nep-ino New Economics Papers
on Innovation
Issue of 2010‒02‒20
eighteen papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. Differentiation of Innovation Behavior of Manufacturing Firms in the New Member States. Cluster Analysis on Firm-Level Data By Ewa Balcerowicz; Marek Peczkowski; Anna Wziatek-Kubiak
  2. An Empirical investigation of the Determinants of R&D Cooperation By O.A. Carboni
  3. The Innovation Patterns of Firms in Low and High Technology Manufacturing Sectors in the New Member States By Ewa Balcerowicz; Marek Peczkowski; Anna Wziatek-Kubiak
  4. Cold Start for the Green Innovation Machine By Philippe Aghion; Reinhilde Veugelers; Clément Serre
  5. The Job Creation Effect of R&D Expenditures By Bogliacino, Francesco; Vivarelli, Marco
  6. Managing external knowledge flows: The moderating role of absorptive capacity. By Escribano Sáez, Álvaro; Fosfuri, Andrea; Tribó, Josep A.
  7. Generic Utilization Rates, Real Pharmaceutical Prices, and Research and Development Expenditures By Joseph P. Cook; Graeme Hunter; John A. Vernon
  8. A lifeline for Europe's young radical innovators By Reinhilde Veugelers
  9. Innovation, Labour Demand and Wages in Poland. Some Introductory Results Using Micro-macro Data By Mateusz Walewski
  10. No Green Growth Without Innovation By Philippe Aghion; Reinhilde Veugelers; David Hemous
  11. University-Industry Spillovers, Government Funding, and Industrial Consulting By Richard Jensen; Jerry Thursby; Marie C. Thursby
  12. Flexible Labor and Innovation Performance: Evidence from Longitudinal Firm-Level Data By Zhou, H.; Dekker, R.; Kleinknecht, A.
  13. Economic incongruities in the European patent system By Bruno van Pottelsberghe;
  14. Memo to the New Digital Agenda Commissioner By Bruno van Pottelsberghe; Reinhilde Veugelers
  15. Dual Licensing in Open Source Software Markets By Fabio Maria Manenti; Stefano Comino
  16. Reconciling WTP to actual adoption of green energy tariffs: A diffusion model of an induced environmental marke By Ivan Diaz-Rainey; Dionisia Tzavara
  17. Does the market kill bad ideas? An institutional comparision of committees and markets in network industries By Prabal Roy Choudhury; Debadatta Saha
  18. Population, Innovation, Competition and Growth with and without Human Capital Investment By Alberto Bucci

  1. By: Ewa Balcerowicz; Marek Peczkowski; Anna Wziatek-Kubiak
    Abstract: This paper investigates the differences in innovation behaviour, i.e. differences in innovation sources and innovation effects, among manufacturing firms in three NMS: the Czech Republic, Hungary and Poland. It is based on a survey of firms operating in four manufacturing industries: food and beverages, automotive, pharmaceuticals and electronics. The paper takes into account: innovation inputs in enterprises, cooperation among firms in R&D activities, the benefits of cooperation with business partners and innovation effects (innovation outputs and international competitiveness of firms' products and technology) in the three countries. After employing cluster analysis, five types of innovation patterns were detected. The paper characterises and compares these innovation patterns, highlighting differences and similarities. The paper shows that external knowledge plays an important role in innovation activities in NMS firms. The ability to explore cooperation with business partners and the benefits of using external knowledge are determined by in-house innovation activities, notably R&D intensity.
    Keywords: Innovation patterns of firms, strategy of innovation, innovation behaviour, innovation sources, taxonomies of innovative firms, EU new member states
    JEL: L25 O31 O32 O33
    Date: 2009
  2. By: O.A. Carboni
    Abstract: <p>This paper is a contribution to the empirical literature on R&D cooperation. It explores the variables that determine a firm's R&D collaborative expenditure by means of a sample of Italian firms. A tobit model, adjusted for heteroscedasticity and non-normality (Inverse Hyperbolic Sin transformation to the dependent variable), is used to deal with the large number of zero responses. Size, public grants and innovation are found to be effective in determining the level of cooperative R&D expenditure. Absorptive capacity, expressed by the in-house stable R&D effort, also plays an important role. This is in line with the idea that internal R&D is required if a firm is to take advantage of the outcomes of external R&D investment.</p>
    Keywords: Truncated and censored models; R&D cooperation; firm behaviour
    JEL: O32 O31 D21 C24
    Date: 2009
  3. By: Ewa Balcerowicz; Marek Peczkowski; Anna Wziatek-Kubiak
    Abstract: For many years, analysis on innovations focused on high technology industries which were treated as synonymous with high competitiveness and growth. New research on low and medium technology industries has revealed that their growth is also based on innovations, though their sources differ from high technology industries. As the 'catching up' economies of the EU New Member States (NMS) are based on low and medium technology industries, the differences in innovativeness between high and low technology sector firms as well as within each of the sectors can play an important role in the future development of these countries. This paper aims to show the differences in innovation patterns among manufacturing firms operating in low and high technology sectors in the Czech Republic, Hungary and Poland. It is based on a survey of firms which took into account innovation inputs, cooperation among firms in R&D activities, the benefits of cooperation with business partners, innovation outputs and international competitiveness. The sample consisted of 358 firms operating in both low and medium technology industries (food and beverages and automotive) and high technology industries (pharmaceuticals and electronics). After employing cluster analysis, five types of innovation patterns were detected, characterised and compared in firms operating in the low and medium technology (LMT) sectors, and four in the high technology (HT) sector. Differences and similarities in innovation patterns between firms operating in each of the two sectors are discussed. The paper shows that external knowledge plays a crucial role in innovation activities in NMS' firms. The ability to explore cooperation with business partners and the use of external knowledge are more important for the international competitiveness of the NMS' products than in-house innovation resources.
    Keywords: Innovation of firms, Innovation patterns, Innovation sources, Diversification of innovations, Low-tech industries, High-tech industries, EU New Member States
    JEL: L25 O31 O32 O33
    Date: 2009
  4. By: Philippe Aghion; Reinhilde Veugelers; Clément Serre
    Abstract: This Policy Contribution accompanies the Policy Brief, No Green Growth Without Innovation?. Written by Senior Non-Resident Fellow Philippe Aghion, Senior Resident Fellow Reinhilde Veugelers and Researcher Clément Serre, this paper discusses the state of green innovation and goes into more depth in discussing the current problems in the area. Examining research and development, patent, and venture capital data, the authors point out that there is momentum for private investment in green technologies. However, they argue that, thus far, the implicit tax rate on energy in the EU27 is too low and fragmented, the carbon price in the EU Emissions Trading System is too volatile, and the public R&D expenditures dedicated to energy and environment are too low. They conclude that immediate state intervention is necessary, at least at the onset, to ensure that the green innovation machine? gets properly started.
    Date: 2009–11
  5. By: Bogliacino, Francesco (Universidad EAFIT); Vivarelli, Marco (Università Cattolica del Sacro Cuore)
    Abstract: In this study we use a unique database covering 25 manufacturing and service sectors for 16 European countries over the period 1996-2005, for a total of 2,295 observations, and apply GMM-SYS panel estimations of a demand-for-labour equation augmented with technology. We find that R&D expenditures have a job-creating effect, in accordance with the previous theoretical and empirical literature discussed in the paper. Interestingly enough, the labour-friendly nature of R&D emerges in both the flow and the stock specifications. These findings provide further justification for the European Lisbon-Barcelona targets.
    Keywords: technological change, corporate R&D, employment, product innovation, GMM-SYS
    JEL: O33
    Date: 2010–01
  6. By: Escribano Sáez, Álvaro; Fosfuri, Andrea; Tribó, Josep A.
    Abstract: In this paper, we argue that those firms with higher levels of absorptive capacity can manage external knowledge flows more efficiently, and stimulate innovative outcomes. We test this contention with a sample of 2265 Spanish firms, drawn from the Community Innovation Surveys (CIS) for 2000 and 2002, produced by the Spanish National Statistics Institute (INE). We find that absorptive capacity is indeed an important source of competitive advantage, especially in sectors characterized by turbulent knowledge and strong intellectual property rights protection. The implications for management practice and policy are also discussed.
    Keywords: Absorptive capacity; Innovation; External knowledge flows;
    JEL: O32 O33
    Date: 2009–02
  7. By: Joseph P. Cook; Graeme Hunter; John A. Vernon
    Abstract: Generic utilization rates have risen substantially since the enactment of The Drug Price Competition and Patent Term Restoration Act (Hatch-Waxman) in 1984. In the year Hatch-Waxman was enacted, generic utilization rates were 19 percent; in contrast, today, the generic utilization rate is approximately 70 percent. Striking a balance between access to existing medicines and access to yet-to-be-discovered (and developed) drugs, through research incentives, was the principal objective of this landmark legislation. However, given the current rate of generic utilization, it seems plausible, if not likely, that any balance achieved by the 1984 Act has since shifted away from research incentives and towards improved access, ceteris paribus. Among other factors, recent mandatory substitution laws in most states have driven up generic utilization rates. In the current paper, we employ semi-annual data from 1992 to 2008 to examine the link between generic utilization rates and real U.S. prescription drug prices. This link is important because previous research has identified a causal relationship between real drug prices in the U.S. and industry-level R&D investment intensity. We identify a statistically significant, positive relationship between generic utilization rates in the U.S. and real U.S. prescription drug prices. Specifically, we estimate an elasticity of real drug prices to generic utilization rates of -0.15. This finding, when coupled with previous empirical work on the determinants of pharmaceutical R&D intensity, suggests an elasticity of R&D to generic utilization rates of about 0.090. While the magnitude of this elasticity is modest, as theory would predict—the effect of greater generic erosion of brand sales at patent expiration is heavily discounted due to the long time horizon to generic erosion when an R&D project is in clinical development. However, because there has been a very substantial increase in generic utilization rates since 1984, the impact on R&D is nevertheless quite large. We explore this and other issues in the current paper.
    JEL: I11 I18 K0 L0
    Date: 2010–02
  8. By: Reinhilde Veugelers
    Abstract: In this Policy Brief, Reinhilde Veugelers shows that Young Innovative Companies (YICs) in Europe achieve significantly higher innovative sales than other innovation-active firms, representing 36% of sales having market novelties. She also confirms that YICs are more affected by credit constraints than other innovation-active firms. If Europe is to exit the current crisis intact and fulfill its full growth potential in the medium term, the author therefore believes Europe must develop policies and incentives which are tailored to the needs of European young radical innovators.
    Date: 2009–03
  9. By: Mateusz Walewski
    Abstract: There is a large body of literature on the relationship between innovations and employment at the firm level, with most of the results indicating positive effects. Thus far, this kind of analysis has not been performed for Poland and it seems to be an important and interesting field for research. On the other hand, there is some empirical evidence that developments in the Polish labour market are at least partially driven by the Skill Biased Technical Change (SBTC) process. This paper tries to fill in this gap by looking at three dimensions of the relationship between innovations and employment in Poland: innovations and job creation, innovations and the skill structure of employment innovations, and wage formation. The results of the analysis indicate that there is a weak but positive relationship between the level of innovations and the probability of job creation. However, we have not been able to prove that innovations have any effect on the skill structure of labour demand in Poland. We have however found a positive and statistically significant relationship between the level of innovations and skill-biased wage changes. The results indicate that innovations positively influence the wages of skilled workers while they negatively influence the wages of the unskilled.
    Keywords: innovation, employment, wages, Poland
    JEL: J23 J24 J31 O33
    Date: 2009
  10. By: Philippe Aghion; Reinhilde Veugelers; David Hemous
    Abstract: This Policy Brief, co-written by Senior Non-Resident Fellow Philippe Aghion, Senior Resident Fellow Reinhilde Veugelers and David Hemous of Harvard University, attempts to change the terms of the debate surrounding climate change policy. The authors argue that policymakers should do more to encourage innovation and investment in green? research and development rather than focusing solely on the setting of a carbon price. Using a model developed by Aghion in a previous paper, they argue that a carbon price would have to be about 15 times higher in the first five years and 12 times higher in the next five years if innovation is not properly subsidized by governments. The authors also provide several policy recommendations for incentivising this type of green growth? in the private sector.
    Date: 2009–11
  11. By: Richard Jensen; Jerry Thursby; Marie C. Thursby
    Abstract: This paper presents a theoretical model of faculty consulting in the context of government and industry funding for research within the university, which then frames an empirical analysis of the funding and consulting of 458 individual faculty inventors from 8 major US universities. In the theory, firms realize that they free ride on government sponsored research of the faculty they hire as consultants and faculty realize their university research projects indirectly benefit from their firm experience. The model accounts for faculty quality, project characteristics, faculty share of license revenue from university research, and the university's research support. Empirically we find that government research funding is positively related to consulting, independent of faculty quality. We find that government and industry funding for university research are strategic complements as well as evidence of the ability of universities to leverage their research infrastructure to attract research funding.
    JEL: O31 O34 O38
    Date: 2010–02
  12. By: Zhou, H.; Dekker, R.; Kleinknecht, A. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Firms with high shares of workers on fixed-term contracts have significantly higher sales of imitative new products but perform significantly worse on sales of inno¬va¬tive new products (“first on the marketâ€). High functional flexibility in “insider-outsider†la¬bor markets enhances a firm’s new product sales, as do training efforts and highly edu¬ca¬¬ted personnel. We find weak evidence that larger and older firms have higher new pro¬duct sales than do younger and smaller firms. Our findings should be food for thought to eco-nomists making unqualified pleas for the deregulation of labor markets.
    Keywords: J5;M5;O15;O31;innovation performance;new product sales;numerical flexibility;OSA longitudinal dataset;SMEs
    Date: 2010–01–21
  13. By: Bruno van Pottelsberghe;
    Abstract: Bruno van Pottelsberghe and Malwina Mejer argue that the consequences of the fragmentation' of the European patent system are more dramatic than the mere prohibitive costs of maintaining a patent in force in many jurisdictions. The authors first show that heterogeneous national litigation costs, practices and outcome induce a high level of uncertainty. But also that a high degree of managerial complexity results from systemic incongruities due to easier parallel imports', possible time paradoxes' and the de facto paradox of having EU-level competition policy and granting authority, ultimately facing national jurisdictional primacy on patent issues.
    Date: 2009–01
  14. By: Bruno van Pottelsberghe; Reinhilde Veugelers
    Abstract: Senior Resident Fellows Reinhilde Veugelers and Bruno van Pottelsberghe provide recommendations for the term of new Digital Agenda Commissioner Neelie Kroes in this supplement to Bruegel's Memos to the New Commission: Europe's Economic Priorities 2010-2015. They argue that Kroes should move past a focus on infrastructure and concentrate more on ICT's potential to contribute to growth in the European Union. This should include a focus on emerging ICT products and services to helpl foster an ICT single market and more public support for R&D and innovation, through tailored programmes designed to aid high-risk innovative projects conceived by new ICT companies.
    Date: 2010–01
  15. By: Fabio Maria Manenti (University of Padua); Stefano Comino (Università di Udine)
    Abstract: In this paper we present a theoretical model to study the characteristics and the commerciaI sustainability of dual licensing, an open source (OS) business strategy that has gained popularity among software vendors. With dual licensing, a firm releases the same software product under both a traditional proprietary license and an open souree one. We show that the decision to employ a dual licensing strategy occurs whenever the feedbacks of the open souree community are valuable enough compared to the quality of the software that the firm is able to develop in-house. Our analysis points to the centraI role of an appropriate managing of OS licenses in order to balance the pros and cons of "going open source" and to make this versioning strategy viable for software vendors; our analysis also suggests a possible explanation for the observed proliferation of open source licenses.
    Keywords: open source software, open source business models, embedded software, dual licensing, versioning, license proliferation
    JEL: L11 L17 L86 D45
    Date: 2010–01
  16. By: Ivan Diaz-Rainey; Dionisia Tzavara
    Abstract: This paper develops a formal model that links the willingness to pay (WTP) literature with the established innovation diffusion literature. This concern arises from an attempt to reconcile the large disparities that have been observed between actual adoption of green energy tariffs and WTP for such tariffs. These disparities have often been attributed to upward response bias and the free rider problem. However, empirical research indicates that other factors have hindered the development of green energy markets, including supply side problems and poor regulation. Using an epidemic diffusion framework our model shows how increasing consumer environmental concern driven by word of mouth and mass media communication channels results in a growing number of people who state they are WTP for green energy. The presence of upward response bias and the free rider problem result in 'feasible adoption' being below stated WTP. Feasible adoption is, in turn, differentiated from actual adoption by the extent of market imperfections. It is concluded that; (1) the potential of such markets may take time to reap and that the low penetration rates of today may reflect a conventional diffusion trajectory and (2); low and stable energy prices appear to be a precondition if consumers are to contribute substantively to the funding of renewables investments through green tariffs.
    Keywords: Willingness-to-pay, innovation diffusion, green energy, environmental valuation
    Date: 2009–06–26
  17. By: Prabal Roy Choudhury (Indian Statistical Institute, New Delhi); Debadatta Saha (Indian Statistical Institute, New Delhi)
    Abstract: The paper analyzes the problem of protocol coordination between two firms, where one firm has private information about its own protocol. The institutional characteristics of the market and the class of strategies adopted by the firms admit multiple equilibria in the market. Of these, one particular equilibrium has an interior information revelation cutoff for the firm with private information. This demonstrates that the market might not be able to "kill bad ideas", but it does "reward good ideas". In contrast, the institutional design of the committee ensures that the same class of strategies gives rise to a unique equilibrium in the committee, with the informed firm revealing all private information. The committee game results generalize easily to multiple periods as well as to multiple firms and is robust to an exit option. The market game result holds for a certain range of parameter values for multiple firms.
    Keywords: Networks, standardization, coordination, asymmetric information, institutional design
    JEL: L14 L15 D82 D02
    Date: 2009–06
  18. By: Alberto Bucci (University of Milan)
    Abstract: This paper analyzes how population and product market competition may interact with each other in affecting the pace of productivity growth. We find that the impact of a change in population (size/growth) and in the degree of market concentration on economic growth varies depending on the structure of the underlying model economy and, more precisely, depending on the presence of purposeful human (versus physical) capital investment, the type of input used in the uncompetitive sector, the form of households' intertemporal utility and whether product market competition (measured by the elasticity of substitution between differentiated intermediates) is disentangled or not from the input-shares in total income. We also find that only a fully endogenous growth model with purposeful human capital investment at the individual level and a continuum of degrees of inter-generational altruism is simultaneously able to predict an ambiguous link between population and economic growth rates and to display no strong scale effects in economic growth, while keeping the property that positive economic growth is feasible even without any population change. The paper also examines the conditions under which population (size/growth) and product market competition/monopoly power can be complementary factors in economic growth.
    Keywords: Population (size and growth); Endogenous and Semi-endogenous Economic Growth; Human and Physical Capital Investment; Innovation; Scale Effects; Competition,
    Date: 2009–11–26

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