nep-ino New Economics Papers
on Innovation
Issue of 2010‒04‒04
nineteen papers chosen by
Steffen Lippert
Massey University Department of Commerce

  1. The Supply Side of Innovation: H-1B Visa Reforms and US Ethnic Invention By William Kerr; William Lincoln
  2. Communities, Knowledge, and Innovation: Indian Immigrants in the US Semiconductor Industry By Paul Almeida; Anupama Phene; Sali Li
  3. The Impact of Foreign Acquisitions on the Investors‘ R&D Activities – Firm-level Evidence By Joel Stiebale
  4. Catching Up to the Technology Frontier: The Dichotomy between Innovation and Imitation By Madsen, Jakob; Islam, Md Rabiul; Ang, James
  5. Optimal research and development expenditure: a general equilibrium approach By Galo Nuño
  6. The periphery paradox in innovation policy: Latin America and Eastern Europe Compared By Rainer Kattel; Annalisa Primi
  7. Innovation and the Elasticity of Trade Volumes to Tariff Reductions By Rubini, Loris
  8. The geography and co-location of European technology-specific co-inventorship networks By Christ, Julian P.
  9. Cluster Sustainability in Peripheral Regions: A case study on Israel´s and Finland´s biotechnology industries By Shiri M. Breznitz; Antti-Jussi Tahvanainen
  10. Corporate governance and innovation: an organizational perspective By Belloc, Filippo
  11. Introduction to Intellectual Property Rights, Software Protection & Development in the South Mediterranean Countries By Driouchi, Ahmed; Zouag, Nada
  12. Structural Change, Innovation and Growth in the Single EU Market By Paul J.J. Welfens; Dora Borbély
  13. Adaptation, Mitigation and “Green” R&D to Combat Global Climate Change. Insights From an Empirical Integrated Assessment Exercise By Francesco Bosello
  14. Financial System and Innovations: Determinants of Early Stage Venture Capital in Europe By Christian Schröder
  15. The financial crisis and the future of innovation: A view of technical change with the aid of history By Carlota Perez
  16. The valuation of N-phased investment projects under jump-diffusion processes By R. Andergassen; L. Sereno
  17. Quality Ladders, Competition and Endogenous Growth By Michele Boldrin; David K Levine
  18. Digital Rights Management, Intellectual Property Rights Protection and Economic development: The case of digital piracy in the South Mediterranean countries By Driouchi, Ahmed; Kadiri, Molk; Alaoui Belghiti, Moulay Abdelaziz
  19. Windows of technological opportunity: do technological booms influence the relationship between firm size and innovativeness? By Degner, Harald

  1. By: William Kerr; William Lincoln
    Abstract: This study evaluates the impact of high-skilled immigrants on US technology formation. We use reduced-form specifications that exploit large changes in the H-1B visa program. Higher H-1B admissions increase immigrant science and engineering (SE) employment and patenting by inventors with Indian and Chinese names in cities and firms dependent upon the program relative to their peers. Most specifications find limited effects for native SE employment or patenting. We are able to rule out displacement effects, and small crowding-in effects may exist. Total SE employment and invention increases with higher admissions primarily through direct contributions of immigrants.
    Keywords: Innovation, Research and Development, Patents, Scientists, Engineers, Inventors, H-1B, Immigration, Ethnicity, India, China, Endogenous Growth
    JEL: F15 F22 J44 J61 O31
    Date: 2010–02–01
  2. By: Paul Almeida (Georgetown University); Anupama Phene (George Washington University); Sali Li (University of Wisconsin, Milwaukee)
    Abstract: This paper investigates the influence of technological, geographic, and ethnic communities on the innovativeness of Indian inventors. We study Indian inventors in the semiconductor industry in the US and examine their patenting profiles between 1975 and 1999 to identify the influences on the quantity and quality of their innovations. We find that inventors who rely on knowledge from technological and geographic communities enhance their innovativeness. Knowledge from the ethnic Indian community is related to inventor innovativeness in the form of an inverted U. The negative effect of knowledge gained from the ethnic community on innovativeness is pronounced for experienced inventors.
    Keywords: innovation, knowledge, semiconductor industry
    JEL: M0 M1
    Date: 2010–03–24
  3. By: Joel Stiebale
    Abstract: This paper provides empirical evidence on the relationship between cross-border acquisitions and innovation activities at the fi rm level. In contrast to previous studies that analyze the eff ects on innovation in target fi rms, this paper investigates the eff ects on the investing fi rms. For the empirical analysis a unique fi rm-level data set is constructed that combines survey data for German fi rms with a merger and acquisition database. After a cross-border acquisition, investing fi rms display a higher rate of domestic expenditures for research and development. After controlling for endogeneity of foreign acquisitions by estimating a two-equation system with limited dependent variables and applying instrument variable techniques it is found that part of this correlation stems from a causal eff ect. The estimated eff ects are robust towards alternative identifi cation strategies and are higher in industries with high knowledge intensity. The analysis is complemented by an investigation of the eff ects on tangible investment spending and by a comparison of the eff ects of cross-border acquisitions to those of Greenfi eld foreign direct investments and domestic M&As.
    Keywords: Multinational enterprises; mergers and acquisitions; innovation
    JEL: D21 F23 G34 C31 O31 O33
    Date: 2010–01
  4. By: Madsen, Jakob; Islam, Md Rabiul; Ang, James
    Abstract: Using data for 55 developing and developed countries, this research examines the roles of technology transfer, research intensity, educational attainment and the ability to absorb foreign technology in explaining cross-country differences in productivity growth. The results show that innovation is an important factor for growth in OECD countries whereas growth in developing countries is driven by imitation. Furthermore the interaction between educational attainment and the distance to the frontier is a significant determinant of growth in the overall sample.
    Keywords: R&D; endogenous growth theory; absorptive capacity
    JEL: O30 O40
    Date: 2010
  5. By: Galo Nuño (Banco de España)
    Abstract: How much should be spent in research and development (R&D)? How should R&D vary over the business cycle? In this paper we answer both questions in the context of a calibrated dynamic general equilibrium model with Schumpeterian endogenous growth. Firstly, we demonstrate that, although the existence of distortions in a decentralized economy produces underinvestment in R&D, a simple proportional subsidy to R&D spending alone cannot restore the first best allocation. The optimal proportional R&D subsidy attains a second best allocation in which R&D spending exceeds its first best level. Secondly, we show how the observed procyclicality of R&D is socially inefficient. However, the welfare loss due to this dynamic inefficiency is much smaller than the loss due to underinvestment in R&D.
    Keywords: Schumpeterian growth, technology adoption, optimal subsidy
    JEL: E32 O38 O40
    Date: 2010–03
  6. By: Rainer Kattel; Annalisa Primi
    Abstract: In this paper we are interested in analyzing the dynamics of the innovation policy in non-frontier countries, and their relationship with structural change and development.
    Date: 2010–03
  7. By: Rubini, Loris
    Abstract: I study the implications of endogenous productivity choices ("innovation") on the effects of trade liberalization. I find that a model with innovation generates an elasticity of trade volumes to tariff reductions that is fifty percent larger than models without innovation, and consistent in magnitude to empirical estimates. To show this, I develop a new model of international trade with innovation, and calibrate it to data on Canada and the United States before the Free Trade Agreement. Feeding into the calibrated model the tariff drop that resulted from the agreement, the increase in the trade volumes is similar to that observed in the data. Without innovation, the change in trade volumes is considerably lower, and similar in magnitude to what existing models without innovation have found.
    Keywords: innovation; trade liberalization; trade elasticity; international trade
    JEL: F12 F41 O31
    Date: 2009–12–17
  8. By: Christ, Julian P.
    Abstract: This paper contributes with empirical findings to European co-inventorship location and geographical coincidence of co-patenting networks. Based on EPO co-patenting information for the reference period 2000-2004, we analyze the spatial con figuration of 44 technology-specific co-inventorship networks. European co-inventorship (co-patenting) activity is spatially linked to 1259 European NUTS3 units (EU25+CH+NO) and their NUTS1 regions by inventor location. We extract 7.135.117 EPO co-patenting linkages from our own relational database that makes use of the OECD RegPAT (2009) files. The matching between International Patent Classification (IPC) subclasses and 44 technology fields is based on the ISI-SPRU-OST-concordance. We con firm the hypothesis that the 44 co-inventorship networks differ in their overall size (nodes, linkages, self-loops) and that they are dominated by similar groupings of regions. The paper offers statistical evidence for the presence of highly localized European co-inventorship networks for all 44 technology fields, as the majority of linkages between NUTS3 units (counties and districts) are within the same NUTS1 regions. Accordingly, our findings helps to understand general presence of positive spatial autocorrelation in regional patent data. Our analysis explicitly accounts for different network centrality measures (betweenness, degree, eigenvector). Spearman rank correlation coefficients for all 44 technology fields confirm that most co-patenting networks co-locate in those regions that are central in several technology-specific co-patenting networks. These findings support the hypothesis that leading European regions are indeed multi- filed network nodes and that most research collaboration is taking place in dense co-patenting networks. --
    Keywords: Co-patenting,co-inventorship,networks,linkages,co-location,RegPAT
    JEL: C8 O31 O33 R12
    Date: 2010
  9. By: Shiri M. Breznitz; Antti-Jussi Tahvanainen
    Abstract: Even with globalization, industrial clusters are maintaining their importance in today’s economy. With the decomposition of production we find that clusters are becoming focused on specific industries and stages of production. This paper analyzes two peripheral western countries, Finland and Israel, which saw success in their ICT clusters and wanted to duplicate this success building on their knowledge in the life science industry to create biotechnology clusters. This paper focuses on two innovation-based clusters, the bio¬technology agglomerations in Rehovot, Israel, and Helsinki, Finland. These industrial districts consist of companies, many spun out of university research, that are either devoted to early-stage R&D (Israel), or choose to conduct the entire business cycle (Finland). Utilizing a multi-method study that includes both quantitative and qualitative research, with a series of in-depth interviews and site visits, archival and statistical data, the paper investigates whether a cluster of young research companies can become the basis of industrial growth and bring economic sustainability to a region. We find that while the firms’ strategic choices regarding their focus on certain positions in the value chain do not necessarily have any direct implications on the sustainability of the respective clusters as such, a variety of other characteristics necessary for long-term sustainability are missing in both clusters. These include particularly inter-firm knowledge flows within the clusters, an active and demanding VC market, connections to international expertise, and opportunities to recruit experienced expertise.
    Keywords: clusters, biotechnology, peripheral regions, sustainability
    Date: 2010–03–24
  10. By: Belloc, Filippo
    Abstract: Traditional economic studies of innovation, built on the contribution of Schumpeter, cannot explain why firms of the same size and market power can show largely different innovation performances. Contrastingly, the literature on corporate governance provides some useful insights for understanding corporate innovation activity, to the extent that such literature examines the economic consequences of different modes of coordination between firm participants. The process through which individuals integrate their human and physical resources within the firm is indeed central to the dynamic of corporate innovation. This paper provides the first survey of the literature on this issue. We start by discussing why a theory of the firm must be put at the base of an economic analysis of corporate innovation. We then describe three main channels – corporate ownership, corporate finance and labour – through which a system of corporate governance shapes firm innovation activity. Finally, we examine the recent literature on national structures of governance.
    Keywords: corporate governance; innovation; theory of the firm; specific investments
    JEL: D23 O16 G30 O31
    Date: 2010–01–10
  11. By: Driouchi, Ahmed; Zouag, Nada
    Abstract: This paper looks at the role of intellectual property rights in development in the context of South Mediterranean countries. A special focus is placed on software piracy data and analysis to assess the current losses implied by the practices of non compliance with IPRs. Descriptive and regression analyzes are used to show the links between piracy, economic losses and development. The results show how the strengthening of domestic institutions may not mean only applying “the law” and pursuing legally the non compliant. But it means the inclusion of the all players into the process of development. Further research and development besides optimal IPR protection appear to be necessary. The inclusion of the informal sector is then an important part of this enterprise. This requires policies of formalization besides mobilization of knowledge and intellectual property rights among the informal producers and traders.
    Keywords: Intellectual property rights; software piracy; development; South Mediterranean countries.
    JEL: O34
    Date: 2009–06–25
  12. By: Paul J.J. Welfens (EUropäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)); Dora Borbély (EUropäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: An analysis of structural change along its main dimensions (relative goods and factor prices, shifts in sectoral output and employment shares, and the respective contributions of process and product innovation) is first presented. Next, capital mobility is introduced as well as Sinn's controversial characterization of the large German trade surplus against the backdrop of the increase in international outsourcing. The authors then flesh out the model to show that growth, at least in the medium term, hinges on both demand and supply-side dynamics, with the structure of output and the intensity of trade contributing to growth. Finally, in this exegesis on structural change, innovation, and growth, some dynamic Schumpeterian considerations are offered. The bottom line is that the ability of firms from EU15 countries to rely on imported intermediate products from EU accession countries is the basis for gaining competitiveness in both the global economy and vis-à-vis the United States. It enables them to become more price competitive while restructuring domestic outsourcing in the EU15, making it more focused on producing technologically advanced intermediate products than heretofore. A detailed set of empirical regularities are investigated along two main dimensions: innovation traits and structural change, and Sinn's bazaar effect. International competitiveness is evaluated on the basis of revealed comparative advantage indicators (RCAs) and export unit values (EUVs).
    Keywords: Open Economy Macroeconomics, Innovation Dynamics, Structural Change
    JEL: F41 F43 O33
    Date: 2009–08
  13. By: Francesco Bosello (University of Milan, Fondazione Eni Enrico Mattei and Euromediterranean Center on Climate Change (CMCC))
    Abstract: This work develops a framework for the analysis at the macro-level of the relationship between adaptation and mitigation policies. The FEEM-RICE growth model with stock pollution, endogenous R&D investment and emission abatement is enriched with a planned-adaptation module where a defensive capital stock is built through adaptation investment. Within this framework the optimal path of planned adaptation, the optimal inter and intra temporal mix between adaptation, mitigation and investment in R&D, and the sensitivity of a strategy to each other is identified. The major conclusions of this research show that adaptation, mitigation and R&D are strategic complements as all concur together to the solution of the climate change problem; nonetheless the possibility to adapt reduces the need to mitigate and partly crowds out other forms of investment like those in R&D. The optimal intertemporal distribution of strategies is also described: it requires to anticipate mitigation effort that should start already when climate damages are low and postpone adaptation intervention until they are substantial. Thus the possibility to adapt is not a justification to delay abatement activities. A sensitivity analysis demonstrates the robustness of these results to different parameterizations, in particular to changes in expected climate-change damages and in the discount rates.
    Keywords: Climate Change Impacts, Mitigation, Adaptation, Integrated Assessment
    JEL: Q25 Q28
    Date: 2010–02
  14. By: Christian Schröder (EUropäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: This paper highlights the role of financial development in producing innovative products and services. Venture Capitalists (VCs) seem to play a crucial role in achieving product and service innovation. Young entrepreneurs particularly face the problem of financial constraints if starting their business, and risk capital could be their sole solution. However, the level of early-stage venture capital (VC) investments across European countries differ profoundly. I employ a panel analysis to illustrate whether technical and innovative opportunities as well as entrepreneurial environment influence early-stage venture capital investments. In addition, I emphasize the role of the financial system in attracting early stage VC. The empirical analysis was conducted in 15 European countries and looked at the period from 1995 to 2005. The results show that technical and innovation opportunities as well as entrepreneurial environment influence the level of early-stage risk capital. Taking the financial system also into account, the analysis revealed that a bank-based system has a negative impact on the relative amount of early stage VC investments, as a market-based system attracts risk capital for young entrepreneurs. Assumedly, venture capital and debt provided by banks are found not to be complements but rather substitutes.
    Keywords: Early Stage Venture Capital, Risk Capital, Financial System, Financing Innovations
    JEL: G23
    Date: 2009–10
  15. By: Carlota Perez
    Abstract: This essay locates the current financial crisis and its consequences in a historical context. It briefly outlines the difference in patterns of innovation between the first two or three decades of each technological revolution .regularly ending in a major financial collapse. and the next two or three decades of diffusion, until maturity is reached. With this historical experience in mind, the essay discusses the opportunity space for innovation across the production spectrum taking into account the specificity of the Information and Communications Technology (ICT) paradigm and the increasing social and environmental pressures in the context of a global economy. Finally, there is a brief look at the sorts of institutional innovations that would be required to provide adequate finance to take full advantage of those opportunities.
    Date: 2010–02
  16. By: R. Andergassen; L. Sereno
    Abstract: In this paper we consider N-phased investment opportunities where the time evolution of the project value follows a jump-diffusion process. An explicit valuation formula is derived under two different scenarios: in the first case we consider fixed and certain investment costs and in the second case we consider cost uncertainty and assume that investment costs follow a jump-diffusion process
    JEL: G12 G13 G30 C60
    Date: 2010–03
  17. By: Michele Boldrin; David K Levine
    Date: 2010–03–23
  18. By: Driouchi, Ahmed; Kadiri, Molk; Alaoui Belghiti, Moulay Abdelaziz
    Abstract: Abstract: The potential benefits that could be gained from information technologies in South Mediterranean economies are constrained by both DRM and institutional protection related to Intellectual Property Rights. But, pervasive piracy can appear to be a major obstacle to access these benefits. This paper through a simplified theoretical decision model attempts to suggest foundations to reveal levels of protection rates. This is followed by an empirical assessment of the likely effects of different macroeconomic variables in the context of selected South Mediterranean countries using software piracy data and the protection rates derived from the above model. This is intended to reveal the most important variables that drive software protection. The results attained show how protection should be strengthened through further investments in knowledge and through openness to foreign direct investments that lead to superior economic outcomes.
    Keywords: Key words: DRM; Information and communication technologies; piracy; South Mediterranean economies.
    JEL: O17
    Date: 2010–03–24
  19. By: Degner, Harald
    Abstract: Many papers have been written about the effect of firm size on innovativeness, revealing a positive, a negative or a mixed impact. To this day, the so-called Schumpeterian hypothesis of the above-average innovativeness of large firms has been neither confirmed nor rejected, often because of insufficient data or a too-short observation period. Many studies concentrate only on a specific region or a specific sector, or they analyze a very short time period. Windows of technological opportunities, providing technological booms for both firms and sectors, have not yet been investigated. An analysis of Germany’s chemical, metal and electronic-engineering sectors between 1877 and 1932 reveals that the sector-specific long-term relationship between firm size and innovativeness is negative, except during times of specific technological booms. In combination with firm-specific characteristics, this new aspect can contribute to a better understanding of the long-term relationship between firm size and innovativeness. --
    Keywords: Effect of firm size on innovativeness,technological boom,Schumpeterian hypothesis
    Date: 2010

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