nep-ino New Economics Papers
on Innovation
Issue of 2010‒10‒23
twenty-two papers chosen by
Steffen Lippert
Massey University, Albany

  1. A Tale of Two Growth Engines: The Interactive Effects of Monetary Policy and Intellectual Property Rights By Angus C. Chu; Ching-Chong Lai; Chih-Hsing Liao
  2. Innovation and Productivity - Evidence from Six Latin American Countries By Gustavo Crespi; Pluvia Zuniga
  3. Information Disclosure in Innovation Contests By Thomas Rieck
  4. Unions, Innovation, and Technology Adoption: New insights from the cross-country evidence By Hristos Doucouliagos; Patrice Laroche
  5. Innovation by Entrants and Incumbents By Daron Acemoglu; Dan Vu Cao
  6. Anatomy of Learning-from-Exporting: Role of foreign knowledge acquisition By YASHIRO Naomitsu; HIRANO Daisuke
  7. Competing Engines of Growth: Innovation and Standardization By Daron Acemoglu; Gino Gancia; Fabrizio Zilibotti
  8. Incentive Pay or Windfalls: Remuneration for employee inventions in Japan By ONISHI Koichiro; OWAN Hideo
  9. Cyclical Persistence and the Cyclicality of R&D By Min Ouyang
  10. Regulation, Innovation and Productivity By FRANCISCO MARCOS; JUAN SANTALO
  11. Innovation and competition in EU15: Empirical evidence on the Lisbon Decade and beyond By Ugur, Mehmet; Guner, Umit
  12. Employment Growth from the Small Business Innovation Research Program By Link, Albert; Scott, John
  13. Foreign acquisitions, domestic multinationals, and R&D By Roger Bandick; Holger Görg; Patrik Karpaty
  14. Universities as Research Partners By Hall, Bronwyn; Link, Albert; Scott, John
  15. Is human capital relevant in attracting innovative FDI to China? By Wei Heyuan; Aurora A.C. Teixeira
  16. R\&D-based Growth in the Post-modern Era By Strulik, Holger; Prettner, Klaus; Prskawetz, Alexia
  17. Enhancing Developing Country Access to Eco-Innovation: The Case of Technology Transfer and Climate Change in a Post-2012 Policy Framework By David Ockwell; Jim Watson; Alexandra Mallett; Ruediger Haum; Gordon MacKerron; Anne-Marie Verbeken
  18. Who Do Scientists in Public Research Institutions Cooperate with Private Firms? By David B. Audretsch; Werner Bönte; Stefan Krabel
  20. Anatomy of cluster development in China: The case of health biotech clusters By Conlé, Marcus; Taube, Markus
  21. An Empirical Assessment of Absorptive Capacity Configurations in Supply Chains By ELENA REVILLA
  22. The Impact of Funding on Research Collaboration: Evidence from Argentina By Diego Ubfal; Alessandro Maffioli

  1. By: Angus C. Chu (Shanghai University of Finance and Economics, China); Ching-Chong Lai (Institute of Economics, Academia Sinica, Taipei, Taiwan); Chih-Hsing Liao (National Chengchi University)
    Abstract: How do intellectual property rights that determine the market power of firms influence the effects of monetary policy on economic growth and social welfare? To analyze this question, we develop a monetary R&D-based growth model with elastic labor supply. We find that monetary expansion reduces growth and welfare through a decrease in labor supply that reduces R&D; furthermore, a larger market power of firms strengthens these effects of monetary policy in the R&D model. In contrast, increasing the market power of firms dampens the effects of monetary policy in the AK model. In other words, the market power of firms has surprisingly opposite implications on the growth and welfare effects of monetary policy under the two growth engines (i.e., innovation versus capital accumulation). Finally, we simulate the transition dynamics of the R&D-based growth model to compute the complete welfare changes from reducing inflation.
    Keywords: economic growth, inflation, monetary policy, patent policy, R&D
    JEL: O30 O40 E41
    Date: 2010–10
  2. By: Gustavo Crespi; Pluvia Zuniga
    Abstract: This study examines the determinants of technological innovation and its impact on firm labor productivity across six Latin American countries (Argentina, Chile, Colombia, Costa Rica, Panama, and Uruguay) using micro data from innovation surveys. In line with the literature, in all countries firms that invest in knowledge are more able to introduce new technological advances, and those that innovate have greater labor productivity than those that do not. Yet firm-level determinants of innovation investment are much more heterogeneous than in OECD countries. Cooperation, foreign ownership, and exporting increase the propensity to invest in innovation activities and encourage innovation investment in only half of the countries studied. Scientific and market sources of information have little or no impact on firm innovation efforts, which illustrates the weak linkages that characterize national innovation systems in those countries. The results in terms of productivity, however, highlight the importance of innovation in enabling firms to improve economic performance and catch up.
    Keywords: Innovation, Productivity, Developing countries, Latin America, Innovation surveys
    JEL: O12 O14 O31 O33 O40
    Date: 2010–10
  3. By: Thomas Rieck
    Abstract: In innovation contests, the progress of the competing firms in the innovation process is usually their private information. We analyze an innovation contest in which research firms have a stochastic technology to develop innovations at a fixed cost, but their progress is publicly announced. We make a comparison with the case of no information revelation: if the progress is disclosed, the expected profit of the firms is higher, but the expected profit of the sponsor is lower. Additionally, we show that firms may voluntarily reveal their information.
    Keywords: contest, innovation, information revelation
    JEL: O32 D82 D72
    Date: 2010–09
  4. By: Hristos Doucouliagos; Patrice Laroche
    Abstract: There is currently no consensus regarding the effect of unions on technology. We apply meta-regression analysis to the extant econometric studies and find that unions depress investment in new technology. However, this adverse effect has been declining over time and is moderated by country differences in industrial relations and regulations: The adverse effect appears to increase with labor market flexibility. Unions also have an adverse effect on technology adoption. The paper considers both the direct and indirect effects of unions and shows that their effect on technology is larger than their effect on profitability and physical capital. The size of the union effect on technology is compared to the effects of human capital, industry concentration, firm size, growth, profitability, and physical capital.
    Keywords: unions, R&D, innovation, technology adoption, regulation, meta-regression analysis
    JEL: J51 O31 O33
    Date: 2010–10–18
  5. By: Daron Acemoglu; Dan Vu Cao
    Date: 2010–10–08
  6. By: YASHIRO Naomitsu; HIRANO Daisuke
    Abstract: The essence of learning-from-exporting can be thought of as a process in which exporters absorb international knowledge spillovers and feed it back to their innovation efforts. Learning-from-exporting is often difficult to observe because it is conditional on at least two efforts: information gathering from foreign markets and zealous R&D. We exploit unique survey data to explicitly analyze the contribution of these activities to exporters' innovation. We find that gathering information from foreign markets significantly raises exporters' probability of succeeding in technology upgrades or new product developments, along with their R&D activities. While learning about the latest foreign technology and competitor products is at the core of such knowledge acquisition, international marketing activities, such as gathering feedback from foreign customers or information on the taste and needs of foreign customers, is also associated with a significant contribution. The importance of foreign knowledge acquisition is also confirmed for exporters that do not serve high-income markets or those that supply intermediate goods. Although it is likely that the acquisition of foreign knowledge contributes to exporters' innovation strategies, such as where to allocate R&D resources, it does not seem to raise the marginal effectiveness of R&D.
    Date: 2010–10
  7. By: Daron Acemoglu; Gino Gancia; Fabrizio Zilibotti
    Date: 2010–10–08
  8. By: ONISHI Koichiro; OWAN Hideo
    Abstract: This paper summarizes historical developments in Japan’s legal treatment of firms’ invention remuneration policies and examines the impact of such policies on R&D performance using original data from surveys including the 2005 IIP Invention Remuneration Survey, the 2007 RIETI Inventor Survey and its 2008 follow-up survey. Tracking the linkages between remuneration policy and R&D performance is complicated by Japanese firms’ reluctance to reveal the details of their policies to their employees before the 2004 amendment of Japan’s Patent Law. By matching the data from firm-level and individual-level surveys, we find that nearly 40% of inventors believed that their firms did not have revenue-based remuneration although their employers reported they actually had instituted such policies. We estimate the effect of revenue-based remuneration policies on R&D performance using two policy variables for the incidence of contingent remuneration policies, one of which depends on the firms’ responses and the other on individual employees’ survey responses.
    Date: 2010–10
  9. By: Min Ouyang (Department of Economics, University of California-Irvine)
    Abstract: We propose cyclical persistence as an important factor influencing the link between short-run cycles and long-run growth, through the cyclicality of R&D. A simple theory is presented, suggesting that higher persistence can drive R&D pro-cyclical by raising the cyclicality of innovation’s expected marginal return relative to that of its marginal opportunity cost. Our theory is carried to an industry panel of R&D and output. We find that cyclical persistence can account for about half of the observed variation in industry R&D’s cyclicality.
    Keywords: Business cycles; Growth; Cyclical persistence; R&D
    JEL: E32 E44 O30
    Date: 2010–08
  10. By: FRANCISCO MARCOS (Instituto de Empresa); JUAN SANTALO (Instituto de Empresa)
    Abstract: This paper estimates the average effect of regulatory intensity and administrative redtape on productivity and innovation. For this purpose we exploit the exogenous variation of the decentralization process that has taken place in Spain during the last three decades. Using objective proxies for legislative and regulatory activity such as the number of pages and number of new norms published in the regional legislative reporters we find a strong negative impact of regulatory intensity on regional innovation and productivity.
    Date: 2010–07
  11. By: Ugur, Mehmet; Guner, Umit
    Abstract: In March 2000, the Lisbon Summit set the European Union the goal of becoming ‘the most dynamic and competitive knowledge-based economy in the world’ by 2010. This paper aims to ascertain the extent to which various indicators of innovation in EU15 have improved and whether such improvement has been driven by higher levels of competition in EU15 economies. To this end, we provide a descriptive account of the competition and innovation indicators from 1980-2008. Then, we discuss the relationship between market structure (level of competition) and innovation; and estimate the impact of the former on the latter. We report that aggregate innovation measures for EU15 have been increasing over the 1980-2008 period and there does not seem to be a significant change in the trend during the Lisbon decade (200-2008). Furthermore, increasing levels of innovation have been associated with increasing economic rents – i.e., with further departures from the perfect-competition baseline. Fixed-effect panel-data regression results point out a positive and statistically significant relationship between economic rents and various measures of innovations.
    Keywords: Innovation; competition; European Union; Lisbon Agenda
    JEL: O38 O31 D43
    Date: 2010–09
  12. By: Link, Albert (University of North Carolina at Greensboro, Department of Economics); Scott, John (University of North Carolina at Greensboro, Department of Economics)
    Abstract: This paper investigates employment growth in small firms funded by the U.S. Small Business Innovation Research (SBIR) program. Using data collected by the National Research Council for each of five federal agencies, our analysis shows that on average over two-fifths of all projects retained 0 employees after completion and over one-third retained only 1 or 2 employees. Thus, on average, the direct impact of SBIR funded projects on employment is small, especially when compared to the mean number of employees in the firms. However, there are substantial cross-project differences in the number of retained employees that are explained by differences in the firms and their SBIR projects. We find across funding agencies that projects with intellectual property—patents, copyrights, trademarks, or publications—retained more employees after completion of the project. Also, we find that the public funding of research by the SBIR program is more likely to stimulate employment when the government created a market for the products, processes, or services developed by the research projects.
    Keywords: small business research; employment growth; entrepreneurship; intellectual property
    JEL: J48 L53 O38
    Date: 2010–10–11
  13. By: Roger Bandick; Holger Görg; Patrik Karpaty
    Abstract: The aim of this paper is to evaluate the causal effect of foreign acquisition on R&D intensity in targeted domestic firms. We are able to distinguish domestic multinationals and non-multinationals, which allows us to investigate the fear that the change in ownership of domestic to foreign multinationals leads to a reduction in R&D activity in the country, as headquarter activities are relocated to the new owner’s home country. We use unique and rich firm level data for the Swedish manufacturing sector and different micro-econometric estimation strategies in order to control for the potential endogeneity of the acquisition dummy. Overall, our results give no support to the fears that foreign acquisition of domestic firms lead to a brain drain of R&D activity in Swedish MNEs. Rather, this paper finds robust evidence that foreign acquisitions lead to increasing R&D intensity in acquired domestic MNEs and non-MNEs
    Keywords: domestic multinationals, foreign acquisition, R&D, propensity score matching
    JEL: F23
    Date: 2010–10
  14. By: Hall, Bronwyn (University of California at Berkeley, Department of Economics); Link, Albert (University of North Carolina at Greensboro, Department of Economics); Scott, John (University of North Carolina at Greensboro, Department of Economics)
    Abstract: Universities are a key institution in the US innovation system and an important aspect of their involvement is the role they play in Private-Public Partnering activities. This study seeks to gain a better understanding of the performance of university-industry research partnerships using a sample survey of pre-commercial research projects funded the U.S. government's Advanced Technology Program. Although results must be interpreted cautiously due to the small size of the sample, the study finds that projects with university involvement tend to be in areas involving "new" science and therefore experience more difficulty and delay but also are more likely not to be aborted prematurely. We interpret this finding to imply that universities are contributing to basic research awareness and insight among the partners in ATP-funded projects.
    Keywords: university; research
    JEL: O30
    Date: 2010–10–11
  15. By: Wei Heyuan (Faculdade de Economia, Universidade do Porto); Aurora A.C. Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC Porto; OBEGEF)
    Abstract: The impact of human capital on foreign direct investment (FDI) has been assessed in an essentially descriptive manner. In general, most quantitative studies focus on the macroeconomic level, that is, the level of countries. Microeconomic studies, with firms as the unit of analysis, are scarce internationally and even more so in the case of China. Based on a survey performed on several innovative firms in China, this study assesses the importance of human capital in attracting FDI to China, and estimates is corresponding impact. This impact is analyzed based not only on the direct, but also the indirect effects of human capital, through the firms’ Research and Development (R&D) efforts and contacts with universities. Using a sample of 77 firms, and considering two proxies for human capital (general and specific), we concluded that even though human capital does not constitute a direct factor in attracting FDI to China, it is a positive indirect factor by way of R&D efforts. We have also established that knowledge infrastructures (universities) and physical infrastructures (transport network) comprise important factors to attract FDI.
    Keywords: Foreign Direct Investment (FDI); Human Capital; Research and Development (R&D); China
    Date: 2010–10
  16. By: Strulik, Holger; Prettner, Klaus; Prskawetz, Alexia
    Abstract: Conventional R\&D-based growth theory suggests that productivity growth is positively correlated with population size or population growth, an implication which is hard to see in the data. Here we integrate microfounded fertility and schooling into an otherwise standard R\&D-based growth model. We then show how a Beckerian child quality-quantity trade-off explains why higher growth of productivity and income per capita are associated with lower population growth. The medium-run prospects for future economic growth - when fertility is going to be below replacement level in virtually all fully developed countries - are thus much better than predicted by conventional R\&D-based growth theory.
    Keywords: endogenous growth, R\&D, declining population, fertility, schooling, human capital, post-modern society, post-transitional fertility
    JEL: J13 J24 O10 O30 O40
    Date: 2010–10
  17. By: David Ockwell; Jim Watson; Alexandra Mallett; Ruediger Haum; Gordon MacKerron; Anne-Marie Verbeken
    Abstract: The deployment of eco-innovations in developing countries is a key driver of their contribution to efficiently addressing global environmental challenges. It is also a key driver of markets for eco-innovation and sustainable economic development. This report explores the barriers developing countries face in accessing markets for eco-innovation. It outlines the key considerations policy needs to address to overcome these barriers and discusses the extent to which selected existing policy mechanisms and organisation have achieved this. The key finding of the report is that the majority of existing policy mechanisms fails to recognise the critical importance of developing indigenous eco-innovation capabilities amongst developing country firms. Indigenous eco-innovation capabilities are essential to facilitating both the diffusion of existing ecoinnovations within developing countries and sustainable economic development based on the adoption, adaption and development of environmentally sound technologies that fit with the bespoke conditions faced by developing countries. Building up eco-innovation capabilities in developing countries requires a shift away from the current focus on large project based approaches which emphasise the transfer of the hardware aspects of clean technologies, towards approaches that emphasise flows of codified knowledge (know-how and know-why) and tacit knowledge. Policy also needs to be improved to better respond to the context-specific technological and cultural requirements which vary inter- and intra-nationally.<BR>La diffusion des éco-innovations dans les pays en développement est un facteur clé de la contribution de ces pays à une lutte effective contre les grands enjeux environnementaux. C’est aussi un déterminant essentiel des marchés pour l’éco-innovation et le développement durable. Le présent rapport identifie les barrières auxquels les pays en développement sont confrontés pour accéder aux éco-innovations. Il souligne les enjeux clés que les politiques publiques doivent prendre en compte pour contourner ces barrières. Il évalue la réussite dans ce domaine de certains des mécanismes et organisations existants. La principale conclusion de ce rapport est que la majorité des mécanismes existants n’accordent pas suffisamment d’importance au développement des capacités locales à innover dans le domaine de l’environnement. Ces capacités, dans les pays concernés, contribuent de manière décisive à la fois à la diffusion des éco-innovations dans les pays en développement et à un développement durable fondé sur l’adoption, l’adaptation et le développement de technologies favorables à l’environnement qui soient adaptées aux contextes particuliers des pays en développement. Renforcer la capacité à innover dans les pays en développement suppose de renoncer partiellement à la priorité accordée actuellement au soutien aux grands projets ; cette priorité met l’accent sur le transfert des aspects purement technologiques. Le rapport plaide pour des approches qui mettent l’accent sur les flux de connaissance codifiés (pourquoi, comment) et tacites. Il convient également d’améliorer les politiques publiques de sorte qu’elles prennent mieux en compte les besoins technologiques et culturels propres aux contextes et qui varient au sein d’un même pays et entre les pays.
    Keywords: technology transfer, green technologies, eco-innovation, absorptive capabilities, innovation capabilities, multilateral environmental agreements
    JEL: O19 O31 O33 O34 O38 Q54 Q55 Q56 Q58
    Date: 2010–05–18
  18. By: David B. Audretsch; Werner Bönte; Stefan Krabel
    Abstract: As public research institutions are increasingly pressured to transfer research results to industry, evaluation of their performance is not only based on their scientific output but also on their commercialization success. Although it is well known that research cooperation activities are an important channel of knowledge transfer, the knowledge about factors driving research cooperation is limited. This paper explicitly focuses on scientist perspective and investigates the relevance of academic values and perceived costs and benefits of cooperation for a scientist's decision to cooperate with private firms. Our analysis is based on two survey waves performed with scientists in the Max Planck Society in Germany which is a publicly funded research organization focusing on basic research. Our empirical results suggest that open science identity is an important determinant of scientist fundamental decision to cooperate with private firms at all. The decision to keep on cooperating with private firms is directly influenced by cost sharing incentives and by firms' confidentiality requirements. Besides these direct effects, our results suggest that perceived reputational reward, monetary benefits, and time costs associated with cooperation influence cooperation behavior indirectly through their impact on the attractiveness of cooperation. The latter is a strong and robust predictor of cooperation behavior.
    Date: 2010
  19. By: Vincent Mangematin (MTS - Management Technologique et Strategique - Grenoble Ecole de Management); Khalid Errabi (MTS - Management Technologique et Strategique - Grenoble Ecole de Management)
    Abstract: There is growing academic and policy interests in the factors that underpin the formation and the growth of clusters, especially for such ‘hyped up' scientific and technological fields as the nanotechnologies. This paper analyses the determinants of scientific cluster growth (measured by the number of publications that emanate there from), distinguishing between structural effects (i.e. initial cluster size, scientific field composition and geographic location) on the one hand and its scientific variety, organizational diversity and degree of openness (in terms of collaboration with outside actors) on the other. Overall, scientific variety enhances clusters growth, but organizational diversity slows it down. However, patterns of growth are different in Asia, Europe and North America. It seems that cluster evolution is highly contingent on national systems of innovation and on the history of collaboration amongst local actors. Policy makers and cluster strategists must design specific policies by zone, and should not simply attempt to replicate best practices from one zone to another. Slow growth may reflect also ‘elitist' strategies - those based on quality rather than on numbers
    Keywords: cluster growth; nanotechnology; scientific district; publication
    Date: 2010–10–15
  20. By: Conlé, Marcus; Taube, Markus
    Abstract: Focussing on China's health biotech clusters the study explores the anatomy of interaction in as well as between various clusters. While the literature has identified the existence of a dense network of durable interactions among firms and between firms and academia at a particular location as one of the most important prerequisites for well-performing clusters, we show that network ties extending beyond regional boundaries are equally valuable for the innovative capacity of China's biotech firms. Analysing the demographic process of cluster emergence we show that there exist different types of biotech clusters in China, which are closely linked and exchange knowledge and technology amongst each other. It appears as if further analysis of these cross-cluster links may provide important insights of how learning and innovation works in China's health biotech industry. Although China's science parks and industrial bases may on an individual basis appear to be badly structured, the organization of China's health biotech industry turns out to be substantially enhanced once these external linkages are taken into consideration. --
    Keywords: China,health biotechnology,cluster,entrepreneurship,localization
    Date: 2010
  21. By: ELENA REVILLA (Instituto de Empresa)
    Abstract: This study aims to investigate how supply chain partners develop absorptive capability in terms of three learning processes (exploration, assimilation and exploitation). We propose and empirically assess a taxonomy that classifies supply chain relationships based on differences in absorptive capacity. We also explore the performance implications of this taxonomy in 153 companies, operating as key suppliers of the same focal buyer. The results suggests that supply chain partners which develop absorptive capability in a relational context, not only have better levels of operational performance, but also create new ideas for the creation/development of innovative products.
    Date: 2010–09
  22. By: Diego Ubfal; Alessandro Maffioli
    Abstract: In this paper, we evaluate the impact of research grants on the amount of collaboration, among scientific researchers in Argentina. We find a positive and significant impact of funding on collaboration, which is measured in terms of the number of co-authors for publications in peer-reviewed journals. In particular, we find a significant impact of the grants for funded researchers both on the size of their ego network, and on their 2-step indirect links, measured by the number of direct and 1-step indirect co-authors. We also find evidence that this impact was driven by the results of funded researchers at the upper tail of the distribution of collaboration outcomes. Our identification strategy is based on comparing collaboration indicators for researchers with financially supported projects with those of a control group of researchers who submitted projects that were accepted in terms of quality, but not supported because of shortage of funds. We obtain consistent results by using different non-experimental techniques such as difference-in-differences models combined with propensity score matching methods and a non-parametric difference-in-differences estimator.
    Keywords: Scientific Collaboration, Social Networks, Program Evaluation, Nonparametric Difference-in-Differences Estimator, Latin America, Argentina
    JEL: O31 D85
    Date: 2010–10

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