nep-ino New Economics Papers
on Innovation
Issue of 2009‒09‒11
six papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. The Financing of R&D and Innovation By Bronwyn H. Hall; Josh Lerner
  2. Do broad patents deter research cooperation ? By Tropéano, J.P.; Trommetter, M.
  3. Who Invents?: Evidence from the Japan-U.S. inventor survey By John P. WALSH; NAGAOKA Sadao
  4. Relative Performance and R&D Competition By Toshihiro Matsumura; Noriaki Matsushima; Susumu Cato
  5. Inciting Protocols – How International Environmental Agreements Trigger Knowledge Transfers By Thijs Dekker; Herman R.J. Vollebergh; Frans P. de Vries; Cees A. Withagen
  6. Induced Innovation and Social Inequality: Evidence from Infant Medical Care By David M. Cutler; Ellen Meara; Seth Richards

  1. By: Bronwyn H. Hall; Josh Lerner
    Abstract: Evidence on the “funding gap“ for investment innovation is surveyed. The focus is on financial market reasons for underinvestment that exist even when externality-induced underinvestment is absent. We conclude that while small and new innovative firms experience high costs of capital that are only partly mitigated by the presence of venture capital, the evidence for high costs of R&D capital for large firms is mixed. Nevertheless, large established firms do appear to prefer internal funds for financing such investments and they manage their cash flow to ensure this. Evidence shows that there are limits to venture capital as a solution to the funding gap, especially in countries where public equity markets for VC exit are not highly developed. We conclude by suggesting areas for further research.
    JEL: G24 G32 O32 O38
    Date: 2009–09
  2. By: Tropéano, J.P.; Trommetter, M.
    Abstract: The authors develop a theoretical model where two competing firms need access to basic knowledge that only one firm owns. They determine the impact of an imperfect property right on the incentive to transfer that knowledge to the competitor. They compare these transfer strategies. (i) Patenting may lead to litigation costs that depend on the competition toughness. (ii) Keeping the knowledge secret involves no licence revenue but ensures a monopoly profit. (iii) The firm can also coooperate with the competitor and thereby avoids litigation. They show that whenever competition between both firms is low, making patentable basic knowledge promotes knowledge transfer through research cooperation.
    JEL: D23
    Date: 2009
  3. By: John P. WALSH; NAGAOKA Sadao
    Abstract: Human resources are increasingly seen as a key to innovation competitiveness, and there is a need for detailed, systematic data on the demographics of inventors, their motivations, and their careers. To gain systematic data on who invents, we collected detailed information on a sample of inventors in the U.S. and Japan (the RIETI-Georgia Tech inventor survey). The data come from a unique set of matched surveys of U.S. and Japanese inventors of triadic patents, i.e., patents from patent families with granted patents in the U.S. and applications filed in Japan and in the EPO, with data from over 1900 responses from the U.S. and over 3600 responses from Japan. Based on these survey data, we compare the profiles, motivations, mobility and performance of inventors in the U.S. and Japan. Overall, we find some important similarities between inventors in the U.S. and Japan. The distribution across functional affiliations within the firm, by gender, by educational fields and their motivations, are all quite similar. In particular, in both countries we find inventors emphasizing task motivations over pecuniary motivations. Firm-centered motivation (e.g., generating value for my firm) is also an important reason for inventing and this reason is relatively more important in the U.S. than Japan. Their distribution across types of organizations is quite similar. The percent of university inventors is nearly the same in the two countries, and the distribution of these inventors across technology classes is also quite similar. However, the percent from very small firms is significantly higher in the U.S. There are a few important differences. American inventors are much more likely to have a Ph.D. American inventors are older (even controlling for differences in the share of the inventors with Ph.D.s). The modal Japanese inventor has his first invention in his 20s, while for the U.S., the mode is the early 30s, and we also find many more American inventors over age 55 at the time of their triadic patent invention. In both countries, older inventors tend to produce higher value patents. American inventors are also much more mobile (although Japanese inventors with Ph.D.s also have high rates of mobility, mainly in the form of secondments). In the U.S., mobility tends to decline with age, while in Japan, mobility is higher for older inventors (likely due to the differences in retirement ages in the two countries). In both countries, mobility is associated with greater access to outside information. Finally, we find that foreign-born inventors are very important in the U.S. (we did not collect data on country of origin for Japan). Overall, these results suggest that inventor characteristics may be important for firm performance, and that institutional differences may affect the profile of inventors in each country, although the inventors of the two countries are very similar in many respects. Future work will examine how these cross-national differences in inventor profiles affect innovation in each country.
    Date: 2009–07
  4. By: Toshihiro Matsumura; Noriaki Matsushima; Susumu Cato
    Abstract: This paper formulates a duopoly model in which firms care about relative profits as well as their own profits. Our purpose is to investigate the relationship between the weight of relative performance and R&D expenditure. We find a non-monotone relationship between the weight of relative performance in their objectives and their R&D levels. Both highly reciprocal (altruism) and negative reciprocal attitudes yield high levels of R&D, while the intermediate situations yield low levels of R&D.
    Date: 2009–08
  5. By: Thijs Dekker (Institute for Environmental Studies, VU University Amsterdam); Herman R.J. Vollebergh (Netherlands Assessment Agency, Bilthoven); Frans P. de Vries (Stichting Management School, Division of Economics, University of Stirling); Cees A. Withagen (Dept. of Spatial Economics, VU University Amsterdam, Dept. of Economics, and CentER, Tilburg University)
    Abstract: This paper studies how sulfur protocols trigger invention and diffusion of technologies for reducing SO2 emissions. For this goal we constructed a patent data set on SO2 abatement technologies filed in 15 signatory and non- signatory countries in the period 1970-1997. Our data enable us to study intended knowledge diffusion by separating so called mother patents, or original inventions, from family patents, which represent the same invention but are patents filed in foreign countries. We find that innovating firms file both types of patent applications before the protocols are actually implemented. Moreover, the filing of patents abroad (‘families’) is particularly strong in the countries that cooperate through the international protocols, i.e., the signatory countries. Our results suggest that firms are aware of the potential private benefits of such international agreements. They exploit potential advantages of larger product markets by seeking protection in countries that participate in the protocols.
    Keywords: International environmental agreements; Inventions; Knowledge transfers; Patents; Acid rain
    JEL: D7 D8 Q5
    Date: 2009–08–18
  6. By: David M. Cutler; Ellen Meara; Seth Richards
    Abstract: We develop a model of induced innovation where research effort is a function of the death rate, and thus the potential to reduce deaths in the population. We also consider potential social consequences that arise from this form of induced innovation based on differences in disease prevalence across population subgroups (i.e. race). Our model yields three empirical predictions. First, initial death rates and subsequent research effort should be positively correlated. Second, research effort should be associated with more rapid mortality declines. Third, as a byproduct of targeting the most common conditions in the population as a whole, induced innovation leads to growth in mortality disparities between minority and majority groups. Using information on infant deaths in the U.S. between 1983 and 1998, we find support for all three empirical predictions. We estimate that induced innovation predicts about 20 percent of declines in infant mortality over this period. At the same time, innovation that occurred in response to the most common causes of death favored the majority racial group in the U.S., whites. We estimate that induced innovation contributed about one third of the rise in the black-white infant mortality ratio during our period of study.
    JEL: I1 I12 J1 J15
    Date: 2009–09

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