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on Innovation |
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Issue of 2009‒07‒03
twelve papers chosen by Steffen Lippert Massey University Department of Commerce |
| By: | Alexander Popov (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Peter Roosenboom (Erasmus University Rotterdam, Burgemeester Oudlaan 50, 3062 PA Rotterdam, Netherlands.) |
| Abstract: | We provide the first cross-country evidence of the effect of investment by private equity firms on innovation, focusing on a sample of European countries and using Kortum and Lerner’s (2000) empirical methodology. Using an 18-country panel covering the period 1991-2004, we study how private equity finance affects patent applications and patent grants. We address concerns about causality in several ways, including exploiting variation in laws regulating the investment behaviour of pension funds and insurance companies across countries and over time. We also control for the standard determinants of innovation like R&D, human capital, and patent protection. Our estimates imply that while private equity investment accounts for 8% of aggregate (private equity plus R&D) industrial spending, PE accounts for as much as 12% of industrial innovation. We also present similar evidence from the biotech industry to alleviate concerns that our results are biased by aggregation. JEL Classification: C23, G15, O16. |
| Keywords: | private equity, venture capital, innovation. |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:200901063&r=ino |
| By: | Dirk Czarnitzki; Federico Etro; Kornelius Kraft |
| Abstract: | We develop a simple model of competition for the market that shows that, contrary to the Arrow view, endogenous entry threat in a market induces the average firm to invest less in R&D and the incumbent leader to invest more than the average firm. We test these predictions with a Tobit model based on a unique dataset and survey for the German manufacturing sector (the Mannheim Innovation Panel). In line with our predictions, endogenous entry threats perceived by the firms reduce R&D intensity for the average firm, but not for an incumbent leader. Moreover, the size of the firms and their patent stocks, proxy for the protection of IPRs, are positively related to R&D intensity. These results hold after a number of robustness tests with instrumental variables. |
| Keywords: | R&D, Entry, Endogenous market structures, Leadership |
| JEL: | O31 O32 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:mib:wpaper:163&r=ino |
| By: | Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Persson, Lars (Research Institute of Industrial Economics (IFN)); Svensson, Roger (Research Institute of Industrial Economics (IFN)) |
| Abstract: | We develop a theory of commercialization mode (entry or sale) of entrepreneurial inventions into oligopoly, and show that an invention of higher quality is more likely to be sold (or licensed) to an incumbent due to strategic product market effects on the sales price. Moreover, preemptive acquisitions by incumbents are shown to stimulate the process of creative destruction by increasing the entrepreneurial effort allocated to high-quality invention projects. Using detailed data on patents granted to small firms and individuals, we find evidence that high-quality inventions are often sold, and that they are sold under bidding competition. |
| Keywords: | Acquisitions; Entrepreneurship; Innovation; Start-ups; Patent; Ownership; Quality |
| JEL: | G24 L10 L20 M13 O30 |
| Date: | 2009–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0799&r=ino |
| By: | Choi, Jay Pil |
| 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 other’s patents if litigation costs are not too large. |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:hit:piecis:417&r=ino |
| By: | Joel BAUM; Robin COWAN; Nicolas JONARD |
| Abstract: | Empirical research on strategic alliances has focused on the idea that alliance partners are selected on the basis of social capital considerations. In this paper we emphasize instead the role of complementary knowledge stocks (broadly defined) in partner selection, arguing not only that knowledge complementarity should not be overlooked, but that it may be the true causal force behind alliance formation. To marshal evidence on this point, we design a simple model of partner selection in which firms ally for the purpose of learning and innovating, and in doing so create an industry network. We abstract completely from network-based structural and strategic motives for partner selection and focus instead on the idea that firms’ knowledge bases must “fit” in order for joint leaning and innovation to be possible, and thus for an alliance to be feasible. The striking result is that while containing no social capital considerations, this simple model replicates the firm conduct, network structure, and contingent effects of network position on performance observed and discussed in the empirical literature. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2009-23&r=ino |
| By: | Sabien Dobbelaere (VU University Amsterdam); Roland Iwan Luttens (SHERPPA, Ghent University, and CORE, Université Catholique de Louvain); Bettina Peters (Centre for European Economic Research (ZEW)) |
| Abstract: | We study a two-stage R&D project with an abandonment option. Two types of uncertainty influence the decision to start R&D. Demand uncertainty is modelled as a lottery between a proportional increase and decrease in demand. Technical uncertainty is modelled as a lottery between a decrease and increase in the cost to continue R&D. We relate differences in uncertainty to differences in risk premia. We deduct testable hypotheses on the basis of which we empirically analyze the impact of uncertainty on the decision to start an R&D project. Using data for about 4000 German firms in manufacturing and services (CIS IV), our model predictions are strongly confirmed. |
| Keywords: | Investment under uncertainty; R&D; demand uncertainty; technical uncertainty; entry threat |
| JEL: | D21 D81 L12 O31 |
| Date: | 2009–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20090044&r=ino |
| By: | Bojanowski, Michał; Corten, Rense; Westborck, Bastian |
| Abstract: | This paper examines the structure and dynamics of the global network of inter-firm research and development (R&D) partnerships using longitudinal data for 1989--2002. We contribute to a recent literature that has attributed patterns and changes in the network to major political and technological developments, but which has omitted the structure in the underlying firm population. Two often made claims are that R&D collaboration is important in nowadays fierce competitive environment, but that the importance of international partnerships has declined over time. We integrate data on firms and alliances and confront both hypotheses with our data and a novel set of methods, which enable to control for structure in the firm population. |
| Keywords: | Inter-firm collaboration; R\&D partnerships; International technology transfer; Social network analysis |
| JEL: | L14 O32 |
| Date: | 2009–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15741&r=ino |
| By: | Toshihiro Matsumura; Noriaki Matsushima |
| Abstract: | This paper investigates an asymmetric duopoly model with a Hotelling line. We find that helping a small (minor) firm can reduce both social and consumer surplus. This makes a sharp contrast to existing works showing that helping minor firms can reduce social surplus but always improves consumer surplus. We also investigate R&D competition. We find that a minor firm may engage in R&D more intensively than a major firm in spite of economies of scale in R&D activities. |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:0742&r=ino |
| By: | Moritz Müller; Robin COWAN; Geert Duysters; Nicolas JONARD |
| Abstract: | This paper investigates how technological distance between firms affects their network of R&D alliances. Our theoretic model assumes that the benefit of an alliance between two firms is given by their technological distance. This benefit-distance relationship determines the ego-network of each firm as well as the overall network structure. Empirical relevance is confirmed for the bio-pharmaceutical industry. Although we find that the network structure is largely explained by firm size, technological distance determines the positioning of firms in the network. |
| Keywords: | technological distance, research alliance, network formation, pharmaceutical industry. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2009-24&r=ino |
| By: | Donald Siegel (School of Business University at Albany, SUNY); Charles Wessner (Board on Science, Technology, and Economic Policy National Research Council) |
| Abstract: | There has been little direct, systematic empirical analysis of the role that universities play in enhancing the success of entrepreneurial ventures. We attempt to fill this gap by analyzing data from the SBIR program, a set-aside program that requires key federal agencies (e.g., Department of Defense) to allocate 2.5 percent of their research budget to small firms that attempt to commercialize new technologies. Based on estimation of Tobit and negative binomial regressions of the determinants of commercial success, we find that start-ups with closer ties to universities achieve higher levels of performance. |
| JEL: | M13 O31 O32 O38 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:jms:wpaper:1&r=ino |
| By: | Katrin Tinn; Evangelia Vourvachaki |
| Abstract: | This paper analyzes the impact of equity market information imperfections on R&D driven growth. The mechanism proposed is built on two premises. First, the R&D-sector relies largely on equity finance, because of its production features. Second, equity can be persistently mispriced. This is due to investors rationally taking into account both private and public information. This paper shows that optimism in equity market can generate long-run consumption gains, despite the excess capital losses realized in the short-run. This result arises from the externalities in R&D production that result in uderinvestment in R&D in a market economy with perfect information. |
| Keywords: | Equity mispricing, R&D growth, Optimism, Welfare. |
| JEL: | G12 O30 O40 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp383&r=ino |
| By: | David Flath |
| Abstract: | This paper explores a panel data set matching establishment-based production statistics from Japan's Census of Manufacturers with wholesale price indices from the Bank of Japan, and Herfindahl indices from the Japan Fair Trade Commission. The data include annual observations over the period 1961-1990, for 74 industries at the 4-digit s.i.c. level. We estimate Cobb-Douglas production functions and Solow residuals for each industry and then use these estimates to further analyze the determinates of industrial concentration and innovation. The industries having great capital intensity, small employment of labor, and with high price-cost margins tend to be more concentrated. Cross-section estimates reveal a U-shaped mapping from concentration to innovation. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:0739&r=ino |