nep-ino New Economics Papers
on Innovation
Issue of 2009‒04‒25
twenty papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. Patent Pools and Cross-Licensing in the Shadow of Patent Litigation By Jay Pil Choi
  2. Product Innovation Incentives: Monopoly vs. Competition By Marius Schwartz
  3. Which Immigrants Are Most Innovative and Entrepreneurial? Distinctions by Entry Visa By Jennifer Hunt
  4. Private Equity and Long-Run Investment: The Case of Innovation By Lerner, Josh; Strömberg, Per; Sörensen, Morten
  5. Languages, Fees and the International Scope of Patenting By Harhoff, Dietmar; Hoisl, Karin; van Pottelsberghe de la Potterie, Bruno
  6. Does it Matter Who Has the Right to Patent: First-to-invent or First-to-file? Lessons From Canada By Shih-tse Lo; Dhanoos Sutthiphisal
  7. In serach of lost disincentive effect from intra-industry spillovers By Stéphane Lhuillery
  8. Appropriability, Patents, and Rates of Innovation in Complex Products Industries By Luigi Marengo; Corrado Pasquali; Marco Valente; Giovanni Dosi
  9. Industrial Research Institutes’ Collaboration: a three-way solution to integrating new research skills By Bienkowska, Dzamila; Larsen, Katarina
  10. Innovation Systems and Global Value Chains By C. Pietrobelli; R. Rabellotti
  11. Market Share, R&D Cooperation, and EU Competition Policy By Richard Rubble; Bruno Versaevel
  12. Organising Innovation By Ende, J. van den
  13. The geography of innovation : challenge to technology policy within regions By Muriel Fadairo; Nadine Massard
  14. A Real Options Perspective On R&D Portfolio Diversification By Bekkum, S. van; Pennings, H.P.G.; Smit, J.T.J.
  15. What Does it Take for an R&D Tax Incentive Policy to Be Effective? By Pierre Mohnen; Boris Lokshin
  16. What is the Effect of the Current Financial Crisis on Venture Capital Financing? Empirical Evidence from US Internet Start-ups By Block, Joern; Sandner, Philipp
  17. The Widening and Deepening of Innovation Policy: What Conditions Provide for Effective Governance? By Borras, Susana
  18. The European Technology Policy : Propositions for a Multilevel Governance By Muriel Fadairo
  19. Comparing national systems of innovation in Asia and Europe: theory and comparative framework By Edquist, Charles; Hommen, Leif
  20. University professors and research commercialization: An empirical test of the “knowledge corridor” thesis By Gabrielsson, Jonas; Politis, Diamanto; Tell, Joakim

  1. By: Jay Pil Choi
    Abstract: This paper develops a framework to analyze the incentives to form a patent pool or engage in cross-licensing arrangements in the presence of uncertainty about the validity and coverage of patents that makes disputes inevitable. It analyzes the private incentives to litigate and compares them with the social incentives. It shows that pooling arrangements can have the effect of sheltering invalid patents from challenges. This result has an antitrust implication that patent pools should not be permitted until after patentees have challenged the validity of each otherfs patents if litigation costs are not too large.
    Date: 2009–03
  2. By: Marius Schwartz (Department of Economics, Georgetown University)
    Abstract: Arrow (1962) showed that a secure monopolist (unconcerned with preemption) has a weaker incentive than would a competitive firm to invest in a patentable process innovation. This paper shows that the ranking can be reversed for product innovations. Only the innovator sells the new product, a differentiated substitute for the old. Under alternative market structures considered, the old product is sold only by that same firm (two-product monopoly), only by a different firm (post-innovation duopoly), or in perfect competition. In an asymmetric Hotelling model, the innovation incentive under monopoly is greater than under duopoly if and only if the new product has the higher quality, and is always greater than under perfect competition. Classification-JEL Codes: D4, L1
    Date: 2009–04–02
  3. By: Jennifer Hunt
    Abstract: Using the 2003 National Survey of College Graduates, I examine how immigrants perform relative to natives in activities likely to increase U.S. productivity, according to the type of visa on which they first entered the United States. Immigrants who first entered on a student/trainee visa or a temporary work visa have a large advantage over natives in wages, patenting, commercializing or licensing patents, and publishing. In general, this advantage is explained by immigrants' higher education and field of study, but this is not the case for publishing, and immigrants are more likely to start companies than natives with similar education. Immigrants without U.S. education and who arrived at older ages suffer a wage handicap, which offsets savings to the United States from their having completed more education abroad. Immigrants who entered with legal permanent residence do not outperform natives for any of the outcomes considered.
    JEL: J61 O31
    Date: 2009–04
  4. By: Lerner, Josh (Harvard business School); Strömberg, Per (Institute for Financial Research); Sörensen, Morten (Columbia University)
    Abstract: A long-standing controversy is whether LBOs relieve managers from short-term pressures from public shareholders, or whether LBO funds themselves are driven by short-term profit motives and sacrifice long-term growth to boost short-term performance. We investigate 495 transactions with a focus on one form of long-term activities, namely investments in innovation as measured by patenting activity. We find no evidence that LBOs are associated with a decrease in these activities. Relying on standard measures of patent quality, we find that patents granted to firms involved in private equity trans actions are more cited (a proxy for economic importance), show no significant shifts in the fundamental nature of the research, and are more concentrated in the most important and prominent areas of companies' innovative portfolios.
    Keywords: Private equity; patents; innovation; short-termism
    JEL: G24 G32 O31
    Date: 2009–02–15
  5. By: Harhoff, Dietmar; Hoisl, Karin; van Pottelsberghe de la Potterie, Bruno
    Abstract: This paper analyzes firms’ choices regarding the geographic scope of patent protection within the European patent system. We develop an econometric model at the patent level to quantify the impact of office fees and translation costs on firms’ decision to validate a patent in a particular country once it has been granted by the EPO. These costs have been disregarded in previous studies. The results suggest that both translation costs and fees for validation and renewals have a strong influence on the behavior of applicants. The estimates are then employed to simulate the impact of the London Protocol, a recent policy reform which reduces translation requirements in the European patent system. National validations of patents granted by the EPO are estimated to increase by 29%.
    Keywords: patents; patent fees; patent validation; renewal fees; translation costs
    JEL: O30 O31 O38 O57
    Date: 2009–03–30
  6. By: Shih-tse Lo; Dhanoos Sutthiphisal
    Abstract: A switch to a first-to-file patent regime from its first-to-invent system has become imminent for the U.S. To learn about probable effects of such a policy change, we examine a similar switch that occurred in Canada in 1989. We find that the switch failed to stimulate Canadian R&D efforts. Nor did it have any effects on overall patenting. However, the reforms had a small adverse effect on domestic-oriented industries and skewed the ownership structure of patented inventions towards large corporations, away from independent inventors and small businesses. These findings challenge the merits of adopting a first-to-file patent regime.
    JEL: O3
    Date: 2009–04
  7. By: Stéphane Lhuillery (Chaire en Economie et Management de l'Innovation, Collège du Management de la Technologie, Ecole Polytechnique Fédérale de Lausanne)
    Abstract: Standard innovation surveys do not consider incoming spillovers for non-innovative firms. The Swiss innovation surveys presented here measure the importance of competitors' knowledge for both innovating and noninnovating firms. This original feature not only enables us to accurately identify the role of incoming knowledge on R&D decisions and innovation output, but also to compare resulting data with those which standard innovation questionnaires provide. Using a panel data over four periods, we show that knowledge from rivals actually deters manufacturing firms from engaging in R&D activities. Moreover, we provide stronger evidence that intra-industry spillovers are more detrimental to innovation than that generally provided by data from standard surveys. The results suggest that the dominance of the absorptive capacity effect is more important to firms investing in R&D and that non-innovative firms rely more heavily than expected on their competitors to maintain their technological capacities.
    Keywords: intra-industry spillovers, absorption, innovation survey
    JEL: O31 C35 C81
    Date: 2009–03
  8. By: Luigi Marengo; Corrado Pasquali; Marco Valente; Giovanni Dosi
    Abstract: The economic theory of intellectual property rights is based on a rather narrow view of both competition and technological knowledge. We suggest some ways of enriching this framework with a more empirically grounded view of both and, by means of a simulation model, we analyze the impact of different property right regimes on the dynamics of a complex product industry, that is an industry where products are complex multi-component objects and competition takes place mainly through differentiation and component innovation. We show that, as the complexity of the product spaces increases, stronger patent regimes yield lower rates of innovation, lower product quality and lower consumers' welfare. localized ones.
    Keywords: patents; appropriability of innovation; complex product industries; industrial dynamics
    JEL: O31 O34 L11
    Date: 2009–04–07
  9. By: Bienkowska, Dzamila (KTH and HELIX); Larsen, Katarina (KTH)
    Abstract: Innovation processes in emerging fields of technology frequently utilize scientific knowledge and technical skills from several research areas. Likewise, technological development frequently involves a diverse set of organizations including for example private firms, universities, corporate research labs and public or semi-public research and technology organizations (RTOs). These processes spur the need for both organizational and institutional change and adjustment, e.g. in order to facilitate research and development (R&D) and formation of innovation networks. The main question analyzed in the paper is how RTOs cope with integrating new skills in their competence base in the quest for exploring new emerging science fields and technology applications. The empirical setting consists of Swedish semi-public industrial research institutes active in the fields of pulp & paper technology and electronics, optics & communication technology respectively. The results of the study bring attention to three ways of integrating diverse skills and types of actors in R&D networks. These are: organization of collaborative research in formalized industry-specific R&D programs, purposeful organizational change also including redefinition of categories of core research competence and finally by targeting ‘open’ innovation processes characterized by incorporation of both end-users and skills of neighboring technology areas.
    Keywords: Industrial research institutes; Innovation networks; Emerging technology; RTOs; Collaborative R&D; Interdisciplinary; Innovation policy; management and organization; Sweden
    JEL: L20 L33 L52 L80 L84 O25 O31 O32 O38
    Date: 2009–04–22
  10. By: C. Pietrobelli; R. Rabellotti
    Date: 2009–04
  11. By: Richard Rubble (EMLYON Business School - EMLYON Business School); Bruno Versaevel (EMLYON Business School - EMLYON Business School, GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: Current EU policy exempts horizontal R&D agreements from antitrust con- cerns when the combined market shares of participants are low enough. This paper argues that existing theory does not support limiting the exemption to low market shares. This is done by introducing a set of non-innovating outside ï¬rms to the standard framework to assess what link might exist between the market share of innovating ï¬rms and the product market beneï¬ts of cooperation. With R&D output choices, the market share criterion, while it rules out the most socially harmful R&D cooperation agreements, also hinders the most beneï¬cial ones. With R&D input choices, cooperation may actually be desirable in concentrated industries, and harmful in more competitive ones. If R&D cooperation does have anti-competitive effects in product markets, it seems that these are therefore best addressed by other tools than market share criteria.
    Keywords: R&D; Cooperation; Competition; Regulation
    Date: 2009
  12. By: Ende, J. van den (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Innovation offers many opportunities for corporations. That is beyond dispute. The only question is how to make the most of them. In this lecture, I show what the process of innovation entails; I give examples of successful and failed innovations and I discuss the current issues and trends in this field. The challenges facing companies are how to handle uncertainty; how to collaborate with external parties and how to reduce the cost and time involved. My research focuses on the management of the innovation process and the organisation of system innovation. Research findings show how companies can improve the quality of ideas; how they can make more effective use of ideas from external parties; and whether it is best to develop complementary products themselves or contract this work out to others. I also discuss the specific innovation-related issues of the Netherlands and how these can be handled best.
    Keywords: innovation management;technology management;organizing for innovation;idea generation;creativity;crowdsourcing;collaboration for innovation;systemic innovation;organizational forms
    Date: 2008–09–18
  13. By: Muriel Fadairo (CREUSET - Centre de Recherche Economique de l'Université de Saint-Etienne - CNRS : FRE2938 - Université Jean Monnet - Saint-Etienne); Nadine Massard (CREUSET - Centre de Recherche Economique de l'Université de Saint-Etienne - CNRS : FRE2938 - Université Jean Monnet - Saint-Etienne)
    Abstract: The "Geography of Innovation" is based on the desire to give empirical foundations to the explanations behind the pronounced spatial polarisation of the innovation activities. It focuses on an attempt to measure the spatial dimension of knowledge externalities, in order to reveal their role in the organisation of research systems. The aim of this paper is to survey this empirical literature in order to highlight the main results interesting for the innovation policy. This analysis emphasises one main role of technology policy : supporting the institutions which generate knowledge and learning. These are found at various territorial levels, especially within the European Union. Here attention is drawn to the regional intervention level.
    Keywords: technology policy, geography of innovation, knowledge externalities, European regions, knowledge-based economy
    Date: 2009–04–20
  14. By: Bekkum, S. van; Pennings, H.P.G.; Smit, J.T.J. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: This paper shows that the conditionality of investment decisions in R&D has a critical impact on portfolio risk, and implies that traditional diversification strategies should be reevaluated when a portfolio is constructed. Real option theory argues that research projects have conditional or option-like risk and return properties, and are different from unconditional projects. Although the risk of a portfolio always depends on the correlation between projects, a portfolio of conditional R&D projects with real option characteristics has a fundamentally different risk than a portfolio of unconditional projects. When conditional R&D projects are negatively correlated, diversification only slightly reduces portfolio risk. When projects are positively correlated, however, diversification proves more effective than conventional tools predict.
    Keywords: real options;portfolio analysis;research & development
    Date: 2009–04–03
  15. By: Pierre Mohnen; Boris Lokshin
    Abstract: While in 1996, 12 OECD countries offered R&D tax incentives, in 2008 this number increased to 21. Most countries have opted for level-based instead of incremental R&D tax incentives. This paper takes a critical look at how the effectiveness of R&D tax incentives has been assessed in recent evaluations. Whether based on structural models estimating a price elasticity of R&D or on treatment evaluation methods, most studies estimate the cost effectiveness ratio or additionality. If the cost effectiveness ratio is greater than 1, or firms do more R&D than before, the policy is considered to be effective. A more proper net welfare evaluation of this policy should also include administration, compliance and transfer costs, the marginal burden of taxation, as well R&D externalities and the indirect effects on innovation and productivity.<br> The net welfare gain is shown to be sensitive to a certain number of parameters that are not always estimated with great precision. In particular, the transfer cost or deadweight loss associated with level-based tax incentives is shown to depend on the size of the firm, or more precisely its ex-ante R&D level. We report on the success of a past policy changes in the Netherlands and simulate the effect of various parameter changes in the existing Dutch R&D tax incentive scheme. We show that introducing marginal changes in the schemes’s parameters has little impact of increased R&D spending. The policy is more effective for small firms than for large firms. We end with a discussion of the pros and cons of level-based versus incremental R&D tax incentives. <P>Alors qu’en 1996, 12 pays de l’OECD offraient des crédits d’impôt recherche, en 2008 ils furent au nombre de 21. La plupart des pays optent pour des crédits d’impôt en volume et non en accroissement. Nous jetons un regard critique sur la façon dont l’efficacité des incitations à la R-D a été évaluée jusqu’ici. Que ce soit sur la base de modèles structurels qui estiment une élasticité-prix à la recherche ou à partir de méthodes d’évaluation de traitement, la plupart des études testent l’existence d’un effet d’additionalité. Si les entreprises font plus qu’un dollar de recherche par dollar de crédit d’impôt, la politique est considérée comme efficace. Une analyse coût-bénéfice plus globale qui inclurait également les coûts de gestion publique et privée des crédits d’impôt, les coûts additionnels dus à la taxation, les externalités de la recherche et les effets de celle-ci sur l’innovation et la productivité, serait plus appropriée.<br> Le bénéfice social net qui ressort d’une telle analyse est sensible à des estimations par ailleurs assez imprécises de certains de ces effets. Nous montrons que la perte sèche liée aux crédits d’impôt recherche en volume dépend du niveau de R-D exécutée avant l’entrée en vigueur des crédits d’impôt. Nous examinons l’efficacité de la politique des crédits d’impôt recherche aux Pays-Bas. Nous montrons notamment que des changements marginaux dans certains paramètres de cette politique n’ont qu’un impact limité sur les dépenses privées de recherche des entreprises. Cette politique est plus efficace pour les petites entreprises que pour les grandes. Nous terminons en pesant le pour et le contre d’une politique de crédits d’impôt en volume comparée à une politique en accroissement.
    Keywords: R&D tax credits; policy evaluation; cost-benefit analysis, crédits d’impôt recherche; évaluation de politiques; analyse coût-bénéfice.
    Date: 2009–04–01
  16. By: Block, Joern; Sandner, Philipp
    Abstract: Employing a large dataset regarding venture capital investments in US Internet firms, we analyze the effect of the current financial crisis on the venture capital market. Using regression analysis, we find that the financial crisis led to a 20% decrease in the average amount of funds raised per funding round. This effect, however, can only be found in later funding rounds. We argue that firms in later financing rounds that need capital to survive cannot avoid a deduction induced by the financial crisis, whereas firms that seek initial funding postpone their funding and expansion plans until the capital markets have stabilized. Furthermore, firms in later phases of the venture cycle are more likely to be negatively affected by the weak IPO market than firms seeking initial funding. Our results suggest that the financial crisis can lead to a severe "funding gap" in the financing of technological development and innovation.
    Keywords: Entrepreneurship; Financial Crisis; Venture Capital; Innovation Finance
    JEL: O30 L26 G24
    Date: 2009–04–21
  17. By: Borras, Susana
    Abstract: In relation to the gradual and steady introduction of the systemic perspective and of new public management techniques in innovation policy-making during the past decade, many countries in the developed and developing world have been substantially widening and deepening their innovation policies. The introduction of new and more sophisticated policy instruments (deepening) has been accompanied by an expansion of the realm of action for innovation policy (widening). The main argument of this paper is that this remarkable governmental activism and experimentalism raises important analytical questions about the conditions under which innovation policy contributes to an effective governance of the innovation system. Hence, this paper has two main purposes. Firstly, it characterises in an unambiguous way the widening and deepening trends in innovation policy, problematising their possible effects on governance. And, secondly, it develops an analytical toolbox based on a series of theoretical assumptions about the political conditions for effective governance of innovation systems.
    Keywords: Innovation Policy, Innovation System, Governmental Activism, Governmental Experimentalism
    JEL: O31 O32 O33 O34 O38 N5 O47 R58
    Date: 2009
  18. By: Muriel Fadairo (CREUSET - Centre de Recherche Economique de l'Université de Saint-Etienne - CNRS : FRE2938 - Université Jean Monnet - Saint-Etienne)
    Abstract: The aim of this paper is to highlight the relevance of a geographical multilevel technology policy within the European Union. At the present time the European policy of innovation is a "community" policy, in other words it involves a sharing of skills. In this paper we argue that outside the problems that this situation inherently poses, this territorial organisation may be considered as an asset. We use the central concept of technology externalities, taken in its traditional shape and in its renewals, to provide theoretical justifications for a “territorialised technology policyâ€, that is to say a policy of innovation designed and implemented on several territorial levels. Three levels are here taken into account : regional, national, European.
    Keywords: European technology policy; knowledge externalities; multilevel governance.
    Date: 2009–04–20
  19. By: Edquist, Charles; Hommen, Leif
    Abstract: This chapter is structured as follows. In the introductory section, the objectives of the “Small Country Innovation Systems” book project are outlined and the methodological and theoretical foundations of the book are addressed. This is followed by an extended conceptual and theoretical discussion. Using the traditional systems of innovation approaches as the point of departure, we specify the most important concepts used in the book. Subsequently, we outline an activities-based framework for studying and comparing NSIs. Then we discuss the characteristics of the ten countries selected for study (Norway, Sweden, Finland, Denmark, the Netherlands, Ireland, Singapore, Hong Kong, Taiwan and South Korea). Finally we outline the common structure of each of the country studies, including the presentation of a model table of contents. The chapter ends with abstracts of the ten case studies.
    Keywords: National System of Innovation, comparative framework
    JEL: O31 O32 O33 O34 O38 N5 O47 R58
    Date: 2008
  20. By: Gabrielsson, Jonas; Politis, Diamanto; Tell, Joakim
    Abstract: There has been an increasing interest in the determinants and outcomes of successful technology transfer and commercialization of research results. In this study we test the validity of the “knowledge corridor” thesis for explaining the involvement of university professors’ in the early stages of research commercialization. Statistical analysis on a sample of 86 respondents from engineering, natural science and medical faculties in a large Swedish university shows that both entrepreneurial and private industry experience significantly influence their ability to spot and generate business ideas in their research. Moreover, we find that research based business idea generation increase at a faster rate for professors with private sector work experience who have more time for research in their positions. The article ends with a discussion of our empirical findings together with its implications for support activities related to technology transfer and commercialization of research results.
    Keywords: academic entrepreneurship, knowledge corridor, research commercialization
    JEL: O31 O32 O33 O34 O38 N5 O47 R58
    Date: 2009

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