, Monopsony, Buyer Power, R&D, Knowledge Spillovers
    JEL: O31 O32 L13 L20
    Date: 2008–10
  8. By: Jyrki Ali-Yrkkö; Olli Martikainen
    Abstract: ABSTRACT : This study investigates the relationship between innovations and firm growth, based on the data of Finnish firms operating in the software industry. We find that in terms of turnover and employment, firms with only technological innovations do not grow more rapidly than other firms. However, firm growth is positively associated with the combination of technological and non-technological innovations.
    Keywords: innovation, technological, non-technological, R&D, firm, development, employment, growth, Finland
    JEL: O3 O33 L2
    Date: 2008–11–13
  9. By: Isabel Maria Bodas Freitas (Grenoble Ecole de Management); Tommy Clausen (Centre for Technology, Innovation and Culture, University of Oslo); Roberto Fontana (Department of Economics, University of Pavia); Bart Verspagen (Centre for Technology, Innovation and Culture, University of Oslo)
    Abstract: Firms increasingly rely upon external actors for their innovation process. Interaction with these actors may occur formally (i.e. through a collaboration agreement) or informally (i.e. external actors acts as sources of knowledge). This paper analyses the reasons why firms consider it to be important to develop formal and informal external linkages in the innovation process by looking at the role played by firms’ innovative strategies and by taking into account that a complementarity or substitutive relationship might exist between formal and informal linkages. Data come from the Third Community Innovation Survey (CIS 3), where we have access to firm level micro-data from Norway, Sweden, the Netherlands and the UK.
    Keywords: External knowledge sources, Innovation strategy, Formal cooperation, Multinomial Probit.
    JEL: O31 O33 O38
    Date: 2008–11
  10. By: Karafillis, C.C.; Papanagiotou, E.
    Abstract: This paper measures the contribution of innovations in total factor productivity(TFP) of organic olive farmers. By constructing an innovation variable instead of the use of a time trend, technical change is replaced by technical difference and TFP growth becomes TFP difference. Primary cross section data on organic olive enterprises from a Greek region is used in the application of the restricted frontier profit function. Farmers are classified into groups according to their innovative €ذrofile€ٮ TFP difference among consecutive innovation groups is decomposed into technical difference and adjustment in innovativeness effects. Furthermore, efficiency differences among innovation groups are estimated. Results indicate that more innovative farmers perform better than less innovative ones regarding TFP and efficiency scores. Adoption of innovations has a positive contribution in the reduction of inefficiency and profit-loss. The rate of technical difference is always positive in the formulation of TFP difference whereas the adjustment in innovativeness effects varies among the innovation groups. Finally, high-tech capital is more or less under-utilized, regardless of the innovation group.
    Keywords: Innovations, total factor productivity, profit efficiency, organic farming, Greece, Productivity Analysis,
    Date: 2008
  11. By: Kelly, D.; Henchion, M.; O'Reilly, P.
    Abstract: The new EU Animal Health Strategy suggests a shift in emphasis away from control towards prevention and surveillance activities for the management of threats to animal health. The optimal combination of these actions will differ among diseases and depend on largely unknown and uncertain costs and benefits. This paper reports an empirical investigation of this issue for the case of Avian Influenza. The results suggest that the optimal combination of actions will be dependent on the objective of the decision maker and that conflict exists between an optimal strategy which minimises costs to the government and one which maximises producer profits or minimises negative effects on human health. From the perspective of minimising the effects on human health, prevention appears preferable to cure but the case is less clear for other objectives.
    Keywords: Knowledge transfer, technology transfer, Irish food sector, Research and Development/Tech Change/Emerging Technologies,
    Date: 2008
  12. By: José Luis, Massón-Guerra
    Abstract: One of the structural problems in Latin-American has been the lower innovative capacity and lower generation of economically exploitable knowledge. This phenomenon has been produced by the absence of government’s incentives and strategies in order to be competitive inside the Knowledge Based Economy. More concretely, political, institutional and social factors have contributed negatively within this reality. As a consequence, the knowledge generation in this region is insufficient not only to satisfy its necessities but also to be competitive in the global context. At difference, the developing regions have recognized the significance impact of Science and Technology (S&T) and Education in their sustainable growth. In the Latin-American context, this analysis requires robust indicators that help to evidence the causes of this problematic. In this respect, the absence of harmonized politics and common variables that allows studying the evolution of S&T in the Latin-American region is the main limitation for this analysis. Based on that, this report brings an exploratory analysis that allows identifying the critical factors and the possible solutions of this S&T problematic. In parallel, the case of the National Innovation System implanted in Ecuador is presented and evaluated.
    Keywords: Science; Technology; Entrepreneurship; Innovation
    JEL: Q55 O32 L26 M13 O31
    Date: 2008–05–02
  13. By: Sipos, Gabriela Lucia; Ciurea, Jeanina Biliana
    Abstract: Starting an innovation project assumes to state some competitive objectives referring to the allocated budget, time limit for project’s ending and also to the quality and performance parameters of the new obtained product. Referring to the innovation project development, the risk of unfulfilling the stated competitive objectives referrers to the exceeding the project’s budget and terms, and also to unfitting in the quality and performance parameters established in the innovation project planning stage. The large diversity of risk sources can be expressed by the possibility of appearance of some unexpected variations of the cost, time and quality of the new products. The innovation projects risk is settled by the variations of the cost, time and quality objectives effective values comparing to the planned values. Those variations are determined by purely random factors. The innovation projects characterized by uniform variations of the cost, time and quality objectives effective values around the mean are considered to be under statistic control. Those projects’ risk may be quantified and the risk impact over the project can be limited. The innovation projects characterized by fluctuant variations of the cost, time and quality objectives effective values around the mean are considered to be out of statistic control. The aim of this paper is to present two categories of statistic methods for innovation projects risk quantifying. The first statistic methods that quantify the risk of unfitting the quantitative objectives referrers to the time risk, cost risk and the risk of unfitting established performance parameters. The second category of methods represents statistic methods that quantify the risk of unfitting the qualitative objectives of the projects – the risk of appearance major quality deficiencies.
    Keywords: innovation project; risk evaluation; cost; time and quality objectives
    JEL: O32 G32
    Date: 2008–02
  14. By: D€Ùlessio, Massimiliano; Maietta, Ornella Wanda
    Abstract: Objective of the paper is to verify which are the determinants of innovations in the Italian food industry and which role R&D networking, through the cooperative nature of firm, plays among these determinants. The data used are the 9th (2001-2003) wave of Capitalia surveys based on a representative sample of manufacturing firms with information on firm characteristics, employee education levels, innovation and R&D investments. The approach is a bivariate probit analysis where the two dependent variables are the presence of firm R&D and of innovations and the independent variables are firm characteristics. The results of the analysis show that, among the determinants of firm R&D intra moenia and of firm innovations in the Italian food industry for the years 2001-03, the presence of subsidies for R&D extra moenia, is the most significant variable with the highest marginal effect while the cooperative variable turns out to be positive and significant (6%) after including relative input prices.
    Keywords: innovations, R&D networking, firm property rights., Consumer/Household Economics, Research and Development/Tech Change/Emerging Technologies, O31, O32, D21,
    Date: 2008–11–14

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