nep-ino New Economics Papers
on Innovation
Issue of 2009‒10‒24
eighteen papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. The impact of public funding for innovation on firms' R&D investments: Do R&D cooperation and appropriability matter? By Manuela Gussoni - Andrea Mangani
  2. Patent Office in innovation policy: Nobody's perfect By Bernard Caillaud; Anne Duchêne
  3. Where Does Energy R&D Come From? Examining Crowding Out from Environmentally-Friendly R&D By David Popp; Richard G. Newell
  4. International Cooperation in Pharmaceutical Research By Anna Rita Bennato; Laura Magazzini
  5. Increasing energy and resource efficiency through innovation: an explorative analysis using innovation survey data By Rennings, Klaus; Rammer, Christian
  6. Software Innovation and the Open Source threat By German Lambardi
  7. Innovation and Social Capital: A Cross-country Investigation By Soogwan Doh; Zoltan J. Acs
  8. Weak IPR and Imitation in the South and International Exhaustion of Patent Rights in the North for Innovated Drugs: A Policy Game By Rajat Acharyya; Maria D.C. Garcia-Alonso
  9. Comments and Critics on the Discrepancies between the Oslo Manual and the Community Innovation Surveys in Developed and Developing Countries By Berna Beyhan; Elif Dayar; Derya Findik; Sinan Tandogan
  10. Participation in a Platform Ecosystem: Appropriability, Competition, and Access to the Installed Base By Peng Huang; Marco Ceccagnoli; Chris Forman; D.J. Wu
  11. Islands of Innovation and Internationally Networked Labor Markets: Magnetic Centers for Star Scientists? By Michaela Trippl
  12. Competitive Pressure and the Adoption of Complementary Innovations By Tobias Kretschmer; Eugenio Miravete; José Pernías
  13. Towards Cross-Border Innovation Spaces: A theoretical analysis and empirical comparison of the Öresund region and the Centrope area By Karl-Johan Lundquist; Michaela Trippl
  14. Financial system, innovation and regional development: a study on the relationship between liquidity preference and innovation in Brazil By João Prates Romero; Frederico G. Jayme Jr.
  15. The Role of Product Innovation on the Diffusion of Mobile Telephone By Heli Koski; Tobias Kretchmer
  16. The scientific and technological trajectories of four Latin American countries: Mexico, Costa Rica, Argentina, and Brazil By Leonardo Costa Ribeiro; Isabel de Azeredo Moura; Luiza Teixeira de Melo Franco; Márcia Siqueira Rapini; Eduardo da Motta e Albuquerque
  17. Institutional Influences on strategic entrepreneurial Behaviours By Erkko Autio; Zoltan Acs
  18. Industrial districts in a globalizing world: A model to change or a model of change? By Margherita Russo; Josh Whitford

  1. By: Manuela Gussoni - Andrea Mangani
    Abstract: This paper provides a theoretical and empirical framework to explore how public funding affects firms' R&D investments depending on their engagement in horizontal R&D cooperations and different levels of ap- propriability conditions within the economy. It assumes firms' Cournot-Nash behavior in the choice of the optimal R&D investment level and provides empirical evidence in support of the theoretical ¯ndings using data on Spain and Germany from the Third Community Innovation Survey. Theoretical and empirical re- sults suggest that firms' cooperative behaviour and the appropriability conditions affect the relationship between public funding for innova- tion and R&D investments.
    Keywords: R&D cooperatives; subsidies;knowledge spillovers; innovation.
    JEL: O32 H20 L10 D43 D78
    Date: 2009–10–15
  2. By: Bernard Caillaud; Anne Duchêne
    Abstract: The number of patent applications and "bad" patents issued has been rising rapidly in recent years. Based on this trend, we study the overload problem within the Patent Office and its consequences on the firms' R&D incentives. We assume that the examination process of patent applications is imperfect, and that its quality is poorer under congestion. Depend- ing on policy instruments such as submission fees and the toughness of the non-obviousness requirement, the system may result in a high-R&D equilibrium, in which firms self-select in their patent applications, or in an equilibrium with low R&D, opportunistic patent applications and the issuance of bad patents. Multiple equilibria often coexist, which deeply undermines the effectiveness of policy instruments. We investigate the robustness of our conclusions as to how the value of patent protection is formalized, taking into consideration the introduction of a penalty system for rejected patent applications, as well as the role of commitment to a given IP protection policy.
    Date: 2009
  3. By: David Popp; Richard G. Newell
    Abstract: Recent efforts to endogenize technological change in climate policy models demonstrate the importance of accounting for the opportunity cost of climate R&D investments. Because the social returns to R&D investments are typically higher than the social returns to other types of investment, any new climate mitigation R&D that comes at the expense of other R&D investment may dampen the overall gains from induced technological change. Unfortunately, there has been little empirical work to guide modelers as to the potential magnitude of such crowding out effects. This paper considers both the private and social opportunity costs of climate R&D. Addressing private costs, we ask whether an increase in climate R&D represents new R&D spending, or whether some (or all) of the additional climate R&D comes at the expense of other R&D. Addressing social costs, we use patent citations to compare the social value of alternative energy research to other types of R&D that may be crowded out. Beginning at the industry level, we find some evidence of crowding out in sectors active in energy R&D, but not in sectors that do not perform energy R&D. This suggests that funds for energy R&D do not come from other sectors, but may come from a redistribution of research funds in sectors that are likely to perform energy R&D. Given this, we proceed with a detailed look at climate R&D in two sectors – alternative energy and automotive manufacturing. Linking patent data and financial data by firm, we ask whether an increase in alternative energy patents leads to a decrease in other types of patenting activity. We find crowding out for alternative energy firms, but no evidence of crowding out for automotive firms. Finally, we use patent citation data to compare the social value of alternative energy patents to other patents by these firms. Alternative energy patents are cited more frequently, and by a wider range of other technologies, than other patents by these firms, suggesting that their social value is higher.
    JEL: O33 Q4 Q42 Q55
    Date: 2009–10
  4. By: Anna Rita Bennato (University of Rome “Tor Vergata”, Department of Economics, and University of Bristol); Laura Magazzini (Department of Economics (University of Verona))
    Abstract: Since 1990 the global patent regime strengthened dramatically. The introduction of the Trade-Related Aspect of Intellectual Property Rights (TRIPS) agreement in 1995 has represented an important evolution into the Intellectual Property Rights (IPRs) regime. On January 1, 2005 the TRIPS regulations about the new patent regime came into force in all developing countries, imposing all WTO members patent protection in all productive areas, including pharmaceutical products (with the exception of least-developed members of WTO, for which enforcement of product patent protection and undisclosed information rights for pharmaceuticals is postponed to 2016). Despite the attention devoted to the issue by the theoretical literature, scattered empirical work is available at date. We aim at studying whether the new patent regime has stimulated international cooperation on innovative activities between WTO members, focusing on less developed countries. In particular, we adopt a gravity framework in order to examine the impact of the level of enforcement of property rights on bilateral flows of pharmaceutical knowledge. The analysis is conducted using data from the PatentScope and ISI Web of knowledge, and results provide a sound test of conflicting theories about the effect of TRIPS enforcement on technology transfer.
    Keywords: IPRs, pharmaceutical products, R&D co-operation
    JEL: F13 O34 O57
    Date: 2009–10
  5. By: Rennings, Klaus; Rammer, Christian
    Abstract: Energy and resource efficiency innovations (EREIs) are often seen as win-win opportunities for both the economic and the environmental performance of firms. It is thus worth asking how the innovation activities and performance of firms with regard to energy and resource efficiency look like: Do EREI firms follow distinct innovation strategies? Do EREIs spur or limit innovation success? And what are the particular features of EREI firms compared to conventional innovators? Using German innovation data, we find that EREIs are determined by a larger set of technology-push and market-pull factors. On the supply side, R&D budgets, research infrastructure and networking with other firms are important factors of influence, while on the demand side increased productivity and cost reductions are decisive, as well as improved product quality. On the other hand, EREIs are complex activities which also need regulatory incentives. Although EREIs are not more successful compared to conventional innovations, they contribute substantially to the economic success of firms.
    Keywords: Resource efficiency,energy efficiency,environmental innovations,innovation surveys
    JEL: Q01 Q55 O31 O33
    Date: 2009
  6. By: German Lambardi (Toulouse School of Economics)
    Abstract: In this paper I study how innovation investment in a software duopoly is affected by the fact that one of the firms is, or might become Open Source. Firms can either be proprietary source (PS) or open source (OS) and have different initial technological levels. An OS firm is a for profit organization whose basic software is OS and it is distributed for free. The OS firm, however, is able to make profits from selling complementary software and, on the cost side, it receives development help from a community of users. I first compare a duopoly composed by two PS firms with a mixed duopoly of a PS and OS firm and I find that a PS duopoly might generate more innovation than a mixed duopoly if the initial technological gap between firms is small. However if this gap is large, a PS duopoly generates less innovation than a mixed duopoly. I then extend the setting to allow PS firms to switch to OS or to remain PS. A PS firm wants to become OS if it gets behind enough in the technological race against a competitor. I find that the outside option to become OS might soften competition on innovation since the technological leader prefers to reduce his innovation investment to avoid the OS switch of the follower. Therefore, although the switch to OS could generate higher investment levels ex-post it might generate lower investment ex-ante. In this context I find that a government subsidy to OS firms could be potentially harmful for innovation.
    Keywords: Software Market, Open Source, Innovation Incentives
    JEL: L13 L17 O31 O38
    Date: 2009–09
  7. By: Soogwan Doh (George Mason University); Zoltan J. Acs (George Mason University)
    Abstract: This study explores the impact of social capital on innovation by constructing a more general measure of social capital indicator consisting of generalized and institutional trust, associational activities and civic norms. We test the hypothesis that social capital has a positive impact on innovation at the national level. After controlling for R&D expenditure and human capital there is a positive relationship between social capital and innovation. Social capital interacts with entrepreneurship and the strongest relationship is between associated activities and entrepreneurship. This is consistent with the need to build social relationships in today's networked economy.
    Keywords: human capital, social capital, entrepreneurship, innovation, generalized and institutional trust, civic norms, associational activities
    JEL: L26 J24 O31 O5
    Date: 2009–10–13
  8. By: Rajat Acharyya; Maria D.C. Garcia-Alonso
    Abstract: We consider a policy game between a high-income country hosting a drug innovator and a low-income country hosting a drug imitator. The low-income country chooses whether to enforce an International Patent Regime (strict IPR) or not (weak IPR) and the high-income country chooses whether to allow parallel imports (PI) of on-patent drugs or market based discrimination (MBD). We show that, for a moderately high imitation cost, both (Strict IPR, Parallel Imports) and (Weak IPR, MBD) emerge as the Subgame Perfect Nash Equilibrium (SPNE) policy choices. For relatively smaller imitation costs, (Weak IPR, MBD) is the unique SPNE policy choice. The welfare properties reveal that although innovation may be higher at the (Strict IPR, PI), the market coverage and national welfare of the low-income country, and the total welfare are all lower. This opens up the efficiency issue of implementing TRIPS and at the same time allowing international exhaustion of patent rights.
    Keywords: Patent protection; TRIPS; innovation; imitation; Parallel Imports; Pharmaceuticals
    JEL: D4 L1 I1
    Date: 2009–10
  9. By: Berna Beyhan (TEKPOL-STPS, Science and Technology Policy Studies, Middle East Technical University); Elif Dayar (TEKPOL-STPS, Science and Technology Policy Studies, Middle East Technical University); Derya Findik (TEKPOL-STPS, Science and Technology Policy Studies, Middle East Technical University); Sinan Tandogan (Scientific and Technological Research Council of Turkey (TUBITAK))
    Abstract: This study aims to investigate how successful Community Innovation Survey (CIS) is in reflecting main concerns of measuring innovation stated in the Oslo Manual. Although this survey has been widely applied throughout the European countries since 1992, the discussions over its suitability as a reliable tool to measure innovation along different cultures of innovativeness still remain. Motivated by the arguments on the reliability of CIS as a tool to measure innovation and its conformity to the guidelines of the Oslo Manual, this paper reviews and discusses these arguments in a broader context and presents the implications of possible problems that arise due to these discrepancies in the case of a developing country, namely, Turkey.
    Keywords: Innovation measurement, Oslo Manual, Community Innovation Survey
    Date: 2009–10
  10. By: Peng Huang (College of Management, Georgia Tech); Marco Ceccagnoli (College of Management, Georgia Tech); Chris Forman (College of Management, Georgia Tech); D.J. Wu (College of Management, Georgia Tech)
    Abstract: In this study we examine the antecedents of small independent software vendor (ISV) decisions to join a platform ecosystem. Using data on the history of partnering activities from 1201 ISVs from 1996 to 2004, we find that appropriability strategies based on intellectual property rights and the possession of downstream complementary capabilities by ISVs are positively related to partnership formation, and ISVs use these two mechanisms as substitutes to prevent expropriation by the platform owner. In addition, we show that greater competition in downstream product markets between the ISV and the platform owner is associated with a lower likelihood of partnership formation, while the platform’s penetration into the ISV’s target industries is positively associated with the propensity to partner. The results highlight the role of innovation appropriation, downstream complementary capabilities, and collaborative competition in the formation of a platform ecosystem.
    Keywords: platform ecosystem, partnership, intellectual property rights, downstream capabilities
    JEL: L26 L86 O33 O34
    Date: 2009–09
  11. By: Michaela Trippl
    Date: 2009
  12. By: Tobias Kretschmer (Institute for Communication Economics, LMU Munich); Eugenio Miravete (Department of Economics, University of Texas at Austin); José Pernías (Department of Economics, Universidad Jaume I de Castellón)
    Abstract: Liberalization of the European automobile distribution system in 2002 limits the ability of manufacturers to impose vertical restraints, leading to a substantial restructuring of the industry and increasing the competitive pressure among dealers. We estimate an equilibrium model of profit maximization to evaluate how dealers change their innovation strategies with this regime change. Using French data we evaluate the existence of complementarities among adoptions of innovations and the scale of production. We conclude that as firms expand their scale of production they concentrate their effort in one type of innovation only. Results are robust to the existence of unobserved heterogeneity.
    Keywords: Competitive Pressure, Complementarity, Product and Process Innovation
    JEL: C35 L86 O31
    Date: 2009–09
  13. By: Karl-Johan Lundquist; Michaela Trippl
    Date: 2009
  14. By: João Prates Romero (Cedeplar-UFMG); Frederico G. Jayme Jr. (Cedeplar-UFMG)
    Abstract: This paper discusses and assesses the features of the Brazilian Financial System, as well as the impacts of Liquidity Preference on Credit and Regional Development in Brazil. Precisely, we test the relationship between credit and development, and the role of banks in regional development. We estimate a panel across states in Brazil in order to test the impact of liquidity preference and other financial variables on Brazilian states credit level. We have also tested the relationship between liquidity preference and other financial variables across states and the number of patents, aiming at testing the importance of technology and innovation on regional development by means of bank system. Conclusions confirm both hypotheses.
    Keywords: Monetary System, National Innovation System, Credit
    JEL: E50 O16 O33
    Date: 2009–08
  15. By: Heli Koski; Tobias Kretchmer
    Abstract: ABSTRACT : Most existing empirical work on technology diffusion assumes technologies to remain constant throughout the diffusion process. However, many consumer technologies improve significantly over time. Using data on the characteristics of new mobile handsets over a ten-year period and controlling for potential endogeneity problems, we find that handset quality and variety had a significant impact on the global diffusion of mobile telephony. Our estimation results further suggest that earlier empirical studies on diffusion may have attributed too much of diffusion to network effects.
    JEL: L96 O33
    Date: 2009–10–14
  16. By: Leonardo Costa Ribeiro (Cedeplar-UFMG); Isabel de Azeredo Moura (Cedeplar-UFMG); Luiza Teixeira de Melo Franco (Cedeplar-UFMG); Márcia Siqueira Rapini (Cedeplar-UFMG); Eduardo da Motta e Albuquerque (Cedeplar-UFMG)
    Abstract: This paper introduces the differences and similarities of interactions between science and technology (S&T) among four Latin American countries: Argentina, Brazil, Costa Rica and Mexico. Through the analysis of articles and patents data as well as the elaboration of global matrices and national three-dimensional matrices, it was possible to observe the recent trajectory of the scientific and technological production of countries. The results indicate that the Latin American countries have a similar pattern regarding their scientific and technological structure and they are part of a regime characterized by immature National Systems of Innovation (NSI).
    Keywords: Latin American countries, science and technology interaction, national systems of innovation
    JEL: O O3
    Date: 2009–09
  17. By: Erkko Autio (Imperial College Business School); Zoltan Acs (George Mason University)
    Abstract: The purpose of this paper is to examine the existence of cross-level moderating effects between national appropriability conditions, individual level predictors and entrepreneurial growth aspirations. We test a multi-level model that connects the determinants of strategic resource allocation decisions at the individual level with the strength of the intellectual property rights regime at the national level. The results suggest that the strengths of the intellectual property regime will moderate negatively the relationship between an individual's education and her growth aspirations and moderate positively the relationship between an individual's income and her growth aspirations. The findings support claims that strategic entrepreneurial behavior cannot be fully understood without giving attention to the context in which those behaviors are observed.
    Keywords: strategic entrepreneurship, multi-level analysis, intellectual property protection, growth aspirations
    JEL: L26 J24 C3 M13 F5
    Date: 2009–10–05
  18. By: Margherita Russo; Josh Whitford
    Abstract: Industrial districts – and especially industrial districts in Italy – have been put forth as a model of economic development premised on the deep rooting of firms in a local socio-economic system that is both rich in skills and tied into international flows of goods and knowledge. But there is also a sense today that those districts are in transformation, that globalization has put them “on the move.” This has led some to question whether a model that is becoming many models can still in fact be a model. In this paper, we use a study of the Modenese mechanical district – an archetypical industrial district – to examine this “movement.” We argue that when properly understood the Italian districts do still offer lessons that are generalizable to other regional economies. We show that the district in question is changing, and show in particular that there has been a rise to prominence in the district of relatively small multinational firms. These are changes that are not atypical of industrial districts in Italy. We argue that a deeper look at just how the districts are changing makes clear that this rise to prominence has not severed these firms’ ties to smaller firms in the district. Rather, they have drawn upon those relations for essential support both on production and innovation. We also show also that there is a cognizance of this fact in the district, evidenced in efforts to recreate private regional institutions consistent with a district structure “on the move.” Drawing on our these findings, and on a theoretical approach that holds that productive systems in industrial districts are constituted by the multiplicity of interactions between firms, we conclude that changes in the district in question require also changes in the institutions that sustain those interactions, including especially the emergence of “new public spaces” and new “scaffolding structures.” Using the concrete example of a company created to foster collaborative technology transfer among its owner-members, we discuss the nature of the public spaces and scaffolding structures attuned to the needs of a more vertical and fragmented open district structure. We finally consider implications for public policies supporting innovation.
    Keywords: Innovation policy; local development policies; regional development policies; evaluation management
    JEL: D78 O31 O32 O38 R58
    Date: 2009–07

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