nep-ino New Economics Papers
on Innovation
Issue of 2010‒10‒30
sixteen papers chosen by
Steffen Lippert
Massey University, Albany

  1. Innovation and Employment: A firm level analysis with European R&D Scoreboard data By Francesco Bogliacino
  2. Does history matter for the relationship between R&D, Innovation and Productivity? By Elena Huergo; Lourdes Moreno
  3. Effectiveness of Public R&D Subsidies in East Germany – Is it a Matter of Firm Size? By Janina Reinkowski; Björn Alecke; Timo Mitze; Gerhard Untiedt
  4. Listen to the market: Do its complexity and signals make companies more innovative By Ana Pérez-Luño; Jesus Cambra-Fierro
  5. An investigation of the relation between cooperation and the innovative success of German regions By Tom Broekel; Matthias Buerger; Thomas Brenner
  6. Evaluation of public R&D policies: A cross-country comparison By CZARNITZKI Dirk; LOPES BENTO Cindy
  7. Which firms want PhDs? The effect of the university-industry relationship on the PhD labour market By José García-Quevedo; Francisco Mas-Verdú; José Polo-Otero
  8. Labor Laws and Innovation By Viral V. Acharya; Ramin P. Baghai; Krishnamurthy V. Subramanian
  9. The Porter Hypothesis and Hyperbolic Discounting By Prabal Roy Chowdhury
  10. Technology Diffusion with Learning Spillovers: Patent versus Free Access By Matthieu Glachant; Yann Ménière
  11. R&D-Based Growth in the Post-Modern Era. By Holger Strulik; Klaus Prettner; Alexia Prskawetz
  12. Trade and Innovation: Report on the Chemicals Sector By Nobuo Kiriyama
  13. Firm Size Distribution under Horizontal and Vertical R&D By Pedro Mazeda Gil; Fernanda Figueiredo
  14. Relating R&D and Investment Policies to CCS Market Diffusion Through Two-Factor Learning By Lohwasser, Richard; Madlener, Reinhard
  15. Domestic or International Hotels: The Frontrunner of Service Innovation and Customer Choice in Pakistan By Ellahi, Abida; Rashid , Abdul
  16. On the Correlation between Research Performance and Social Network Analysis Measures Applied to Research Collaboration Networks By Alireza Abbasi; Jorn Altmann

  1. By: Francesco Bogliacino (JRC-IPTS)
    Abstract: In this article, we analyse the microeconomic relationship between innovation and employment, using company data from R&D Scoreboard for Europe covering 2000-2008. We estimate a reduced form equation in which R&D can account for both product and process innovation. The existence of non constant elasticities is assessed, due to the combination of efficient scale and decreasing return to R&D: in our empirical estimates the scale effect tends to prevail for a given R&D intensity generating an increasing relationship between total turnover and employment. Our results have important implications for policymakers: R&D and innovation supporting policies should be correctly tailored and monitored since the results depend on the characteristics of the firms benefited. By the same token, calibration of general equilibrium models aimed at quantifying the employment impact of R&D and innovation policies should take into account that the average elasticity can be a very rough approximation. We claim that our results support the position that R&D and innovation policies should be tailored towards favouring entry by knowledge intensive firms, instead of supporting existing actors.
    Keywords: Technological change, corporate R&D, employment, panel data
    JEL: O33 J20
    Date: 2010–09
  2. By: Elena Huergo; Lourdes Moreno
    Abstract: This paper analyzes the relationship between R&D expenditures, innovation and productivity growth, taking into account the possibility of persistence in firms’ behaviour. We study this relationship for a sample of Spanish manufacturing firms between 1990 and 2005, estimating a model with four equations: participation in technological activities, R&D intensity, the generation of innovations and the impact of these technological outputs on total factor productivity growth. Our results reflect the existence of true state dependence both in the decision of R&D investment and in the production of innovations. The omission of this persistence leads to an overestimation of the current impact of innovations on productivity growth. However, the presence of persistence in technological inputs and outputs entails current R&D activities having long–run effects on a firm’s productivity.
    Keywords: CDM model, productivity growth, persistence in R&D and innovation.
    JEL: D24 L6 O3
    Date: 2010–10–21
  3. By: Janina Reinkowski; Björn Alecke; Timo Mitze; Gerhard Untiedt
    Abstract: This paper analyses the impact of public subsidies on private sector research and development (R&D) activity for East German firms. Using propensity score matching, our empirical results indicate that subsidized firms indeed show a higher level of R&D intensity and a higher probability for patent application compared to non-subsidized firms for our sample year 2003. On average we find an increase in the R&D intensity of about 3.7 percentage points relative to non-subsidized firms. The probability for patent applications rises by 21 percentage points. These results closely match earlier empirical results for East Germany. Given the fact that the East German innovation system is particularly driven by small and medium sized enterprises (SME), we put a special focus on the effectiveness of the R&D subsidies for this latter subgroup. Here no previous empirical evidence is available so far. Our findings indicate that policy effectiveness also holds for private R&D activity of SMEs, where the highest increase in terms of R&D intensity is estimated for micro businesses with up to 10 employees.
    Keywords: Propensity score matching; R&D subsidies; East Germany; SME
    JEL: C14 C21 O32 O38
    Date: 2010–09
  4. By: Ana Pérez-Luño (Department of Business Administration, Universidad Pablo de Olavide); Jesus Cambra-Fierro (Department of Business Administration, Universidad Pablo de Olavide)
    Abstract: This paper analyzes four modes of innovation that differ in their scope of newness – innovation generation and adoption–, and in their degree of change –radical and incremental innovations. Building a theoretical model based on the Market Orientation (MO) and contingency theory literatures and utilizing a unique sample of innovating firms, we find that MO positively influence the number incremental generation and adoption of innovations. We also find that environmental complexity moderates the relationship between MO and radical and incremental innovation generation and adoption. That is, we have found that high environmental complexity enhances the introduction of radical and incremental internally generated innovations and harms the introduction of incremental innovation adoptions for market oriented firm. These findings add to the innovation and MO literatures. Our results also have important implications for both commercial activities and R&D policies adopted by firms.taking place in this sector enhances its potential as a showcase for processes of anticipation and adaptation to the environment. In addition, the paper aims to shed some light on the question of whether strategy potentially moderates the MO-performance link. Finally, the principal implications of our findings are discussed.
    Keywords: Market orientation, environmental complexity, innovation
    Date: 2010–10
  5. By: Tom Broekel; Matthias Buerger; Thomas Brenner
    Abstract: Concepts like regional innovation systems, innovative milieu, and learning regions emphasize the positive contribution of intra-regional cooperation to firmsÕ innovation performance. Despite substantial numbers of case studies, the quantitative empirical evidence for this claim is thin. Using data on the co-application and co- invention of patents for 270 German labor market regions the study shows that intra- regional cooperation intensity and regional innovation efficiency are associated. In contrast to the negative influence of inter-regional cooperation, medium levels of intra-regional cooperation stimulate regional innovation efficiency.
    Keywords: regional innovation efficiency, cooperation intensity, collaboration, regional cooperation
    JEL: O18 R11 O31
    Date: 2010–10
    Keywords: Innovation; Policy evaluation; Treatment effects; Cross-country comparison
    JEL: O38
    Date: 2010–10
  7. By: José García-Quevedo (Barcelona Institute of Economics (IEB) and Dpt. of Political Economy and Public Finance, University of Barcelona); Francisco Mas-Verdú (Dpt. of Economics and Social Sciences, Universidad Politécnica de Valencia and Barcelona Institute of Economics (IEB)); José Polo-Otero (CYD Foundation and Barcelona Institute of Economics (IEB))
    Abstract: PhD graduates hold the highest education degree, are trained to conduct research and can be considered a key element in the creation, commercialization and diffusion of innovations. The impact of PhDs on innovation and economic development takes place through several channels such as the accumulation of scientific capital stock, the enhancement of technology transfers and the promotion of cooperation relationships in innovation processes. Although the placement of PhDs in industry provides a very important mechanism for transmitting knowledge from universities to firms, information about the characteristics of the firms that employ PhDs is very scarce. The goal of this paper is to improve understanding of the determinants of the demand for PhDs in the private sector. Three main potential determinants of the demand for PhDs are considered: cooperation between firms and universities, R&D activities of firms and several characteristics of firms, size, sector, productivity and age. The results from the econometric analysis show that cooperation between firms and universities encourages firms to recruit PhDs and point to the existence of accumulative effects in the hiring of PhD graduates.
    Date: 2010–03
  8. By: Viral V. Acharya; Ramin P. Baghai; Krishnamurthy V. Subramanian
    Abstract: Stringent labor laws can provide firms a commitment device to not punish short-run failures and thereby spur their employees to pursue value-enhancing innovative activities. Using patents and citations as proxies for innovation, we identify this effect by exploiting the time-series variation generated by staggered country-level changes in dismissal laws. We find that within a country, innovation and economic growth are fostered by stringent laws governing dismissal of employees, especially in the more innovation-intensive sectors. Firm-level tests within the United States that exploit a discontinuity generated by the passage of the federal Worker Adjustment and Retraining Notification Act confirm the cross-country evidence.
    JEL: F30 G31 J08 J5 K31
    Date: 2010–10
  9. By: Prabal Roy Chowdhury
    Abstract: We examine pollution-reducing R&D by a monopoly firm producing a dirty product. In a dynamic framework with hyperbolic discounting, we establish conditions under which the Porter hypothesis goes through, i.e. environmental regulation increases R&D, thus reducing pollution, as well as increasing firm profits. This is likely to hold whenever R&D costs are at an intermediate level, and the planning horizon of the firms is large.
    Keywords: Porter hypothesis, abatement tax, R&D, hyperbolic discounting.
    JEL: H2 L1 L2 L5
    Date: 2010–10–22
  10. By: Matthieu Glachant (CERNA - Centre d'économie industrielle - Mines ParisTech); Yann Ménière (CERNA - Centre d'économie industrielle - Mines ParisTech)
    Abstract: The paper analyzes the interplay between technology diffusion and patent law. We develop a dynamic model where initial adoptions generate learning spillovers that reduce the cost of subsequent adoptions. In this setting, we contrast technology diffusion paths under competitive supply, subsidized adoption and patent protection. Competitive supply entails various coordination failures that cannot be fully …fixed through a public subsidy. We show that a patent holder can internalize externalities more efficiently, insofar as patent protection is fully effective. By contrast, fully competitive supply may be more efficient when patent enforcement is imperfect.
    Keywords: Technology diffusion; intellectual property rights; price discrimination; learning spillovers
    Date: 2010
  11. By: Holger Strulik; Klaus Prettner; Alexia Prskawetz
    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 micro-founded 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, postmodern society, post-transitional fertility.
    Date: 2010–10
  12. By: Nobuo Kiriyama
    Abstract: This study analyses linkages between trade and innovation in the chemicals sector, building on past work at the OECD on trade and innovation. The chemicals sector has a long history of innovation and is a large trading item. It covers very diverse sub-sectors. This paper analyses and compares different trade and innovation linkages in basic industrial chemicals, speciality and fine chemicals and consumer chemicals. This sector has also been a subject of successive rounds of multilateral trade negotiations, and partly as a consequence tariff rates have been reduced over time. Nonetheless remaining tariffs are still non-negligible and constitute impediments to trade. Export restrictive measures on raw material inputs are also being highlighted on the trade negotiating agenda. Moreover, the chemicals sector is heavily regulated for health and environmental reasons and further legislative initiatives have been pursued, whose practical impact on innovation remains to be seen. Intellectual property has played a very important role in technology diffusion in this sector, and infringement of intellectual property continues to be a major problem.
    Keywords: innovation, multilateral trade negotiations, intellectual property, technical barriers to trade, emerging economies, financial crisis, environmental regulations, chemicals, Chemicals Tariff Harmonization Agreement, export restrictive measures
    JEL: F13 F14 L65 O31
    Date: 2010–09–29
  13. By: Pedro Mazeda Gil (CEF.UP, Faculdade de Economia, Universidade do Porto); Fernanda Figueiredo (CEAUL, Faculdade de Economia, Universidade do Porto)
    Abstract: This paper studies the firm size distribution arising from an endogenous growth model of quality ladders with expanding variety. The probability distribution function of a given cohort of firms is a Poisson distribution that converges asymptotically to a normal of log size. However, due to firm entry propelled by horizontal R&D, the total distribution - i.e., when the entire population of firms is considered - is a mixture of Poisson distributions which is systematically right skewed and exhibits a fatter upper tail than the normal distribution of log size. Our theoretical results qualitatively match the empirical evidence found both for the cohort and the total distribution, and which has been presented as a challenge for theory to explain. Moreover, by obtaining a total distribution with a gradually falling variance over a long time span, the model is able to address complementary empirical evidence that points to a total distribution subtly evolving over time.
    Keywords: Firm size distribution; Skewness; Heavy tails; Endogenous growth; Horizontal and vertical R&D
    JEL: O41 O38 L11
    Date: 2010–10
  14. By: Lohwasser, Richard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: Carbon capture and storage (CCS) technologies have the potential to play a major role in the stabilization of anthropogenic greenhouse gases. To develop the capture technology from its current early pilot phase towards commercial maturity, significant public and private funding is directed towards R&D projects and pilot power plants. However, we know little about how this funding relates to the economics of CCS power plants and their market diffusion. This paper addresses that question. We initially review past learning effects from both capacity installations and R&D efforts for a similar technology, flue-gas desulfurization, using the concept of two-factor learning, and estimate the learning curve. We apply the obtained learning-by-doing rate of 7.1% and the learning-by-researching rate of 6.6% to CCS in the electricity market model HECTOR, which simulates 19 European countries hourly until 2040, to understand the impact of learning and associated policies on the market diffusion of CCS. Simulation results show that the individual impact of learning is similar for both learning rates, regardless of the CO2 price. We then evaluate the effectiveness of policies subsidizing CCS investment costs (addressing learning-by-doing) and of policies providing R&D grants (addressing learning-by-researching) by relating the policy budget to the realized CCS capacity. We find that policies promoting diffusion through subsidies are, at lower policy cost, about equally effective as policies providing R&D funding. At higher spending levels, diffusion-promoting policies are more effective. Overall, policy effectiveness increases in low CO2 price scenarios, but the CO2 price still remains the key prerequisite for the economic competitiveness of CCS, even with major policy support.
    Keywords: Policy effectiveness; CCS; two-factor learning; electricity market
    JEL: C63 O30
    Date: 2010–06
  15. By: Ellahi, Abida; Rashid , Abdul
    Abstract: The purpose of this study is to analyze the factors that measure the preferences of customers for domestic and international hotels operating in Pakistan. A questionnaire derived from previous studies was completed by 200 hotel-customers in Pakistan. Data is analyzed using SPSS software by employing factor analysis with VERIMEX rotation and multiple regressions The results indicate that international hotels have more attributes and are preferred by customers as compare to domestic hotels. The study reinforces and refines the body of knowledge relating the service innovation and customer choices for hotel industry in Pakistan. The study also tries to highlight the relative importance of tangible and intangible factors in the hotel sector It may establish useful base for future empirical work in this field, at least in developing countries.
    Keywords: Customer preference; Service innovation; Hotel attributes; Factor analysis
    JEL: D12 A10
    Date: 2010–04–10
  16. By: Alireza Abbasi (Technology Management, Economics, and Policy Program (TEMEP), Seoul National University); Jorn Altmann (Technology Management, Economics, and Policy Program (TEMEP), Seoul National University)
    Abstract: In this study, we develop a theoretical model based on social network theory to understand how the collaboration (co-authorship) network of scholars correlates to the research performance of scholars. For this analysis, we use social network analysis (SNA) measures (i.e., normalized closeness centrality, normalized betweenness centrality, efficiency, and two types of degree centrality). The analysis of data shows that the research performance of scholars is positively correlated with two SNA measures (i.e., weighted degree centrality and efficiency). In particular, scholars with strong ties (i.e., repeated co-authorships, i.e., high weighted degree centrality) show a better research performance than those with low ties (e.g., single co-authorships with many different scholars). The results related to efficiency show that scholars, who maintain a strong co-authorship relationship to only one co-author of a group of linked co-authors (i.e., co-authors that have joined publications), perform better than those researchers with many relationships to the same group of linked co-authors.
    Keywords: Social Network Analysis, Co-authorship Network, Researchers' Performance.
    JEL: C43 C44 C65 D80 D85 M12 M21
    Date: 2010–10

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