nep-ino New Economics Papers
on Innovation
Issue of 2010‒01‒23
twenty-six papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. The role of patents and licenses in securing external finance for innovation By Harhoff, Dietmar
  2. R&D and Innovation Empirical Analysis for Tunisian Firms By EL ELJ, Moez
  3. The R&D-patent relationship: An industry perspective By Danguy, Jérôme; de Rassenfosse, Gaétan; van Pottelsberghe de la Potterie, Bruno
  4. Do Sources of Knowledge Transfer Matter? – A Firm-level Analysis in the PRD, China By Wan-Hsin LIU
  5. Licensing a common value innovation when signaling strength may backfire By Cuihong Fan; Byoung Heon Jun; Elmar Wolfstetter
  6. Emergent and declining themes in the Economics and Management of Innovation scientific area over the past three decades By Aurora A.C. Teixeira; José Miguel Silva
  7. Profit Taxation, Innovation and the Financing of Heterogeneous Firms By Christian Keuschnigg; Evelyn Ribi
  8. Financing technology transfer By Darcy, Jacques; Krämer-Eis, Helmut; Guellec, Dominique; Debande, Olivier
  9. Innovation and economic growth By Uppenberg, Kristian
  10. The virtue of industry-science collaborations By Czarnitzki, Dirk
  11. Measuring the Returns to R&D By Bronwyn H. Hall; Jacques Mairesse; Pierre Mohnen
  12. Auctioning Process Innovations when Losers’ Bids Determine Royalty Rates By Cuihong Fan; Byoung Heon Jun; Elmar Wolfstetter
  13. The financing of innovative firms By Hall, Bronwyn H.
  14. Pre-Emptive Patenting: Securing Market Exclusion and Freedom of Operation By Dominique Guellec; Catalina Martinez; Maria Pluvia Zuniga
  15. Business R&D expenditure and capital in Europe By Helmers, Christian; Schulte, Christian; Strauss, Hubert
  16. The Emerging Patent Marketplace By OECD
  17. Identifying the intellectual scientific basis of the Economics and Management of Innovation Management area By José Miguel Silva; Aurora A.C. Teixeira
  18. Academia-Industry Linkages and the Role of Active Innovation Policies – Firm-level Evidence in Hong Kong By Wan-Hsin LIU
  19. Competition and Economic Growth: a Critical Survey of the Theoretical Literature By Scopelliti, Alessandro Diego
  20. A policy to boost R&D: Does the R&D tax credit work? By Ientile, Damien; Mairesse, Jacques
  21. Growth and Firm Dynamics with Horizontal and Vertical R&D By Pedro Rui Mazeda Gil; Paulo Brito; Óscar Afonso
  22. Outsourcing and Technological Change By Bartel, Ann P.; Lach, Saul; Sicherman, Nachum
  23. Technology frontier, labor productivity and economic growth: Evidence from OECD countries By Théophile T. Azomahou; Bity Diene; Mbaye Diene
  24. R&D capital and economic growth: The empirical evidence By Mc Morrow, Kieran; Röger, Werner
  25. The role of design in upgrading within Global Value Chains. Evidence from Italy By Marco Bettiol; Maria Chiarvesio; Stefano Micelli
  26. Development, organization and management of techno-economic networks: the Cuban biotech sector and vaccine industry By Jens Plahte

  1. By: Harhoff, Dietmar (Ludwig-Maximilians-Universität Munich)
    Abstract: Financing constraints have been discussed as a major obstacle to innovation. Small and medium-sized enterprises and start-ups are particularly concerned by such impediments. Venture capital has emerged as a partial solution in some countries, but is only available for start-up firms with major growth potential. Recently, new intermediaries have attempted to provide external finance to innovative firms based on the firms’ patent portfolios. Patents have been used as collateral or as assets assembled in patent funds seeking to commercialize the patent rights. Patent auctions are indicative of a nascent market for patented technology. This paper presents an overview on the role of patents and licenses, both in the classical sense and as instruments for financing innovation. It also discusses implications of these developments for public policy and the design of patent systems.
    Keywords: entrepreneurship; intellectual property; equity; innovation; finance; venture capital; R&D; financing constraints; funding gaps
    JEL: G24 G32 L20 L26 O30 O32 O34 O38
    Date: 2009–12–23
  2. By: EL ELJ, Moez
    Abstract: In the context of economic globalization and of the internationalization of R&D activity, innovation is becoming one of the most important assets for corporations in developed and emerging countries as well. The aim of this research is to analyze the main determinants of technological innovation of Tunisian firms on the basis of the innovation survey conducted by Tunisian Ministry of Scientific Research, Technology and Skills Development in 2005. Precisely, we analyze the effects of the external technological factors and In house R&D effort variables on innovation performances of Tunisian firms. We, then attempt to explore these relationships and see if they are affected by other moderator variables linked to exportation intensity and foreign capital share. In our estimation, we utilize the binomial logit model. Our preliminary results show that R&D activity is not the only explanatory factor of the innovation. In addition, Tunisian firms with high export ratio as well as firms with significant foreign capital participation are found to be not innovating since they depend primarily on the innovations conducted abroad.
    Keywords: Technological Innovation; Technological opportunities; R&D in Developing Countries; Logit Regression with Interactive variables
    JEL: O55 O33 O31 C25
    Date: 2009–10–24
  3. By: Danguy, Jérôme (Solvay Brussels School of Economics and Management); de Rassenfosse, Gaétan (Solvay Brussels School of Economics and Management); van Pottelsberghe de la Potterie, Bruno (Solvay Brussels School of Economics and Management)
    Abstract: This paper re-visits the empirical failure to establish a clear link between R&D efforts and patent counts at the industry level. It is claimed that the “propensity-to-patent” concept should be split into an “appropriability propensity” and a “strategic propensity”. The empirical contribution is based on a unique panel dataset composed of 18 industries in 19 countries over 19 years. The results confirm that the R&D-patent relationship is affected by research productivity, appropriability propensity and strategic propensity factors. The observed increase in the propensity to file for patents is much stronger for supranational (that is, triadic or regional) patents than for priority filings, suggesting that the current patent hype is essentially the result of a globalization phenomenon.
    Keywords: Propensity to patent; strategic propensity; appropriability; research productivity
    JEL: O34 O38 P14
    Date: 2010–01–13
  4. By: Wan-Hsin LIU
    Abstract: This paper investigates whether knowledge transferred from different sources matter differently for carrying out different innovation outcomes, using a firm-level dataset collected in the Pearl River Delta (PRD) in China. It also investigates whether companies in the PRD in China tend to innovate in a similar way as companies in the Asian Newly Industrialised Economies (NIEs) did decades ago. Our estimation results suggest that companies in the PRD, as companies in the Asian NIEs, strongly rely on sourcing from their OEM customers but not on own R&D activities to implement innovative processes to increase production efficiency. In contrast, they engage in own R&D activities in order to develop innovative products, to realise higher innovation sales and to create new knowledge qualified for patenting. In addition to own R&D activities, they rely on sourcing knowledge from different sets of sources to support them to carry out the last three types of innovation outcomes
    Keywords: innovation, knowledge transfer, knowledge production function, flying geese model, China
    JEL: O1 O3 R1
    Date: 2009–12
  5. By: Cuihong Fan (Shanghai University of Finance and Economics); Byoung Heon Jun; Elmar Wolfstetter (Humboldt University at Berlin)
    Abstract: This paper reconsiders the licensing of a common value innovation to a downstream duopoly, assuming a dual licensing scheme that combines a first-price license auction with royalty contracts for losers. Prior to bidding firms observe imperfect signals of the expected cost reduction; after the auction the winning bid is made public. Bidders may signal strength to their rivals through aggressive bidding, which may however backfire and mislead the innovator to set an excessively high royalty rate. We provide sufficient conditions for existence of monotone bidding strategies and for the profitability of combining auctions and royalty contracts for losers.
    Keywords: Patents, licensing, auctions, royalty, innovation, R&D, mechanism design.
    JEL: D21 D43 D44 D45
    Date: 2010–01
  6. By: Aurora A.C. Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC Porto); José Miguel Silva (MIETE, Faculdade de Engenharia, Universidade do Porto)
    Abstract: A literature survey covers the state-of-the-art of a certain investigation field and is a critical evaluation that can help define new research and facilitate the understanding of the area by new researchers of that scientific field. Although there are already some excellent attempts to provide a survey in the Economics and Management of Innovation area, these are in general qualitative. Using bibliometric tools, which help to explore, organize and analyze large amounts of information, we characterize, in a quantitative way, the published literature in innovation area. Based on the 1047 abstracts of the articles published between 1974 and 2007 in the innovation area’s ‘seed journal’ we observed that the themes that have grown the most in recent years were “Open innovation, Copyrights, Intellectual Property Rights, Open Software”, “University-Industry Relations and Transfer of Technology and Knowledge”, and “Entrepreneurship, Incubation, Spin-offs and Entrepreneurial Universities”. In contrast, themes such as “Learning and Experimentation, Troubleshooting”, “Development of new Products, Processes, Markets, Organizational”, “Cooperation in R&D+I”, “Multinational/International trade in the process of innovation”, and “Management Policy of Science and Technology “, noted a marked decline.
    Keywords: Survey; Innovation; Bibliometrics
    Date: 2010–01
  7. By: Christian Keuschnigg; Evelyn Ribi
    Abstract: Credit constraints are more frequent among growth companies with large investment opportunities. For the same reason, profit taxes may harm innovative firms more than standard ones. This paper develops a model of heterogeneous firms where an endogenous share opts for innovation and faces credit constraints in the subsequent expansion phase. We emphasize four results: (i) R&D subsidies not only encourage innovation but also relax finance constraints and help innovative firms to exploit investment opportunities to a larger extent. (ii) Taxes which are neutral in a neoclassical world, still restrict expansion investment of constrained firms by reducing free cash-flow and thereby discourage innovation. (iii) A revenue neutral increase in profit taxes to finance larger R&D subsidies redistributes towards innovative firms and boosts aggregate productivity and welfare. (iv) A revenue neutral tax cut cum base broadening policy similarly boosts innovation and welfare
    Keywords: Profit taxes, R&D subsidies, innovation, investment, credit constraints
    JEL: G32 G38 H25
    Date: 2010–01
  8. By: Darcy, Jacques (European Investment Fund); Krämer-Eis, Helmut (European Investment Fund); Guellec, Dominique (Organisation for Economic Co-operation and Development); Debande, Olivier (European Investment Bank)
    Abstract: Global policy discussions increasingly focus on innovation and the knowledge economy as a driver of long-term growth. In parallel new forms of innovation processes are emerging, notably open innovation and innovation networks stressing the importance of connections between various stakeholders. Links between universities and the business sector are of particular importance as many inventions come out of universities but have to be further developed to become economically relevant innovations. New financing instruments and attracting private investors to technology transfer (TT) are necessary but difficult as the patterns of risk and information in this “in-between area” is complex: Technology is not basic anymore and it requires large amounts of capital to be scaled up – with uncertain market prospects. This paper addresses new financial instruments for TT, building on European Investment Fund’s experience in this field.
    Keywords: Technology Transfer; Financing; Innovation; Commercialisation; Funding gap; Patents; Licensing; Intellectual Property
    JEL: O30 O31 O32 O34
    Date: 2009–12–23
  9. By: Uppenberg, Kristian (European Investment Bank, Economic and Financial Studies)
    Abstract: The literature on economic growth has identified knowledge expansion as a key propellant. Early research derived this conclusion from the residual that remained after the growth contributions from capital and labour had been accounted for. Later modifications expanded the concept of fixed capital to include intangible capital. The underlying drivers of innovation have, meanwhile, been explored by the endogenous growth literature. Together, these efforts have reconfirmed the role of knowledge and innovation in growth. But they also point to the importance of competition and firm entry and exit as key motivators for firms to innovate. Policies aiming to boost growth must therefore look beyond the amounts invested in R&D and also provide for wellfunctioning labour, product and financial markets.
    Keywords: Research and development; innovation; neoclassical growth model; endogenous growth
    JEL: O30 O40
    Date: 2009–12–23
  10. By: Czarnitzki, Dirk (KU Leuven)
    Abstract: This article analyzes the potential benefits of industry-science collaborations for samples of Flemish and German firms. A firm collaborating with science may benefit from knowledge spillovers and public subsidies as industry-science collaborations are often granted preferred treatment. I shed light on the potential spillover and subsidy effects by estimating treatment effect models using nearest neighbour matching techniques. For both countries, I find positive effects on business R&D. Firms that engage in industry-science collaborations invest more in R&D compared to the counterfactual situation where they would not collaborate with science. Furthermore, within the sample of firms collaborating with science, a subsidy for that collaboration leads, on average, to higher R&D in the involved firms. Thus there is no full crowding-out of subsidies targeted to science-industry collaborations.
    Keywords: R&D; industry-science collaboration; subsidies; treatment effects estimation
    JEL: O31 O32 O38
    Date: 2009–12–23
  11. By: Bronwyn H. Hall; Jacques Mairesse; Pierre Mohnen
    Abstract: We review the econometric literature on measuring the returns to R&D. The theoretical frameworks that have been used are outlined, followed by an extensive discussion of measurement and econometric issues that arise when estimating the models. We then provide a series of tables summarizing the major results that have been obtained and conclude with a presentation of R&D spillover returns measurement. In general, the private returns to R&D are strongly positive and somewhat higher than those for ordinary capital, while the social returns are even higher, although variable and imprecisely measured in many cases. <P>Nous faisons un survol de la littérature économétrique qui mesure les rendements de la recherche-développement. Nous esquissons les modèles théoriques sousjacents et nous discutons en détail les problèmes de mesure et d’économétrie qui se posent quand il s’agit d’estimer ces modèles. Ensuite, nous présentons une série de tableaux qui résument les principaux résultats qui ont été obtenus et nous finissons par une discussion des mesures d’externalité de la recherche. En général, les rendements privés de la recherche sont positifs et légèrement plus élevés que ceux de l’investissement en capital physique et les taux de rendement sociaux de la R-D sont encore plus élevés, mais fragiles et imprécis.
    Keywords: returns to R&D, innovation, social returns, spillovers, rendements de la R&D, innovation, rendements sociaux, externalités
    Date: 2010–01–01
  12. By: Cuihong Fan (Shanghai University of Finance and Economics); Byoung Heon Jun; Elmar Wolfstetter (Humboldt University at Berlin)
    Abstract: We consider a licensing mechanism for process innovations that combines a license auction with royalty contracts to those who lose the auction. Firms’ bids are dual signals of their cost reductions: the winning bid signals the own cost reduction to rival oligopolists, whereas the losing bid influences the beliefs of the innovator who uses that information to set the royalty rate. We derive conditions for existence of a separating equilibrium, explain why a sufficiently high reserve price is essential for such an equilibrium, and show that the innovator generally benefits from the proposed mechanism.
    Keywords: Patents, licensing, auctions, royalty, innovation, R&D, mechanism design.
    JEL: D21 D43 D44 D45
    Date: 2010–01
  13. By: Hall, Bronwyn H. (University of California-Berkeley)
    Abstract: To what extent are new and/or innovative firms fundamentally different from established firms, and therefore require a different form of financing? The theoretical background for this proposition is presented, and the empirical evidence on its importance is reviewed. Owing to the intangible nature of their investment, asymmetric-information and moral-hazard, these firms are more likely to be financed by equity than debt and behave in some cases as though they are cash-constrained, especially if they are small. Recognising the role for public policy in this area, many countries have implemented specific policies to bring the cost of financing innovation more in line with the level that would prevail in the absence of market failures.
    Keywords: R&D; innovation; financing; liquidity constraints; venture capital
    JEL: G24 G32 O32 O38
    Date: 2009–12–23
  14. By: Dominique Guellec; Catalina Martinez; Maria Pluvia Zuniga
    Abstract: We investigate statistically the characteristics, functioning and incidence of pre-emptive patenting, defined as patent filings whose main effect is to hamper the grant of other patents. Patent applications can be used to prevent the grant of exclusive rights on markets and technologies to others in order to ensure freedom of operation to their holder or keep patent-less competitors out of the market. Combining data from examination outcomes and prior art at the European Patent Office (EPO), we develop a methodology to identify pre-emptive patent applications. We find evidence of pre-emption associated to patent applications cited as compromising patentability while being deemed non inventive. Furthermore, amongst them, those which are withdrawn by the applicant have the strongest pre-emptive power. The coincidence of low inventiveness and high pre-emptive impact supports the idea that some of these patents may be strategically designed by their applicants to block patenting by others.<BR>Nous analysons statistiquement les caractéristiques, le fonctionnement et les effets des brevets préemptifs, définis comme des (demandes de) brevets dont l’effet principal est d’empêcher la délivrance d’autres brevets. Les demandes de brevets peuvent être utilisées pour empêcher la délivrance de droits exclusifs à d’autres parties sur des marchés et des technologies en vue d’assurer la liberté de manœuvre à leur titulaire ou de maintenir des compétiteurs sans brevets à l’écart du marché. Combinant des données du résultat de l’examen et de l’art antérieur de l’Office Européen des Brevets (OEB), nous développons une méthodologie qui identifie les demandes préemptives de brevets. Nous trouvons des évidences de préemption pour des demandes de brevets citées comme compromettant la brevetabilité d’autres demandes alors qu’elles ne sont pas elles-mêmes jugés inventives. De plus parmi elles, celles qui sont abandonnées par le demandeur lui-même ont le pouvoir préemptif le plus fort. La coïncidence de faible inventivité et de pouvoir préemptif fort suggère que certaines de ces demandes de brevets sont stratégiquement conçues par leur titulaire en vue de bloquer la prise de brevet par d’autres.
    Keywords: blocking patents, citations, offensive and defensive patenting, patents, pre-emptive patenting
    JEL: C25 C51 K41 L00 L20
    Date: 2009–12–30
  15. By: Helmers, Christian (University of Oxford); Schulte, Christian (Ludwig-Maximilians-Universität München); Strauss, Hubert (European Investment Bank, Economic and Financial Studies)
    Abstract: This study presents new estimates of business R&D capital stocks for 22 countries at the aggregate and industry levels. At 9 percent of GDP, the EU business R&D capital stock falls short of its US and Japanese counterparts. Within the EU, R&D capital stocks are much lower in the southern and the new member states, reflecting large and persistent disparities in R&D expenditure. There was hardly any convergence over the past decade. The R&D capital stock is concentrated on three technologyintensive manufacturing industries and is positively correlated with growth in total factor productivity across countries and industries. Finally, the ratios between the stocks of R&D capital and tangible capital suggest marked differences in how R&D and tangible capital are combined in production.
    Keywords: R&D capital stock; R&D expenditure; tangible capital stock; R&D intensity; high-tech manufacturing
    JEL: E22 L60 O30 O47
    Date: 2009–12–23
  16. By: OECD
    Abstract: Facilitating the mobilisation, sharing, or exchange of patents is increasingly important to promote innovation in this globalised and well-networked world, where the circulation of ideas and technologies is essential to innovation. In the context of open innovation, patents are expected to play a role as a means for transferring ideas and technologies from one entity to another, in addition to acting as a means for excluding others from using companies’ own ideas and technologies. In such a situation, a variety of new entities focusing on patent-related transactions are emerging. Some IP specialist firms seek to monetise patents by creating strategic patent portfolios and licensing them. Others provide websites to establish online marketplaces where patents and ideas could be traded. And still others establish a co-operative venture that buys and licenses patents to its members for defensive purpose. They also include IP investment banks that will lend against the value of IP, and firms that seek to create funds, similar to mutual funds, which allow investors to earn revenue from royalties. These new players now could significantly influence the circulation of patents. It would be important for governments to deepen their understanding of how these new players are performing in the patent transaction markets in order to support their development in the most socially beneficial directions. This may also be important for traditional technology-oriented companies, since the effective use of patent transaction markets will help them improve their innovation process and strengthen their competitiveness. Therefore, analysis of the functions, business models, and activities of IP specialist firms is the central topic of this research.<P>Le nouveau marché des brevets<BR>De plus en plus, il est important de faciliter la mobilisation, le partage ou l’échange de brevets pour promouvoir l’innovation dans ce monde globalisé et très interconnecté où la circulation des idées et des technologies est essentielle pour l’innovation. Dans l’optique de l’innovation ouverte, les brevets devraient jouer un rôle en tant que moyen de transfert d’idées et de technologies d’une entité à l’autre, tout en servant à empêcher que d’autres utilisent les idées et technologies appartenant aux entreprises. Dans ces conditions, il apparaît actuellement diverses entités nouvelles dont l’activité est axée sur les transactions relatives aux brevets. Certaines entreprises spécialisées en PI cherchent à monétiser des brevets en créant des portefeuilles de brevets stratégiques et en concédant les licences d’exploitation qui s’y rattachent. D’autres s’emploient à mettre en place sur des sites Web des marchés en ligne où les brevets et les idées pourraient faire l’objet d’échanges. D’autres encore constituent des coopératives qui achètent des brevets et cèdent les licences d’exploitation à leurs membres à des fins défensives. On voit aussi se créer des banques d’investissement spécialisées dans la PI, qui octroient des prêts en utilisant la valeur de la PI comme garantie, et des entreprises qui cherchent à créer des fonds, comparables à des fonds communs de placement, permettant aux investisseurs de tirer des revenus des redevances. Ces nouveaux acteurs pourraient exercer désormais une puissante influence sur la circulation des brevets. Il importe, pour les pouvoirs publics, de mieux connaître les comportements de ces nouveaux acteurs sur les marchés où s’opèrent les transactions sur les brevets afin de pouvoir favoriser un essor de ces marchés tendant vers ce qui sera optimal pour la collectivité. Il peut être important aussi pour les entreprises classiques à vocation technologique de bien appréhender ces évolutions, car l’utilisation des marchés des transactions concernant les brevets les aidera à améliorer leur processus d’innovation et à renforcer leur compétitivité. L’analyse des fonctions, des modèles économiques et des activités des entreprises spécialisées en PI constitue donc le thème central de cette recherche.
    Keywords: innovation, IP market, IP, patent licence, patents, technology market, brevets, innovation, licence de brevet, marché de la PI, marché des technologies, PI
    Date: 2009–12–22
  17. By: José Miguel Silva (MIETE, Faculdade de Engenharia, Universidade do Porto); Aurora A.C. Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC Porto)
    Abstract: Last decades observed a considerable increase of literature devoted to innovation-related studies. This area is characterized by fruitful interdisciplinary and there is not a single discipline that embraces all aspects of innovation. From the analysis of nearly 60.000 references, included in the 1442 articles published in the area’ seed journal, we concluded that the Economics and Management of Innovation discipline presents a lower degree of autonomy as its dependency upon broader and core scientific areas such as Economics is rather high - about a third of the references were made to articles published in top (mainstream) journals of Economics. Nevertheless, the apparent large dependency on the mainstream, the most influential authors are associated with heterodox approaches, namely the evolutionary approach (e.g., Richard R. Nelson) and the European approach to innovation (e.g., Keith Pavitt and Chris Freeman).
    Keywords: State-of-the-art; Innovation; Bibliometrics
    Date: 2010–01
  18. By: Wan-Hsin LIU
    Abstract: This paper analyses academia-industry linkages of the Hong Kong (HK) electronics small- and medium-sized enterprises (SMEs) and investigates the role of active innovation policies in this regard. It uses data collected from a questionnaire survey in HK, focusing on three main academia-industry linkages: academic institutions as training bases, as innovation sources and as innovation partners for companies. Our analysis results show that HK companies tend to rely on hiring highly-qualified labour trained by academic institutions to gain access to advanced academic knowledge. In contrast, they do not yet perceive academic institutions as important sources or partners for their innovation activities; however, their willingness to do so seems to be positively affected by the active innovation policies on site
    Keywords: academia-industry linkage, innovation policy, Hong Kong, China
    JEL: L60 O31 O38 R10
    Date: 2009–12
  19. By: Scopelliti, Alessandro Diego
    Abstract: The paper examines the relationship between competition and economic growth, in the theoretical framework described by endogenous growth models, but with a specific interest in the policy implications. In this perspective, the key issue in the debate can be presented as follows: do competition policies always create the best conditions for promoting innovation and growth? Or do they also produce some disincentives for the investment decisions in R&D, such to limit the development of industries with higher innovation? In order to answer these questions, the paper presents a survey of the theoretical literature on competition and growth and it discusses the main models of endogenous growth, both the ones based on horizontal innovation, such as Romer (1990) or Rivera-Batiz and Romer (1991), and the ones based on vertical innovation, like Aghion and Howitt (1992) or Aghion, Dewatripont and Rey (1997). In particular, specific attention is paid to the most recent models of Schumpeterian growth, which show the existence of a non-linear relationship between competition and growth, by considering either the initial degree of competition (Aghion, Blundell, Bloom, Griffith and Howitt, 2005) or the distance from the technological frontier. (Acemoglu, Aghion and Zilibotti, 2006). Finally, the review of the previous models of endogenous growth allows to draw some conclusions about further and possible developments of research on the relation between product market competition and economic growth.
    Keywords: expanding product varieties; increasing product quality; incentives for innovation; creative destruction; escape-competition effect; distance to frontier
    JEL: O41 O34 O33 O31
    Date: 2009–12–10
  20. By: Ientile, Damien (Paris School of Economics); Mairesse, Jacques (CREST (Paris) & University of Maastricht)
    Abstract: In this article we address various issues raised by the evaluation of the R&D tax credit policy. We first consider the studies that estimate the direct effects of the tax credit on R&D inputs. We discuss results obtained through different approaches and methods and show that they give a contrasted picture of the policy’s effectiveness. Next we argue that a comprehensive evaluation of the R&D tax credit should include other outcomes and present studies focussing on them. We also initiate a very tentative meta-analysis to obtain a more synthetic view on the various evaluation results. We finally conclude that harmonization and increased comparability in evaluation studies would be useful to bridge the gab between evaluation and policy design and implementation.
    Keywords: R&D; R&D tax credit; R&D capital; capital use cost; evaluation; meta-analysis
    JEL: H25 H32 O32
    Date: 2009–12–23
  21. By: Pedro Rui Mazeda Gil (CEF.UP and Faculdade de Economia, Universidade do Porto); Paulo Brito (Instituto Superior de Economia e Gestão and UECE, Universidade Técnica de Lisboa); Óscar Afonso (CEF.UP and Faculdade de Economia, Universidade do Porto)
    Abstract: This paper develops a tournament model of horizontal and vertical R&D under a lab-equipment specification. A key feature is that the overall growth rate is endogenous, as the splitting of the growth rate between the intensive and the extensive margin is itself endogenous. This setup gives rise to strong inter-R&D composition effects, while making economic growth and firm dynamics closely related, both along the balanced-growth path and transition. The model hence offers a (qualitative) explanation for the negative or insignificant empirical correlation between aggregate R&D intensity and both firm size and economic growth, a well-known puzzle in the growth literature.
    Keywords: endogenous growth, vertical and horizontal R&D, firm dynamics, transitional dynamics
    JEL: O41 D43 L16
    Date: 2010–01
  22. By: Bartel, Ann P. (Columbia University); Lach, Saul (Hebrew University, Jerusalem); Sicherman, Nachum (Columbia University)
    Abstract: We present a dynamic model where the probability of outsourcing production is increasing in the firm’s expectation of technological change. As the pace of innovations in production technologies increases, the less time the firm has to amortize the sunk costs associated with purchasing and adopting new technologies to produce in-house. Therefore, purchasing from market suppliers, who can afford to use the latest technology, becomes relatively cheaper. The predictions of the model are tested using a panel dataset on Spanish firms for the time period 1990 through 2002. In order to address potential endogeneity problems, we use an exogenous proxy for technological change, namely the number of patents granted by the U.S. patent office classified by technological class. We map the technological classes to the Spanish industrial sectors in which the patents are used and provide causal evidence of the impact of expected technological change on the likelihood and extent of production outsourcing. No prior study has been able to provide such causal evidence. Our results are robust to the inclusion of detailed characteristics of the firms as well as firm fixed effects.
    Keywords: outsourcing, technological change
    JEL: J21 L23 L24 O33
    Date: 2009–12
  23. By: Théophile T. Azomahou; Bity Diene; Mbaye Diene (CREA, University of Luxembourg)
    Abstract: We use 29 OECD countries data spanning over 1960-2000 to study the growth strategy when countries are close to the technology frontier. Relying on a semi-parametric generalized additive model, we estimate labor productivity equations. We find that the number of agents enrolled in higher education is a determinant of growth. Moreover, when a country is sufficiently near the technology frontier thanks to an increasing R&D expenditure, it becomes optimal to invest in fundamental research, since after a short period of efficiency, business R&D can no longer ensure the transition toward the technology frontier, while higher education presents the opposite shape. These findings support the main assertion of Aghion and Cohen (2004) that countries which are near the technology frontier have to invest in higher education while those far away from the frontier make their technology level growing up by investing in primary and secondary schooling.
    JEL: I23 J24 O40
    Date: 2009
  24. By: Mc Morrow, Kieran (European Commission); Röger, Werner (European Commission)
    Abstract: This paper reviews the empirical literature on rates of return on R&D and interprets the economic significance of these estimates using a semi-endogenous growth model with a calibrated knowledge production sector. We analyse how R&D subsidies, a reduction of entry barriers for start-ups and increasing high-skilled labour would contribute towards raising productivity and knowledge investment in the EU. The simulation results show that substantial efforts will have to be made if Europe wants to come close to achieving the Lisbon productivity and knowledge-investment targets. Achieving US standards in all three areas would reduce the productivity gap by about 50 percent. Improving the quality of tertiary education and increasing competition in non-manufacturing sectors would also help the EU to get to the productivity frontier.
    Keywords: Productivity differences; endogenous growth; R&D; DSGE models
    JEL: E10 O20 O30 O41
    Date: 2009–12–23
  25. By: Marco Bettiol (University of Padova); Maria Chiarvesio (University of Udine); Stefano Micelli (University of Venice)
    Abstract: The concept of upgrading plays an important role within the global value chain (GVC) theoretical framework (Gereffi et al. 2005). The globalization of supply chains and the presence in the market of low cost producers coming from emergent economies pose serious threats for business that based their competitive advantages on efficiency and manufacturing. Although the literature gathered important results in highlighting the economic impact of upgrading, little research has been done on how design is used as a strategic tool for product innovation within the firm (Ravasi and Lojacono 2005) and how it improves the capability of the firm to upgrade within global value chain. This paper aims at shedding light on the evolution of the role of design in the firm's strategy and value creation. We decide to focus our research on Italian Small and Medium firms (SMEs), with a special interest on those coming from Italian Industrial Districts. The aim of this paper is twofold: a) to study how design is evolving within leading firms and which are the implications of this changes in terms of knowledge creation and sharing, b) to analyse and investigate the relation between design and company's performance. To this end, the authors have assessed the data collected by TeDIS survey, which for over a decade has studied the evolution of Italian small and medium-sized enterprises. The results highlight two particularly significant issues: a) medium-sized companies have a clearer design strategy than in the past and there is a gradual convergence between innovation models based on technology and those based on aesthetics; b) the capacity to invest in a more structured design function enables companies to achieve positive results in terms of both growth and of income generation within global value chains.
    Keywords: Upgrading, Global Value Chain, Industrial Design, Industrial Districts, Small and Medium Firms, Italy
    Date: 2010–01
  26. By: Jens Plahte (Centre for Technology, Innovation and Culture, University of Oslo)
    Abstract: This paper, the second out of two about the Cuban biotech sector and vaccine industry, gives an account of the creation, organization, and management mechanisms of the technoeconomic networks of the Cuban biotech sector and vaccine industry, by applying the concept of techno-economic evaluations developed by Michel Callon. It also seeks to explain the apparent paradox about shifting the emphasis of the biotech sector from that of targeting a ‘modern’ disease pattern to that of a’ traditional’ one that was identified in the first paper. Centralized and participatory decision making processes seem to facilitate close coordination and cooperation between the different research and development centers. The paper also inquires into the relation between the biotech sector and the national System for Science and Technological Innovation.
    Keywords: Innovation systems, techno-economic networks, Cuba, vaccines, biotechnology
    Date: 2010–01

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