nep-ino New Economics Papers
on Innovation
Issue of 2009‒02‒14
fifteen papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. Innovation Success of Non-R&D-Performers: Substituting Technology by Management in SMEs By Rammer, Christian; Czarnitzki, Dirk; Spielkamp, Alfred
  2. Geographic Proximity and Firm-University Innovation Linkages: evidence from Great Britain By Laura Abramovsky; Helen Simpson
  3. Patent Thickets, Licensing and Innovative Performance By Cockburn, Iain; MacGarvie, Megan; Müller, Elisabeth
  4. Innovation and Institutional Ownership By Philippe Aghion; John Van Reenen; Luigi Zingales
  5. Do Shorter Product Cycles Induce Patent Thickets? By Beschorner, Patrick Frank Ernst
  6. Proximity and Innovation in Italian SMEs By Morone, Piergiuseppe; Petraglia, Carmelo; Testa, Giuseppina
  7. Innovative Firms or Innovative Owners? Determinants of Innovation in Micro, Small, and Medium Enterprises By de Mel, Suresh; McKenzie, David; Woodruff, Christopher
  8. Patent Protection, Takeovers, and Startup Innovation: A Dynamic Approach By Andreas Panagopoulos; In-Uck Park
  9. Tax Policy and the Globalisation of R&D By Russell Thomson
  10. Globalization and Innovation in Emerging Markets By Gorodnichenko, Yuriy; Svejnar, Jan; Terrell, Katherine
  11. Filing strategies and the increasing duration of patent applications By Nicolas van Zeebroeck
  12. Financial Signaling by Innovative Nascent Entrepreneurs By David B. Audretsch; Werner Bönte; Prashanth Mahagaonkar
  13. Geographical Organization of Banking Systems and Innovation Diffusion By Pietro Alessandrini; Andrea Filippo Presbitero; Alberto Zazzaro
  14. Bank Size or Distance: What Hampers Innovation Adoption by SMEs? By Pietro Alessandrini; Andrea Filippo Presbitero; Alberto Zazzaro
  15. Productivity of and Returns to Knowledge Investments By Andersson, Åke E

  1. By: Rammer, Christian; Czarnitzki, Dirk; Spielkamp, Alfred
    Abstract: This paper investigates the impact of in-house R&D and innovation management practices on innovation success in small and medium-sized firms (SMEs). While there is little doubt about the significance of technology competence for generating successful innovations, inhouse R&D activities may be a particular challenge for SMEs due to high risk exposure, high fixed costs, high minimum investment and severe financial constraints. SMEs may thus opt for refraining from R&D and relying more on innovation management tools in order to achieve innovation success. We analyse whether such a strategy can pay off. Based on data from the German CIS we find that R&D activities are a main driver for innovation success if combined with external R&D, using external innovation sources or by entering into cooperation agreements. SMEs without in-house R&D can yield a similar innovation success if they effectively apply human resource management tools or team work to facilitate innovation processes.
    Keywords: Innovation Success, R&D, Innovation Management, SMEs
    JEL: L25 O31 O32 O38 O47
    Date: 2008
  2. By: Laura Abramovsky; Helen Simpson
    Abstract: We investigate evidence for spatially mediated knowledge transfer from university research. We examine whether firms locate their R&D labs in proximity to university research departments, and whether those that do are more likely to co-operate with, or source information from universities in the course of their innovative activities. We find evidence that pharmaceutical firms locate their R&D facilities near to frontier chemistry research departments, consistent with accessing localised knowledge spillovers, but also linked to the presence of science parks. In industries such as chemicals and vehicles there is less evidence of immediate co-location with universities, but those innovative firms that do locate near to relevant research departments are more likely to engage with universities.
    Keywords: Innovation, Geography, spillovers, public research
    JEL: O3 R11 R13 I23
    Date: 2008–06
  3. By: Cockburn, Iain; MacGarvie, Megan; Müller, Elisabeth
    Abstract: We examine the relationship between fragmented intellectual property (IP) rights and innovative performance, taking into consideration the role played by in-licensing of IP. Controlling for a variety of firm and market characteristics, we find that firms facing more fragmented IP landscapes are more likely to report expenditures on in-licensing and for those firms that do incur license costs we find a weak positive association between licensing expenditure and fragmented IP rights in the relevant technology. We also observe a negative relationship between IP fragmentation and innovative performance, but only for firms that engage in in-licensing and only for product innovation. The relationship between fragmentation and innovative performance also depends on the size of a firm’s patent portfolio, which suggests an important strategic role for defensive patenting in the context of fragmented property rights.
    Keywords: patent thickets, licensing, innovative performance
    JEL: O31 O34
    Date: 2008
  4. By: Philippe Aghion; John Van Reenen; Luigi Zingales
    Abstract: We find that institutional ownership in publicly traded companies is associated with more innovation(measured by cite-weighted patents). To explore the mechanism through which this link arises, webuild a model that nests the lazy-manager hypothesis with career-concerns, where institutional ownersincrease managerial incentives to innovate by reducing the career risk of risky projects. The datasupports the career concerns model. First, whereas the lazy manager hypothesis predicts a substitutioneffect between institutional ownership and product market competition (and managerial entrenchmentgenerally), the career-concern model allows for complementarity. Empirically, we reject substitutioneffects. Second, CEOs are less likely to be fired in the face of profit downturns when institutionalownership is higher. Finally, using instrumental variables, policy changes and disaggregating by typeof owner we find that the effect of institutions on innovation does not appear to be due to endogenousselection.
    Keywords: Innovation, institutional ownership, career concerns, R&D, productivity
    JEL: O31 O32 O33 G20 G32
    Date: 2009–02
  5. By: Beschorner, Patrick Frank Ernst
    Abstract: The traditional argument that shorter product cycles favor trade secret over patenting is reviewed. A game theoretic model provides an argument that shorter product cycles can induce firms to file more patent applications. The firms may be trapped in a prisoners' dilemma where all firms would jointly prefer to patent less and to not have a patent thicket. If firms start applying for patents on technologies which are not yet mature in order to cover ideas that may eventually turn successful, this may create a patent thicket. The transition into a situation where firms start patenting many ideas instead of single mature technologies is initiated and accelerated when network effects are present or patents exhibit a blocking property.
    Keywords: patent thicket, product cycles, licensing, network effects
    JEL: K2 L1 L2 O31
    Date: 2008
  6. By: Morone, Piergiuseppe; Petraglia, Carmelo; Testa, Giuseppina
    Abstract: Abstract: In this paper we assess the relevance of both knowledge creation and diffusion processes in affecting Italian SMEs’ propensity to innovate. In doing so a knowledge production function (KPF) is estimated for a representative sample of small and medium manufacturing firms over the period 1998-2003. To account for endogeneity of R&D effort in the KPF, we estimate a Heckman selection model on R&D decisions and obtain two main results. First, we do not find the probability of being engaged in intramural R&D activities to be significantly related to firm size. Second, for those firms engaged in R&D activities, the intensity of R&D effort increases with firm size. Then, the KPF is estimated for three different samples of firms using a standard probit where the probability that SMEs will innovate depends upon intramural R&D effort, regional and industrial spillovers and a vector of interaction and control variables. The main results obtained from this second set of regressions are the following: first, we find the probability to innovate to be positively related to sectoral spillovers, the magnitude of such impact being decreasing in firms’ size. Second, knowledge diffusion via geographical proximity enhances the probability of the recipient firm to innovate only if it has an appropriate endowment of human capital.
    Keywords: Innovation; knowledge; spillovers; firm size
    JEL: L6 O3 C25
    Date: 2008–12–05
  7. By: de Mel, Suresh (University of Peradeniya); McKenzie, David (World Bank); Woodruff, Christopher (University of California, San Diego)
    Abstract: Innovation is key to technology adoption and creation, and to explaining the vast differences in productivity across and within countries. Despite the central role of the entrepreneur in the innovation process, data limitations have restricted standard analysis of the determinants of innovation to consideration of the role of firm characteristics. We develop a model of innovation which incorporates the role of both owner and firm characteristics, and use this to determine how product, process, marketing and organizational innovations should vary with firm size and competition. We then use a new large representative survey from Sri Lanka to test this model and to examine whether and how owner characteristics matter for innovation. The survey also allows analysis of the incidence of innovation in micro and small firms, which have traditionally been overlooked in the study of innovation, despite these firms comprising the majority of firms in developing countries. More than one quarter of microenterprises are found to be engaging in innovation, with marketing innovations the most common. As predicted by our model, firm size is found to have a stronger positive effect, and competition a stronger negative effect, on process and organizational innovations than on product innovations. Owner ability, personality traits, and ethnicity are found to have a significant and substantial impact on the likelihood of a firm innovating, confirming the importance of the entrepreneur in the innovation process.
    Keywords: innovation, microenterprises, SMEs, development
    JEL: O31 L26
    Date: 2009–01
  8. By: Andreas Panagopoulos; In-Uck Park
    Abstract: The impact of IP protection on the innovation incentives of startup firms is examined in a dynamic model where an incumbent faces a sequence of potential startups and the incumbent's chance of winning an infringement lawsuit increases with the size of its patent portfolio. It is shown that takeover deals generate extra benefits for the incumbent via its enhanced future bargaining positions, a part of which accrues to the current startup as an increased bargaining share. This increased bargaining share can be large enough to justify the startup's innovation activity that would not have taken place otherwise. This effect may be greatest under moderate levels of IP protection, because the increase in the bargaining share, being proportional to the marginal benefits brought by the last patent added to the portfolio, would be too small if the protection was too weak while it would taper off too quickly if the protection was excessive.
    Keywords: Patent litigation, takeovers, patent portfolios
    JEL: O31 O34 L21 L24 K0
    Date: 2008–05
  9. By: Russell Thomson
    Abstract: This paper examines the factors influencing the globalisation of R&D, with a particular focus on the role of tax policy, using panel data for 25 OECD countries over the period 1980- 2005. Two measures of R&D internationalisation are considered - R&D directly financed from abroad and R&D expenditure by foreign affiliates of US MNEs. The econometric analysis, which appropriately control for other determinants of inter-country differences in R&D investment, finds no evidence that host country R&D tax policy is an important determinant of MNE R&D location decisions or in attracting additional cross-border contract R&D. There is evidence that affiliate fixed capital stock and total sales are strong determinants of R&D performed by affiliates of US MNEs. Controlling for these variables, host country attributes seemed to be less important. In the case of cross-border contract R&D, host country expenditure on R&D via institutions of higher education is also found to be important.
    Keywords: Globalisation of R&D, tax policy, foreign direct investment, multinational enterprises
    JEL: O38 O31 O32 F21
    Date: 2009
  10. By: Gorodnichenko, Yuriy (University of Michigan); Svejnar, Jan (University of Michigan); Terrell, Katherine (University of Michigan)
    Abstract: Globalization brings opportunities and pressures for domestic firms in emerging markets to innovate and improve their competitive position. Using data on firms in 27 transition economies, the authors test for the effects of globalization through the impact of increased competition and foreign direct investment on domestic firms's efforts to innovate (raise their capability) by upgrading their technology, improving the quality of their product or service, or acquiring certification. They find that competition has a negative effect on innovation, especially for firms further from the efficiency frontier, and we do not find support for an inverted U effect of competition on innovation. The authors show that the supply chain of multinational enterprises and international trade are important channels for domestic firms' innovation. They detect no evidence that firms in a more pro-business environment are more likely to display a positive or inverted U relationship between competition and innovation, or that they are more sensitive to foreign presence.
    Keywords: competition; innovation; emerging markets; spillovers
    JEL: F23 O16 P23
    Date: 2009–01–01
  11. By: Nicolas van Zeebroeck (Centre Emile Bernheim, Solvay Brussels School of Economics and Management, Université Libre de Bruxelles, Brussels.)
    Abstract: It has long been implicitly assumed that the roaring backlogs experienced by most patent offices around the world – and harshly criticized by many patentees – are a mere mechanical consequence of surging numbers of patent filings. However, different voices suggest that the patent system may sometimes be gamed by an applicant in order precisely to delay the time when a decision will be taken as to the patentability of his application. By empirically showing the impact of several procedural options chosen by patentees in filing their applications at the EPO, this paper clearly demonstrates that this possibility is real, and probably not anecdotal. Deliberate or not, the main consequence of several procedural options is clearly to delay the grant decision. Why and how firms could win any benefit from such strategies can only be guessed, but whether such behaviours are legitimate or not, socially desirable or not, remains an open question.
    Keywords: Patent length, Patent value, Renewals, Backlogs, Survival Time Analysis
    JEL: O31 O34 O50
    Date: 2009–01
  12. By: David B. Audretsch (Indiana University and Max Planck Institute of Economics, Jena, Germany); Werner Bönte (Bergische Universität Wuppertal and Max Planck Institute of Economics, Jena, Germany); Prashanth Mahagaonkar (Max Planck Institute of Economics, Jena, Germany)
    Abstract: External finance is central for nascent entrepreneurs, people in the process of starting new ventures. We argue that nascent entrepreneurs use patents and prototypes in order to signal their ability to appropriate the returns from their innovation as well as the project's feasibility. Our analysis of 900 nascent entrepreneurs finds that patents and prototypes increase the likelihood of obtaining equity finance. Thus, if signals are credible, innovation positively impacts external financing. Interestingly, entrepreneurs in planning versus early start-up stage portray different signaling effects, indicating that the relation between finance and innovation depends on the stage of a start-up lifecycle.
    Keywords: Innovation, Entrepreneurship, Finance, Information Asymmetries
    JEL: L26 M13 G14 G24 G32 O34
    Date: 2009–02–01
  13. By: Pietro Alessandrini (Universit… Politecnica delle Marche, Department of Economics, MoFiR); Andrea Filippo Presbitero (Universit… Politecnica delle Marche, Department of Economics, MoFiR); Alberto Zazzaro (Universit… Politecnica delle Marche, Department of Economics, MoFiR)
    Date: 2008–09
  14. By: Pietro Alessandrini (Universit… Politecnica delle Marche, Department of Economics, MoFiR); Andrea Filippo Presbitero (Universit… Politecnica delle Marche, Department of Economics, MoFiR); Alberto Zazzaro (Universit… Politecnica delle Marche, Department of Economics, MoFiR)
    Abstract: A growing body of research is focusing on banking organizational issues, emphasizing the difficulties encountered by hierarchically organized banks in lending to informationally opaque borrowers. While the two extreme cases of hierarchical and non{hierarchical organizations are typically contrasted, what shapes the degree of hierarchy and how to measure it remain fairly vague. In this paper we compare bank size and distance between a bank's branches and headquarter as possible sources of organizational frictions, by studying their impact on small rms' likelihood of introducing innovations. Results show that SMEs located in provinces where the local banking system is functionally distant are less inclined to introduce innovations, while the market share of large banks is only slightly correlated with rms' propensity to innovate.
    Keywords: Bank size, Functional distance, Innovation, SMEs
    JEL: G21 G34 O31 R51
    Date: 2008–09
  15. By: Andersson, Åke E (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Information and knowledge are essential to the decision making of firms. However, information is a primitive in the formation of knowledge. Information and the related concepts of risk and surprise are primarily of importance for rational decision making while knowledge is a form of (non-material) capital to be used as a resource in the transformation of different inputs into valuable outputs. Knowledge can be embodied in educated labor, in material capital, as patented production recipes or as contents of publically available documents and other media. In the paper optimality aspects of the acquisition of knowledge capital is analyzed. Estimates of private and public returns to investments in knowledge are reported. Some economic consequences of frictions over time and space are analyzed and new models containing such frictions are proposed.
    Keywords: productivity; growth; knowledge; R&D; returns to R&D; returns to knowledge
    JEL: O11 O31 O33
    Date: 2009–01–28

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