nep-ino New Economics Papers
on Innovation
Issue of 2009‒01‒24
twelve papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. The role of R&D in new firm growth By Erik Stam; Karl Wennberg
  2. Managerial incentive and the firms’ propensity to invest in product and process innovation By Cellini, Roberto; Lambertini, Luca; Sterlacchini, Alessandro
  3. Poolability and Aggregation Problems of Regional Innovation Data: An Application to Nanomaterial Patenting By Roberto Patuelli; Andrea Vaona; Christoph Grimpe
  4. Innovation, R&D and Productivity - assessing alternative specifications of CDM-models By Johansson, Börje; Lööf, Hans
  5. How Much Does Immigration Boost Innovation? By Hunt, Jennifer; Gauthier-Loiselle, Marjolaine
  6. Creating Innovations, Productivity and Growth - the efficiency of Icelandic firms By Ho, Dong-huyn; Lööf, Hans
  7. Productivity Drivers in British Columbia: Strategic Areas for Improvement By Andrew Sharpe; Jean-François Arsenault
  8. Competencies Driving Innovative Performance of Slovenian and Croatian Manufacturing Firms By Janez Prašnikar; Tanja Rajkoviè; Maja Vehovec
  9. Persistence of Profits and the Systematic Search for Knowledge - R&D and profits above the norm By Wiberg, Daniel
  10. Environment Based Innovation: Policy Questions By Argentino Pessoa; Mário Rui Silva
  11. Scope, Strategy and Structure: The Dynamics of Knowledge Networks in Medicine By Consoli, Davide; Ramlogan, Ronnie
  12. Fostering Entrepreneurship for Innovation By Axel Mittelstädt; Fabienne Cerri

  1. By: Erik Stam (Tjalling Koopmans Institute, Utrecht School of Economics, Utrecht University, Utrecht, The Netherlands; Centre for Technology Management, University of Cambridge, Cambridge, United Kingdom; Scientific Council for Government Policy (WRR), The Hague, The Netherlands; Max Planck Institute of Economics - Entrepreneurship, Growth and Public Policy group, Jena, Germany); Karl Wennberg (Centre for Entrepreneurship and Business Creation, Stockholm School of Economics, Stockholm, Sweden.)
    Abstract: Innovative start-ups are an important driver of economic growth. This article presents empirical evidence on the effects of R&D on new product development, inter-firm alliances and employment growth during the early life course of firms. We use a dataset that contains a sample of new firms that is representative for the whole population of start-ups. This dataset covers the first six years of the life course of firms. R&D reveals to play several roles during the early life course of high tech as well as high growth firms. The effect of initial R&D on high tech firm growth runs via increasing levels of inter-firm alliances in the first post-entry years. R&D efforts enable the exploitation of external knowledge. Initial R&D also stimulates new product development later on in the life course of high tech firms, but this does not seem to affect firm growth. R&D does not affect the growth rate of new low tech firms, which seems to be driven mainly by the growth ambitions of the founding entrepreneur. The results show that R&D matters for a limited but important set of new high tech and high growth firms, which are key in innovation and entrepreneurship policies.
    Keywords: New Firms, Innovation, R&D, firm growth, alliances, product development
    JEL: D21 L23 L25 L26 M13
    Date: 2009–01–12
  2. By: Cellini, Roberto; Lambertini, Luca; Sterlacchini, Alessandro
    Abstract: We study the product and process innovation choice of firms in which a managerial incentive à la Vickers (1985) is present. Taking a two-stage dynamic game approach, we show that managerial firms are led to over-invest in process innovation, as compared to standard profit-maximising firms, while they under-invest in product innovation. The reason is that process innovation allows to decrease cost, and this is consistent with a convenient increase in the production level. On the opposite, product innovation allows increasing price, which is in contrast with the taste for output expansion embodied in the objective function of firms run by managers. Preliminary empirical evidence on Italian companies suggests that in fact the managerial nature of firm associates with significantly smaller efforts in product innovation while the effect on process innovation is positive but non-significant.
    Keywords: Process innovation; Product innovation; R&D; Managerial incentive
    JEL: O32 O31 D43 C72
    Date: 2009–01
  3. By: Roberto Patuelli (University of Lugano, Switzerland and The Rimini Centre for Economic Analysis, Italy); Andrea Vaona (University of Lugano, Switzerland and Kiel Institute for the World Economy, Germany); Christoph Grimpe (ZEW Centre for European Economic Research, Germany and Catholic University of Leuven, Belgium and University of Zurich, Switzerland)
    Abstract: Research and development (R&D) in the field of nanomaterials is expected to be a major driver of innovation and economic growth. In this respect, many countries, as national systems of innovation, have established support programs offering subsidies for industry- and government-funded R&D. Consequently, it is of great interest to understand which factors facilitate the creation of new technological knowledge. The existing literature has typically addressed this question by employing a knowledge production function based on firm-, regional- or even country-level data. Estimating the effects for the entire national system of innovation, however, implicitly assumes poolability of regional data. We apply our reasoning to Germany, which has well-known – and wide – regional disparities, for example between the former East and West. Based on analyses at the level of NUTS-3 regions, we find different knowledge production functions for the East and the West. Moreover, we investigate how our results are affected by the adoption of alternative aggregation levels. Our findings have implications for further research in the field, that is, a careful evaluation of poolability and aggregation is required before estimating knowledge production functions at the regional level. Policy considerations are offered as well.
    Keywords: nanotechnology, patents, poolability, Germany, spatial autocorrelation
    JEL: L60 O32 R11 R12
    Date: 2008–01
  4. By: Johansson, Börje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper applies a CDM-model framework to depict the successive links (correlations) between (i) innovation expenditure, (ii) innovation output, and (iii) firm productivity. The CDM model has become popular in many countries among scholars using data from the Community Innovation Survey (CIS). First, the study contrasts a general structural OECD version of the model against a model with country-specific design. Second, the study examines the gains from separating the labour force into ordinary and knowledge labour – as a means to avoid double counting of R&D investments. Third, the paper examines the difference between recognising a firm as a member of an unspecified company group versus a multinational group. Fourth, the paper explores how well sales per employee serves as a proxy for labour productivity proper. Fifth, the paper scrutinises the quality of CIS information by comparing key variables from the voluntary CIS survey with the same variables (for the same firms) recorded in the compulsory and audited register data in Sweden.
    Keywords: Productivity; Innovation; R&D; CDM-model
    JEL: O31 O32
    Date: 2009–01–15
  5. By: Hunt, Jennifer (McGill University); Gauthier-Loiselle, Marjolaine (Princeton University)
    Abstract: We measure the extent to which skilled immigrants increase innovation in the United States by exploring individual patenting behavior as well as state-level determinants of patenting. The 2003 National Survey of College Graduates shows that immigrants patent at double the native rate, and that this is entirely accounted for by their disproportionately holding degrees in science and engineering. These data imply that a one percentage point rise in the share of immigrant college graduates in the population increases patents per capita by 6%. This could be an overestimate of immigration's benefit if immigrant inventors crowd out native inventors, or an underestimate if immigrants have positive spill-overs on inventors. Using a 1940-2000 state panel, we show that immigrants do have positive spill-overs, resulting in an increase in patents per capita of 9-18% in response to a one percentage point increase in immigrant college graduates. We isolate the causal effect by instrumenting the change in the share of skilled immigrants in a state with the state's predicted increase in the share of skilled immigrants. We base the latter on the 1940 distribution across states of immigrants from various source regions and the subsequent national increase in skilled immigrants from these regions.
    Keywords: immigration, innovation
    JEL: J61 D24 O32
    Date: 2009–01
  6. By: Ho, Dong-huyn (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Iceland is one of the smallest European economies and the country was hit severely by the 2008-financial crisis. This paper considers the economy in the period preceding the collapse. Applying a Data Envelopment Analysis on 204 randomly selected firms, the results suggest that a substantial fraction of the Icelandic firms can be classified as non-efficient in their production process. The production scale of many manufacturing firms is too small to be technically efficient, while service firms typically use excessive resources in their production process. A remarkably weak performance in transforming R&D and labour efforts into successful innovations is observed.
    Keywords: Technical efficiency; R&D; Innovation; Productivity
    JEL: C14 D24 O14 O33
    Date: 2009–01–15
  7. By: Andrew Sharpe; Jean-François Arsenault
    Abstract: A brief analysis of British Columbia’s productivity performance and the state of the drivers of this performance reveals that five areas merit additional focus and research. They are, in the proposed order of completion: Education and literacy, including professional qualifications and education for targeted groups such as aboriginals and recent immigrants, credentials recognition. Public and private investment, including public infrastructure, business investment and taxation structure. Research and innovation, including R&D investment, product and process innovation, knowledge diffusion and technology adoption. Resource reallocation, including competition policy, improving market mechanisms, product market regulation and foreign ownership rules. Trade and migration, including interprovincial and international movement of goods and services, skilled and unskilled immigration and emigration and interprovincial migration.
    Keywords: Productivity, Diagnosis, British Columbia,Human Capital, Physical Capital, Innovation,
    JEL: E20 E22 R50 R53 R11 O40
    Date: 2008–12
  8. By: Janez Prašnikar (Faculty of Economics, University of Ljubljana); Tanja Rajkoviè (Faculty of Economics, University of Ljubljana); Maja Vehovec (The Institute of Economics, Zagreb)
    Abstract: The paper discusses the innovative performance of firms and underlying competencies, namely technological, marketing and complementary. Competencies as a broader concept are regarded as networks of capabilities and other firm assets, and can be used for cross-industry comparisons. The study is based on a survey carried out among 86 established Slovenian and Croatian manufacturing companies addressing competencies which they employ in their 105 distinct product lines. Three distinct segments of firms are established based on innovative performance indicators. We used the techniques of multivariate statistics, including cluster analysis and the analysis of variance. The results imply that the most innovative firms simultaneously develop technological, marketing and complementary competencies. They operate in industries in which new technologies offer considerable new opportunities. Weaker technological competencies can be to some extent compensated by strong marketing and complementary competencies. The findings also support the notion of Slovenia and Croatia being technology follower economies, primarily relying on imitation as a source of innovation.
    Keywords: competencies, innovative performance, technology followers, technology leaders
    Date: 2008–12
  9. By: Wiberg, Daniel (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Economic theory tells us that abnormal industry and firm profits will not persist for any length of time. Any industry or firm making profits in excess of the normal rate of return will attract entrants and this competitive process will erode profits. A substantial amount of research however, has found evidence of persistent profits above the norm. Barriers to entry and exit are often put forward as explanation to this anomaly. In the absence of, or with low barriers to entry and exit, this reasoning provides little help in explaining why these above-norm profits arise and persist. In this paper the association between profits and the systematic search for knowledge is investigated. The results show that by investing in research and development firms may succeed in creating products or services that are preferred by the market and/or find a more cost efficient method of production. Corporations that systematically invest in research and development are, by doing so, offsetting the erosion of profits and thereby have profits which persistently diverge from the competitive return. It is argued that even in the absence of significant barriers to entry and exit profits may persist. This can be accredited to a systematic search for knowledge through research and development.
    Keywords: Persistence of profits; research and development; industrial organization
    JEL: L00 L22 L25 O32
    Date: 2009–01–15
  10. By: Argentino Pessoa (Faculdade de Economia, Universidade do Porto); Mário Rui Silva (Faculdade de Economia, Universidade do Porto)
    Abstract: Natural resources and physical cultural resources, termed in this paper as “Environmental Resources”, can be important assets for regional competitiveness and innovation. In recent years, these kinds of assets are being more considered in regional development strategies, because they can be a source of differentiation and of new competitive advantages. In this paper we discuss the role of environmental resources in regional innovation policies. We begin by relating environmental resources with regional development and by emphasizing some opposite views in what refers to the function of environmental resources in regional development. Next we deal with the relationship between regional competitive advantages and innovation strategies. The specificities and problems that arise when the aim is to construct competitiveness advantages through environmental resources valorisation are the core of section 3. In that section, we highlight the characteristics of environmental resources and we check the applicability of the “natural resource curse” to the dynamics based on the valorisation of environmental resources. The reasons that justify the public intervention as well as difficulties concerning the adequate level of intervention (local / regional / national) are also examined. The paper ends with some conclusions and policy implications.
    Keywords: Competitiveness, Environment, Innovation, Innovation Policies, Regional Development
    JEL: O3 Q0 Q2 Q5 R5
    Date: 2009–01
  11. By: Consoli, Davide; Ramlogan, Ronnie
    Abstract: The objective of this paper is to analyse the dynamics of networks in which new knowledge emerges and through which it is exchanged. Our conjecture is that the structure of a network cannot be divorced from the dynamics of the knowledge underpinning its activities. In so doing we look beyond studies based on the assumption of exogenous networks and delve into the mechanisms that stimulate their creation and transformation. In the first part the paper adopts a functional perspective and views networks as constructs aimed at the coordination of knowledge; accordingly, network structure is an emerging property that reflects the employment of an agreed strategy to achieve a collective scope. In the second part these themes are articulated in relation to the dynamics of medical innovation and enriched by an empirical study on the long-term evolution of medical research in Ophthalmology. This exercise highlights the connection between changes in scientific and practical knowledge and the reconfigurations of the epistemic network over a forty-year period. By mapping different network structures we capture variety in the gateways of knowledge creation – that is, the network participants – as well as in the pathways – that is, the inter-organisational collaborations. Our goal is to analyse how these patterns of interaction emerge and transform over time.
    Keywords: Innovation; Network analysis; Inter-organizational Relationships
    JEL: D83 O33 D85 O31
    Date: 2009–01–15
  12. By: Axel Mittelstädt; Fabienne Cerri
    Abstract: Entrepreneurship and firm creation have long been recognised as a vital force driving innovation. With globalization and the co-incident shift towards a knowledge-based economy, the link between entrepreneurship policy and innovation has received renewed attention. By underpinning firm creation and firm expansion entrepreneurship policies strengthen innovation, increasing productivity in the enterprise sector. In return, policies fostering innovation will tend to spur firm creation as the results of R&D are commercialized. Many countries have taken initiatives since early 2000 to test the potential of entrepreneurship and SME policies, articulating these with an innovation-oriented policy approach. This report consists of a synthesis report based on four country case studies on the role of entrepreneurship policies in supporting innovation in Korea, Mexico, Norway and Turkey. These country case studies are appended to the synthesis report.<P>Promouvoir l'entrepreunariat pour soutenir l'innovation<BR>L’entrepreneuriat et les créations d’entreprises sont traditionnellement considérés comme l’un des principaux moteurs de l’innovation. Avec la mondialisation et la transition concomitante vers une économie du savoir, le lien entre les politiques de l’innovation et celles en faveur de l’entrepreneuriat revient sur le devant de la scène. En soutenant la création d’entreprises et leur expansion les politiques en faveur de l’entrepreneuriat renforcent l’innovation et la croissance de la productivité. Réciproquement, les politiques de soutien à l’innovation favorisent généralement la création d’entreprises, car les résultats des activités de R-D sont commercialisés. De nombreux pays ont engagé, dès le début des années 2000, un examen systématique des politiques en faveur de l’entrepreneuriat et des PME, en optant pour une approche axée sur l’innovation. Ce rapport consiste d’un rapport de synthèse basé sur quatre études de cas portant sur le rôle joué par les politiques en faveur de l’entrepreneuriat dans la promotion de l’innovation en Corée, au Mexique, en Norvège et en Turquie. Chacune de ces études de cas est annexée au rapport de synthèse.
    Date: 2008–12–30

This nep-ino issue is ©2009 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.