nep-ino New Economics Papers
on Innovation
Issue of 2009‒08‒08
seventeen papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. Patents, Public-Private Partnerships or Prizes – How should we support pharmaceutical innovation? By Paul Grootendorst
  2. How do young innovative companies innovate? By Gabriele Pellegrino; Mariacristina Piva; Marco Vivarelli
  3. Patent policy, patent pools, and the accumulation of claims in sequential innovation By Gaston Llanes; Stefano Trento
  4. Does Private Equity Investment Spur Innovation? Evidence from Europe. By Alexander Popov; Peter Roosenboom
  6. Software Patent and its Impact on Software Innovation in Japan By MOTOHASHI Kazuyuki
  7. Sectoral R&D intensity and Exchange Rate Volatility: A Panel Study on Economies of the OECD By Prashanth Mahagaonkar; Rainer Schweickert; Aditya S. Chavali
  8. Regional Effects on Cooperative Innovation Activities and the Related Variety of Regional Knowledge Bases By Uwe Cantner; Andreas Meder
  9. Linked versus Nonâ€linked Firms in Innovation: The Effects of Economies of Network in Agglomeration in East Asia By Machikita, Tomohiro; Ueki, Yasushi
  10. R and D for Development of New Drugs for Neglected Diseases How Can India Contribte? By Sudip Chaudhuri
  11. The Performance of Gatekeepers in Innovator Networks By Holger Graf; Jens J. Krüger
  13. R&D Intensity, Technology Transfer and Absorptive Capacity By Md. Rabiul Islam
  14. Inventor networks in emerging key technologies: information technology vs. semiconductors By Holger Graf
  15. "An Agent Based Cournot Simulation with Innovation: Identifying the Determinants of Market Concentration" By Kochanski, Tim
  16. Ready to Leave the Ivory Tower? - Academic Scientists' Appeal to Work in the Private Sector By Michael Fritsch; Stefan Krabel
  17. Learning from the Experiments of Others Simultaneous Search, Coordination in R&D and Diffusion Processes: Laboratory Evidence By Niels D. Grosse; Oliver Kirchkamp

  1. By: Paul Grootendorst
    Abstract: The question as to how society should support pharmaceutical (‘pharma’) innovation is both pertinent and timely: Pharma drugs are an integral component of modern health care and hold the promise to treat more effectively various debilitating health problems. The productivity of the pharma R&D enterprise, however, has declined since the 1980s. Many observers question whether the patent system is conducive to pharma innovation and point to several promising alternative mechanisms. These mechanisms include both ‘push’ programs – subsidies directed towards the cost of pharma R&D – and ‘pull’ programs – lumpsum and royalty-based rewards for the outputs of pharma R&D, that is, new drugs. I review evidence why our current system of pharma patents is defective and outline the various alternative mechanisms that may spur pharma innovation more effectively.
    Keywords: Pharmaceuticals, R&D, patents, prizes, innovation
    JEL: I18 O34
    Date: 2009–07
  2. By: Gabriele Pellegrino (Universita Cattolica del Sacro Cuore, Piacenza and Milano); Mariacristina Piva (Universita Cattolica del Sacro Cuore, Piacenza and Milano); Marco Vivarelli (Universita Cattolica del Sacro Cuore, Piacenza and Milano; IZA, Bonn; Max Planck Institute of Economics, Jena)
    Abstract: This paper discusses the determinants of product innovation in young innovative companies (YICs) by looking at in-house and external R&D and at the acquisition of external technology in embodied and disembodied components. These input-output relationships are tested on a sample of innovative Italian firms. A sample-selection approach is applied. Results show that in-house R&D is linked to the propensity to introduce product innovation both in mature firms and YICs; however, innovation intensity in the YICs is mainly dependent on embodied technical change from external sources, while -in contrast with the incumbent firms- in-house R&D does not play a significant role.
    Keywords: R&D, product innovation, embodied technical change, CIS 3, sample selection.
    JEL: O31
    Date: 2009–08–06
  3. By: Gaston Llanes (Harvard Business School, Entrepreneurial Management Unit); Stefano Trento (Universitat Autonoma de Barcelona, Departament d'Economia i Historia Economica,)
    Abstract: We present a dynamic model where the accumulation of patents generates an increasing number of claims on sequential innovation. We study the equilibrium innovation activity under three regimes: patents, no-patents and patent pools. Patent pools increase the probability of innovation with respect to patents, but we also find that: (1) their outcome can be replicated by a licensing scheme in which innovators sell complete patent rights, and (2) they are dynamically unstable. We find that none of the above regimes can reach the first or second best. Finally, we consider patents of finite duration and determine the optimal patent length.
    Keywords: Sequential Innovation, Patent Pools, Anticommons
    JEL: L13 O31 O34
    Date: 2009–07
  4. 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
  5. By: Jaakko Simonen; Philip McCann
    Abstract: This paper investigates the role played by the sectoral and geographical mobility of labour in the promotion of industrial innovations. Knowledge can be transferred between firms by inter-firm interactions and interfirm cooperation. In addition, knowledge can also be transferred between firms by labour mobility. In order to examine these issues we employ a unique innovation dataset from Finland which combines firm specific information about the innovation performance of the firms along with their individual characteristics, as well as firm specific information regarding the sectoral and geographical origins of their recent labour acquisitions. Analyzing this data allows us to identify the different roles which the geography of knowledge spillovers and exchanges and the geography of labour markets play in the innovation process.
    Keywords: innovation; labour; mobility; R&D; cooperation
    JEL: O31 J60 R30
    Date: 2009–08
  6. By: MOTOHASHI Kazuyuki
    Abstract: In Japan, the software patent system has been reformed and now software has become a patentable subject matter. In this paper, this pro-patent shift on software is surveyed and its impact on software innovation is analyzed. Before the 1990's, inventions related to software could not be patented by themselves, but they could be applied when combined with hardware related inventions. Therefore, integrated electronics firms used to be the major software patent applicants. However, during the period from the late 1990's to the early 2000's, when software patent reforms were introduced, innovative activities (measuring patent applications) by independent software development firms began. We used datasets linking the IIP (Institute of Intellectual Property) patent database (individual patent datasets by using JPO's publication data) and firm level data from the Survey on Selected Services (software part) (METI) and the Basic Survey of Business Activity and Structure (METI). Based on the panel datasets from approximately 550 firms from 2001 to 2005, we found that patent applications from software firms gradually increased from the 1990's, while we were unable to find a direct impact of software patent system reforms. In addition, it was also found that patent application is positively related to a software company's independent strategy of subcontracting out system headed by large system integrators.
    Date: 2009–08
  7. By: Prashanth Mahagaonkar (Max Planck Institute of Economics Jena and Schumpeter School of Business and Economics, Wuppertal); Rainer Schweickert (Kiel Institute for the World Economics); Aditya S. Chavali (Department of Economics, University of Glasgow)
    Abstract: A recent literature has pointed at potential negative effects of exchange rate volatility on innovation. In this paper, we propose that there may be a direct effect as well as an indirect effect via export activity. We test these hypotheses for sectoral R&D intensities using OECD panel data for manufacturing and services sectors for 14 OECD economies and the years 1987 - 2003. We find that the direct negative effect of volatility is pronounced in manufacturing sector but is dominated by the indirect effect via the export channel. Services do not face any effects of volatility on R&D intensities. While it is not clear which channel dominates our results confirm that there is a negative volatility affect related to openness on a sectoral level.
    Keywords: R&D intensity, Innovation, Real Exchange Rate, Volatility, Exports, OECD-Countries
    JEL: E32 F31 O32
    Date: 2009–08–06
  8. By: Uwe Cantner (Friedrich-Schiller-University, School of Economics and Business Administration, Jena); Andreas Meder (Thuringian Ministry of Economic Affairs, Erfurt)
    Abstract: The literature on "Innovation Systems" is divided into several directories. Dif- ferences occur through the definition of the system's borders. This paper intro- duces a methodology how to differentiate between regional and technological effects of cooperative innovation activities and analyzes furthermore how dif- ferent dimensions of regional knowledge affect the regional effects on coopera- tive innovation activities. We find evidence that the related variety of knowl- edge available within a region and its combination with a proxy of the amount of knowledge foster regional effects of cooperative innovation activities. Addi- tionally, we find that the development of German regions fits with the sugges- tions of the Regional Innovation System (RIS) approach.
    Keywords: regional development, regional effects of cooperative behavior, knowledge, related variety of knowledge
    JEL: C30 L14 O32
    Date: 2009–08–06
  9. By: Machikita, Tomohiro; Ueki, Yasushi
    Abstract: This paper proposes a new mechanism linking innovation and network in developing economies to detect explicit production and information linkages and investigates the testable implications of these linkages using survey data gathered from manufacturing firms in East Asia. We found that firms with more information linkages tend to innovate more, have a higher probability of introducing new goods, introducing new goods to new markets using new technologies, and finding new partners located in remote areas. We also found that firms that dispatched engineers to customers achieved more innovations than firms that did not. These findings support the hypothesis that production linkages and faceâ€toâ€face communication encourage product and process innovation.
    Keywords: Southeast Asia, East Asia, Technological innovations, Network, Communication, Business enterprises, Engineer Mobility, Innovation, Linkages
    JEL: D83 L25 O31 O32 O33 R12
    Date: 2009–03
  10. By: Sudip Chaudhuri
    Abstract: In line with TRIPS India has introduced a product patent regime in pharmaceuticals from 1 January, 2005. WIll this lead increase in resources deveoted to R and D by Indian companies for the development of new drugs more suited to the needs of India and other developing countries? Can the innovation capabilities be utilized for developing new drugs for neglected diseases? Can India contribte to lowering the cost of new drug development and make drugs more accessible?
    Keywords: India, resources, TRIPS, pharmaceuticals, developing countries, drugs, diseases, development, developing countries, developed countries, R&D,
    Date: 2009
  11. By: Holger Graf (Friedrich Schiller University of Jena, Economics Department); Jens J. Krüger (Darmstadt University of Technology, Department of Law and Economics)
    Abstract: We investigate the impact of actors' positions within regional innovator networks on their innovative performance. The networks of four selected regions are based on information on patent applicants and inventors. Count data regressions show positive effects on innovation of both the total number of relations and of access to a larger knowledge base. However, when looking at innovators that are characterised by multiple internal and external contacts, our results suggest that these gatekeepers are not able to reap all the benefits associated with their brokering position. This implies that gatekeepers provide some sort of public good to the innovation system.
    Keywords: Innovator networks, Gatekeeper, Zero Inflated Generalised Poisson
    JEL: O31 Z13 R11
    Date: 2009–08–06
  12. By: Dyuti S. Banerjee; Teyu Chou
    Abstract: This paper uses a strategic entry-deterrence approach to address the effects of anti-commercial piracy policies on a firm’s incentive to innovate. Monitoring increases the firm’s incentive to innovate. However, inclusion of innovation does not necessarily result in monitoring as the socially optimal policy. If monitoring is the socially optimal policy then the commercial pirate’s entry may or may not be deterred. The entry-deterring limit price and quality is less than that in the monopoly case. Only in the extreme situation the monopoly results are restored.
    Keywords: Accommodating strategy, aggressive strategy, copyright protection, innovation.
    JEL: K42 L11
    Date: 2009–08
  13. By: Md. Rabiul Islam
    Abstract: In the line of Schumpeterian fully endogenous growth theory, this study attempts to investigate whether differences in research intensity as well as absorptive capacity help to explain cross-country differences in productivity growth in a panel of 55 sample countries including 23 OECD and 32 developing economies over the period 1970 to 2004. Using several indicators of innovative activity and product variety empirical results from system GMM estimator confirm that research intensity has significant positive effect on productivity growth in both the OECD and developing countries. TFP growth is also found to be enhanced by the distance to technology frontier in both the group of countries. R&D based absorptive capacity seems to have significant positive impact on productivity growth in both the groups though strong in OECD countries. Human capital based technology transfer is found significant and robust in both the OECD and developing countries. Absorptive capacity appears to be sensitive to the model specification and measurement of innovative activity as well as product variety.
    Keywords: Schumpeterian growth theory, R&D intensity, TFP growth, technology transfer, human capital, absorptive capacity, system GMM, OECD, developing countries
    JEL: O10 O30 O47
    Date: 2009–08
  14. By: Holger Graf (Friedrich Schiller University of Jena, Economics Department)
    Abstract: We analyze the development of the German knowledge base measured by co-classifications of patents by German inventors and relate this technological development to changes in the structure of the underlying inventor networks. Our central hypothesis states that technologies which become more central to the knowledge base are also characterized by a higher connectedness of the inventor network. We exemplify our theoretical considerations in a comparative study of two patenting fields - information technology and semiconductors. It turns out that information technology shows the highest increases in patents but shows no of a key technology. Contrary, semiconductors develops towards a key technology, despite a moderate increase in the number of patents. The dynamic analysis of inventor networks in both fields shows an increasing connectedness and the emergence of a large component in semiconductors but not in information technology, which is in line with our expectations.
    Keywords: Knowledge relatedness, Innovator networks, Interdisciplinary research, Patents, Key Technology
    JEL: O31 Z13
    Date: 2009–08–06
  15. By: Kochanski, Tim
    Abstract: In this paper, I develop a hybrid model that contains elements of both agent based simulations (ABS) as well as analytic Cournot models, to study the effects of firm characteristics, market characteristics, and innovation on market concentration, as measured by a Herfindahl-Hirschman Index (HHI). The model accommodates the following components: multiple firms with heterogeneous marginal costs, market entry and exit, barriers to entry, low or high cost industries, changing demand, varying levels of marginal cost reducing returns-to-innovation, varying costs associated with innovation, increased returns to innovation from past experience innovating, and varying propensities to innovate within the market. The components mentioned above are commonly cited as determinants of market concentration. A sensitivity analysis which is robust to high degrees of model complexity demonstrates that the model provides results that are consistent with economic theories of markets.
    Keywords: agent based simulation; Cournot; game; innovation; oligopoly
    JEL: C79 D43
    Date: 2009–06
  16. By: Michael Fritsch (Friedrich Schiller University, School of Economics and Business Administration); Stefan Krabel (Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group, Jena)
    Abstract: In this study we investigate the factors that shape the attitudes of scientists toward starting their own business or working in a private sector firm. The analysis is based on data collected from scientists working in the German Max Planck Society, a research institution devoted to basic science. We find that the scientists' evaluations of the attractiveness of working in a private sector firm or of starting their own business differ considerably according to their academic discipline and the perceived commercial potential of their research. The ability to take risks, prior work experience in private firms, and personal experience with industry cooperation lead to a positive attitude towards switching to private sector employment or entrepreneurship. Strong willingness to freely distribute research findings are related to a low appeal of private sector work.
    Keywords: Knowledge transfer, science, entrepreneurship, innovation, commercialization
    JEL: O31 O33 L26 L32
    Date: 2009–08–06
  17. By: Niels D. Grosse (DFG Research Training Group "The Economics of Innovative Change", Friedrich-Schiller-University, Jena); Oliver Kirchkamp (School for Economics and Business Administration, Friedrich-Schiller-University, Jena)
    Abstract: In this paper we are studying a multiple player two-armed bandit model with two risky arms in discrete time. Players have to find the superior arm and can learn from others' history of choices and successes. In equilibrium, there is no con?ict between individual and social rationality. If agents depart from perfect rationality and use count heuristics, they can benefit from coordination (or centralization) of search activities. We test the conjecture that agents gain from coordination with a between-subject design in two treatments. In the experiments we find no gains from coordination. Instead, we find less severe deviations from the equilibrium strategy in the non-coordinated treatment.
    Keywords: two-armed bandit, parallel search, coordination, experiment
    JEL: C91 D83 O33
    Date: 2009–08–06

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.
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