nep-ino New Economics Papers
on Innovation
Issue of 2010‒01‒16
twenty-one papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. Patent Protection with Cooperative R&D Option By Che, Xiaogang; Yang, Yibai
  2. Knowledge spillovers in U.S. patents: a dynamic patent intensity model with secret common innovation factors By Szabolcs Blazsek; ALvaro Escribano
  3. Tax Incentives and R&D Activity: Firm-Level Evidence from Taiwan By Chia-Hui Huang; Chih-Hai Yang
  4. Does Intellectual Monopoly Help Innovation By Michele Boldrin; David K Levine
  5. Patterns of innovatin networking in Dutch small firms By Jeroen de Jong; Willem Hulsink
  6. Recovering the Sunk Costs of R&D: the Moulds Industry Case By Carlos Daniel Santos
  7. R&D-intensive SMEs in Europe:What do we know about them? By Raquel Ortega-Argilés; Lesley Potters; Peter Voigt
  8. Patents, Entrepreneurship and Performance By Christian Helmers; Mark Rogers
  9. The Nature of Inventive Activities : Evidence from a Data-Set of R&D Awards By Fontana, Roberto; Nuvolari, Alessandro; Shimizu, Hiroshi; Vezzulli, Andrea
  10. The dominance of fee licensing contracts under asymmetric information signaling By Manel Antelo
  11. Corporate R&D and Firm Efficiency: Evidence from Europe’s Top R&D Investors By Kumbhakar, Subal C.; Ortega-Argilés, Raquel; Potters, Lesley; Vivarelli, Marco; Voigt, Peter
  12. How Does Innovation Affect Worker Well-being? By Erling Barth; Alex Bryson; Harald Dale-Olsen
  13. User-producer relations, innovation and the evolution of market structures under alternative contractual regimes By Franco Malerba; Luigi Orsenigo
  14. Technological Leadership and Persistence of Monopoly under Endogenous Entry: Static versus Dynamic Analysis By Eugen Kovac; Viatcheslav Vinogradov; Krešimir Žigiæ
  15. A Discrete Model for Patent Valuation By Roy Cerqueti; Marco Ventura
  16. Submarket Dynamics and Innovation: The Case of the U.S. Tire Industry By Guido Buenstorf; Steven Klepper
  17. Organizational Innovation in the Manufacturing Sector and the Knowledge Intensive Business Services By Makó, Csaba; Csizmadia, Péter; Illéssy, Miklós; Iwasaki, Ichiro; Szanyi, Miklós
  18. Innovation, Income Distribution, and Product Variety By Rainer Vosskamp
  19. Using Cyber-enabled Transaction Data to Study Productivity and Innovation in Organizations By Carol Corrado; Julia Lane
  20. Knowledge Spillover on Complex Networks By KONNO Tomohiko
  21. Studying Innovation in Businesses: New Research Possibilities By Nicholas Greenia; Kaye Husbands Fealing; Julia Lane

  1. By: Che, Xiaogang; Yang, Yibai
    Abstract: We investigate R&D incentive under patent protection with cooperation option. Chowdhury [Economics Letters, 2005, 89(1), 120-126] claims that patent protection may decrease R&D incentive when the tournament effect (TE) is negative. However, We show that patent protection in the presence of R&D cooperation option always increases R&D incentive. In addition, to increase R&D incentive, this option strictly dominates imitation and may dominate royalty licensing under patent protection, introduced by Mukherjee [Economics Letters, 2006, 93(2), 196-201].
    Keywords: R&D investment; Patent protection; Cooperative R&D
    JEL: O38 O34 O32
    Date: 2009–12–19
  2. By: Szabolcs Blazsek; ALvaro Escribano
    Abstract: During the past two decades, innovations protected by patents have played a key role in business strategies. This fact enhanced studies of the determinants of patents and the impact of patents on innovation and competitive advantage. Sustaining competitive advantages is as important as creating them. Patents help sustaining competivite advantages by increasing the production cost of competitors, by signaling a better quality of products and by serving as barriers to entry. If patents are rewards for innovation, more R&D should be reflected in more patents applications but this is not the end of the story. There is empirical evidence showing that patents through time are becoming easier to get and more valuable to the firm due to increasing damage awards from infringers. These facts question the constant and static nature of the relationship between R&D and patents. Furthermore, innovation creates important knowledge spillovers due to its imperfect appropriability. Our paper investigates these dynamic effects using U.S. patent data from 1979 to 2000 with alternative model specifications for patent counts. We introduce a general dynamic count panel data model with dynamic observable and unobservable spillovers, which encompasses previous models, is able to control for the endogeneity of R&D and therefore can be consistently estimated by maximum likelihood. Apart from allowing for firm specific fixed and random effects, we introduce a common unobserved component, or secret stock of knowledge, that affects differently the propensity to patent of each firm across sectors due to their different absorptive capacity.
    Keywords: Point process, Conditional intensity, Latent factor, R&D spillovers, Patents, Secret innovations
    JEL: C15 C31 C32 C33 C41
    Date: 2009–12
  3. By: Chia-Hui Huang; Chih-Hai Yang
    Abstract: This paper investigates the effect of tax incentives on R&D activities in Taiwanese manufacturing firms. Specifically, we assess the potential R&D-enhancing effect on recipients of R&D tax credits compared with their non-recipient counterparts. Moreover, the potential difference in the R&D-enhancing effect between high-tech and non-high-tech firms is also examined. Utilizing a firm-level panel dataset during 2001 and 2005, empirical results obtained by propensity score matching show that recipients of R&D tax credits appear on average to have 93.53% higher R&D expenditures and a 14.47% higher growth rate for R&D expenditures than non-recipients with similar characteristics. The R&D-enhancing effect of R&D tax credits is not found to be particularly relevant to high-tech or non-high-tech firms. We further employ a generalized method of moment (GMM) of the panel fixed model to control for the endogeneity of R&D tax credits and firm heterogeneity in determining R&D expenditure. Various estimates based on the entire sample and high-tech-firms are quite similar and there is a significantly R&D-enhancing effect of R&D tax credits. This result suggests that the R&D preferential policy has induced more R&D expenditure by firms in Taiwan. While the existence of the R&D-enhancing effect brought on by tax incentives is intuitive, the estimates can provide insightful implications for the R&D tax policy.
    Keywords: R&D, Tax, Propensity Score Matching
    JEL: H25 H32 K34 O32 O38
    Date: 2009–12
  4. By: Michele Boldrin; David K Levine
    Date: 2009–12–25
  5. By: Jeroen de Jong; Willem Hulsink
    Abstract: Small firms may rely on a variety of network partners, and in various roles, to identify and exploit opportunities for innovation. This paper adds to the literature on innovation networking by developing a typology at the level of innovation objects, rather than at the firm or industry level.  
    Date: 2010–01–05
  6. By: Carlos Daniel Santos
    Abstract: Sunk costs for R&D are an important determinant of the level of innovation in the economy.In this paper I recover them using a Markov equilibrium framework. The contribution istwofold. First, a model of industry dynamics which accounts for selection into R&D, capitalaccumulation and entry/exit is proposed. The industry state is summarized by an aggregatestate with the advantage that it avoids the "curse of dimensionality". Second, the estimatedsunk costs of R&D for the Portuguese moulds industry are shown to be important (3.4 millionEuros). They become particularly relevant since the industry is mostly populated by smallfirms. Institutional changes in the early 1990s generated an increase in demand fromEuropean car makers and created the incentives for firms to pay the costs of investment.Trade-induced innovation reinforced the selection effect by which international trade leads toproductivity growth. Finally, using the estimated parameters, simulations evaluate the effectsof changes in market size, sunk costs and entry costs.
    Keywords: Aggregate state, industry dynamics, Markov equilibrium, moulds industry, R&D,structural estimation, sunk costs
    JEL: C61 D21 D92 L11 L22 O31
    Date: 2009–11
  7. By: Raquel Ortega-Argilés (JRC-IPTS); Lesley Potters (JRC-IPTS); Peter Voigt (JRC-IPTS)
    Abstract: The importance of SMEs in Europe’s innovation process can be seen in both the academic and the political arena. Adopted in June 2008, the ‘Small Business Act’ for Europe reflects the Commission’s political will to recognise the central role of SMEs in the EU economy and was the first to put in place a comprehensive SME policy framework for the EU and its Member States. One of its main aims is to promote growth among SMEs by helping them to tackle problems that hamper their development. This kind of policy calls for a more in-depth look into the nature of the SME population in Europe. Several attempts have been made in recent years to draw taxonomies of firms, but mostly they do not control for size effects within the defined groups of firms. The purpose of this paper is to typify different groups of R&D-intensive SMEs distinguished according to their inputs into the innovation process. In particular, we draw attention to SMEs that contribute the most to the industrial R&D investment in the EU. To do so, we run a cluster analysis on a sample of top European R&D SME investors based on a unique dataset made up of the different waves of the European R&D Investment Scoreboard. The results show that several clusters of R&D-intensive SMEs can be defined by certain characteristics, but that the diversity between clusters calls for a more careful understanding before developing measures to support European R&D-intensive SMEs. For companies labelled as ‘corporate laboratories’ according to the cluster analysis, it would be legitimate to question support for R&D, as these firms do not seem to have significant problems in finding investors that believe in their business model. On the other hand, e.g. the ‘Gazelles’ do in fact grow, but struggle with the high capital investment needed to become and remain large. In this case, it seems it would be more effective to focus on the weaknesses (physical expansion) of these firms rather than supporting their strengths (knowledge, R&D).
    Keywords: SMEs; innovation inputs; cluster analysis
    JEL: O33
    Date: 2009–12
  8. By: Christian Helmers; Mark Rogers
    Abstract: This paper provides an overview of a new database that uses intellectual property data to track the innovative activity of firms in the UK. The paper looks at the extent and nature of patenting activity, focusing on micro firms and SMEs. Over the period 2000 to 2007, SME patenting has increased whereas large firm patenting has fallen and micro firm patenting has been roughly con- stant. Most micro and SMEs patent while relatively young (aged ten or less) and this tendency is becoming more pronounced over time. The paper provides a descriptive analysis on micro firms and SMEs that become high growth firms (defined as having greater than 20 percent growth per annum). Overall, 28.0 percent of young micro and SMEs achieve high growth (over 2002 to 2007). In comparison, 29.4 percent of young micro or SMEs that patent achieve high growth. This difference is much greater for firms in the high-tech industries. Moreover, the analysis shows that due to the skewed nature of the firm-level growth distribution, standard conditional mean estimators may fail to uncover important differences in the association between patenting and firm growth across the conditional growth distribution.
    Keywords: Firm growth, patents
    JEL: L25 O12
    Date: 2009–12
  9. By: Fontana, Roberto; Nuvolari, Alessandro; Shimizu, Hiroshi; Vezzulli, Andrea
    Abstract: This paper presents an exploratory study on the characteristics of inventive activities as captured on the basis of the analysis of a data-set of R&D awards. Our data source is the "R&D 100 Awards" competition organized by the journal Research and Development. Since 1963, the magazine (which at that time was called Industrial Research) has been awarding this prize to 100 most technologically significant new products available for sale or licensing in the year preceding the judgment. The jury is composed of university professors, industrial researchers and consultants with a certified level of competence in the specific areas they are called to asses. The main criteria for assessment are: i) technological significance (i.e., whether the product can be considered a major breakthrough), ii) competitive significance (i.e., how the product compares to rival solutions available on the market). Throughout the years, key breakthroughs inventions such as Polacolor film (1963), the flashcube (1965), the automated teller machine (1973), the halogen lamp (1974), the fax machine (1975), the liquid crystal display (1980), the printer (1986), the Kodak Photo CD (1991), the Nicoderm antismoking patch (1992), Taxol anticancer drug (1993), lab on a chip (1996), and HDTV (1998) have received the prize. We use these data to study the shifts in the distribution of innovative activities across countries, sectors and types of institutions and the changes in the sources of inventive activities over time. Our preliminary findings show: i) the emergence of a challenge to US technological leadership from other rival nations such as Japan and Germany, ii) the critical role of scientific instrumentation as a powerful source of technological breakthroughs, iii) a change in the institutional arrangements where innovative activities take place, from individual corporations, to partnerships increasingly involving public research organizations and universities, iv) a large chunk of inventive activities undertaken without patent protection.
    JEL: O34 O31 O32 N80
    Date: 2009–12
  10. By: Manel Antelo (Universidad de Santiago de Compostela)
    Abstract: This paper compares different licensing contracts defined by the type of payment (fees or royalties) and contract duration (short- or long-term) in a setting in which an outside patent holder that owns a patented innovation lasting for two periods licenses it to downstream Cournot firms; further, there is asymmetric information about firms' costs emerged from the use of innovation, but they are signaled through the output produced in period 1. In this context, if we concentrate on fee contracts, the patent holder prefers short-term (revealing) contracts rather than long-term contracts.
    Keywords: Licensing, signaling, fees, royalties, short- and long-term contracts, welfare
    JEL: D45
    Date: 2009
  11. By: Kumbhakar, Subal C. (Binghamton University, New York); Ortega-Argilés, Raquel (European Commission); Potters, Lesley (Utrecht School of Economics); Vivarelli, Marco (Università Cattolica del Sacro Cuore); Voigt, Peter (European Commission)
    Abstract: The main objective of this study is to investigate the impact of corporate R&D activities on firms' performance, measured by labour productivity. To this end, the stochastic frontier technique is applied, basing the analysis on a unique unbalanced longitudinal dataset consisting of 532 top European R&D investors over the period 2000–2005. R&D stocks are considered as pivotal input in order to control for their particular contribution to firm-level efficiency. Conceptually, the study quantifies the technical inefficiency of a given company and tests empirically whether R&D activities could explain the distance from the efficient boundary of the production possibility set, i.e. the production frontier. From a policy perspective, the results of this study suggest that – if the aim is to leverage companies' productivity – emphasis should be put on supporting corporate R&D in high-tech sectors and, to some extent, in medium-tech sectors. By contrast, supporting corporate R&D in the low-tech sector turns out to have a minor effect. Instead, encouraging investment in fixed assets appears vital for the productivity of low-tech industries. However, with regard to firms' technical efficiency, R&D matters for all industries (unlike capital intensity). Hence, the allocation of support for corporate R&D seems to be as important as its overall increase and an 'erga omnes' approach across all sectors appears inappropriate.
    Keywords: corporate R&D, productivity, technical efficiency, stochastic frontier analysis
    JEL: L2 O3
    Date: 2009–12
  12. By: Erling Barth; Alex Bryson; Harald Dale-Olsen
    Abstract: We explore the effects of management innovations on worker well-being using private sectorlinked employer-employee data for Britain. We find management innovations are associated withlower worker well-being and lower job satisfaction, an effect which becomes more pronouncedwhen we account for the endogeneity of innovation. This is the case for three different countmeasures of innovation - a global measure of innovation and measures for labour innovationsand capital innovations. The effects are ameliorated when workers are covered by a collectivebargaining agreement.
    Keywords: innovation, well-being, job satisfaction, trade unions
    JEL: J28 J51 J81 L23
    Date: 2009–10
  13. By: Franco Malerba (KITeS, Bocconi Univerity - Milan - Italy); Luigi Orsenigo (Università degli Studi di Brescia and KITeS, Bocconi Univerity - Milan - Italy)
    Date: 2009–12
  14. By: Eugen Kovac; Viatcheslav Vinogradov; Krešimir Žigiæ
    Abstract: We build a dynamic oligopoly model with endogenous entry in which a particular firm (leader) invests in an innovation process, facing the subsequent entry of other firms (followers). We identify conditions that make it optimal for the leader in the initial oligopoly situation to undertake pre-emptive R&D investment (strategic predation) eventually resulting in the elimination of all followers. Compared to a static model, the dynamic one provides new insights into the leader’s intertemporal investment choice, its optimal decision making, and the dynamics of the market structure over time. We also contrast the leader’s investment decisions with those of the social planner.
    Keywords: Dynamic oligopoly, endogenous entry, persistence of monopoly, strategic predation, accommodation.
    JEL: L12 L13 L41
    Date: 2009–12
  15. By: Roy Cerqueti (University of Macerata, Italy. Department of Economic and Financial Institutions); Marco Ventura (ISAE - Institute for Studies and Economic Analyses)
    Abstract: This article evaluates patents in a stochastic discrete time framework following the real options approach. By modeling the dynamics of the underlying as a spatial point process both size and time of the jumps can be treated as random variables. The propagation of the jumps from the underlying security to the patent value is not restricted to be immediate, but can occur with a random delay and with varying intensity, depending on the time to maturity. These actual features lead to a more generalized formula for patent value, that in turn may give rise to a non trivial difference in patent value, not accounted for in the existing literature.
    Keywords: patent value; spatial mixed Poisson process; real options.
    JEL: O34 C65
    Date: 2009–12
  16. By: Guido Buenstorf; Steven Klepper
    Abstract: Beginning in 1922, the rate of exit of U.S. tire producers increased sharply and the industry began a severe and protracted shakeout. Just five years earlier, the tire industry experienced a surge in entry that led to a rise of over 80% in the number of producers. We propose an explanation for this episode based on the idea of industry submarkets, which we incorporate in a model of shakeouts. We test this theory and alternative explanations for the surge in entry and exit and the shakeout using a novel data set on patenting in tires and production in the early 1920s of the cord tire, a key innovation we feature in our theory. Our analysis suggests that the development of a new submarket can open up opportunities for entry but also stimulate innovation and in the process reinforce the advantages of the leading incumbents, accentuating the shakeout of producers.
    Keywords: Submarkets, Innovation, Shakeouts Length 31 pages
    JEL: L65 R12 R30
    Date: 2009–12
  17. By: Makó, Csaba; Csizmadia, Péter; Illéssy, Miklós; Iwasaki, Ichiro; Szanyi, Miklós
    Date: 2009–10
  18. By: Rainer Vosskamp (University of Kassel, Institute of Economics, D-34109 Kassel)
    Abstract: On the basis of a modification of K. Lancaster's characteristics approach and a special class of non-homothetic utility functions individual demand functions are derived. Individual demand is determined in a complex way by the income as well as the product qualities and the unit costs of the offered products. It becomes clear that product innovations (changes in product quality), process innovations (changes of unit costs) and changes in personal income distribution (e. g. due to income taxation and redistribution) all influence product variety in a very different way.
    Keywords: innovation, income distribution, product variety, Lancaster's characteristics approach
    JEL: L0 D1 O0
    Date: 2009
  19. By: Carol Corrado; Julia Lane
    Abstract: This paper draws on recent research in a wide variety of disciplines to identify the key elements necessary to build an empirical infrastructure that will advance research on one of the key building blocks of science and innovation policy: organizations. We argue that cyber-tools and new data will permit researchers to examine the innovation process |both successes and failures| and explore business performance and business dynamics at the level of the appropriate economic entity. We develop a roadmap that outlines how the new data can be developed, from harvesting the web to direct observation from deep within companies. The paper identifies a set of research questions and an approach whose pursuit could be used to develop a national research data infrastructure for the study of innovation and organizational performance. One key element of the approach is to identify and study innovation processes within organizations by collecting data on inputs and outcomes of innovation projects (or initiatives) within organizations. Another is the collection of representative data by business function/processes across firms, a proven statistical and economic approach (Sturgeon et al. 2006, Brown 2008, Lewin et al 2008). Finally, we argue that the work to develop new data from deep within firms should involve the participation of computer and information scientists. Opportunities for quasi experimental approaches to data collection, and noninvasive techniques to harvest data from within firms (i.e., auto-populating of researcher databases) need to be explored. More generally, the bringing together of scientists to consider business microdata privacy/access and data collection from organizations is itself significant, with potential for creating opportunities in a broad range of applications.
    Date: 2009–12
  20. By: KONNO Tomohiko
    Abstract: Most growth theories have focused on R&D activities. Although R&D significantly influences economic growth, the spillover effect also has a considerable influence. In this paper, we study knowledge spillover among agents by representing it as network structures. The objective of this study is to construct a framework to treat knowledge spillover as a network. We introduce a knowledge spillover equation, solve it analytically to find a workable solution. It has mainly three properties: (1) the growth rate is common for all the agents only if they are linked to the entire network regardless of degrees, (2) the TFP level is proportional to degree, and (3) the growth rate is determined by the underlying network structure. We compare growth rate among representative networks: regular, random, and scale-free networks, and find the growth rate is the greatest in scale-free network. We apply this framework, i.e., knowledge spill over equation, to the problem of firms forming a network endogenously and show how distance and region size affect the economic growth. We also apply the framework to network formation mechanism. The aim of our paper is not just showing results, but in constructing a framework to study spillover by network.
    Date: 2010–01
  21. By: Nicholas Greenia; Kaye Husbands Fealing; Julia Lane
    Abstract: The rapid pace of globalization and technological change has created demand for more and better analysis to answer key policy questions about the role of businesses in innovation. This demand was codified into law in the America COMPETES Act. However, existing business datasets are not adequate to create an empirically based foundation for policy decisions. This paper argues that the existing IRS data infrastructure could be used in a number of ways to respond to the national imperative. It describes the legal framework within which such a response could take place, and outlines the organizational features that would be required to establish an IRS/researcher partnership. It concludes with a discussion of the role for the research policy community.
    Keywords: Business microdata, innovation, confidentiality, researcher access, tax policy
    Date: 2009–12

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