nep-ino New Economics Papers
on Innovation
Issue of 2010‒11‒27
thirteen papers chosen by
Steffen Lippert
Massey University, Albany

  1. Patent quality and value in discrete and cumulative innovation By Justus Baron; Henry Delcamp
  2. Private Agreements for Coordinating Patent Rights: The Case of Patent Pools By Gallini, Nancy
  3. Collusion through Joint R&D: An Empirical Assessment By Tomaso Duso; Lars-Hendrik Röller; Jo Seldeslachts
  4. Coordination of innovation policy in the catching-up context: Estonia and Brazil compared By Rainer Kattel; Erkki Karo
  5. The level of human capital in innovative firms located in China. Is foreign capital relevant? By Li Shu; Aurora A.C. Teixeira
  6. Innovation-based Nets as Collective Actors: A Heterarchization Case Study from the Automotive Industry By Catarina Roseira; Carlos Brito; Stephan C. Henneberg
  7. Cumulative Innovation and Competition Policy By Alexander Raskovich; Nathan H. Miller
  8. Regional Knowledge and the Emergence of an Industry: Laser Systems Production in West Germany, 1975-2005 By Guido Bünstorf; Michael Fritsch; Luis F. Medrano
  9. Products, patents and productivity persistence: A DSGE model of endogenous growth By Tom Holden
  10. Ising-like agent-based technology diffusion model: adoption patterns vs. seeding strategies By Carlos E. Laciana; Santiago L. Rovere
  11. The agglomeration of R&D labs By Gerald A. Carlino; Jake Carr; Robert M. Hunt; Tony E. Smith
  12. A theoretical and empirical contribution for a better understanding of academic spin-offs’ growth patterns By Chiara Balderi; Andrea Piccaluga
  13. Leveraging Innovations for Inclusive Governance By Gupta, Anil K

  1. By: Justus Baron (CERNA - Centre d'économie industrielle - Mines ParisTech); Henry Delcamp (CERNA - Centre d'économie industrielle - Mines ParisTech)
    Abstract: This article compares the relationship between patent quality and patent value in discrete and cumulative innovation. Using factor analysis and a set of various commonly used patent quality indicators including claims, citations and family size, we build a quality factor jointly driving all indicators for 9255 patents. We then test the significance of this quality factor for predicting patent renewal after 4, 8 and 12 years in an ordered logistic regression. Whereas we establish a robust and significant link between patent quality and value in samples of discrete and complex technology patents, there is no significant link for patents that are essential to technological standards. Consistently, neither the quality factor nor any single indicator allows predicting litigation on an essential patent. We conclude that while there is a robust link between patent quality and value in discrete innovation, this link is much weaker in cumulative innovation. Nevertheless, this affects only narrow, yet highly relevant, technological fields. There is no evidence that cumulativeness affects the relationship between quality and value in whole technological classes classified as “complex” by the literature.
    Date: 2010
  2. By: Gallini, Nancy
    Abstract: Inventors and users of technology often enter into cooperative agreements for sharing their intellectual property in order to implement a standard or to avoid costly infringement litigation. Over the past two decades, U.S. antitrust authorities have viewed pooling arrangements that integrate complementary, valid and essential patents to have “pro-competitive benefits†in reducing prices, transactions costs, and the incidence of costly infringement suits. Since patent pools are cooperative agreements, they also have the potential of suppressing competition if, for example, they harbor weak or invalid patents, dampen incentives to conduct research on innovations that compete with the pooled patents, foreclose competition from downstream product or upstream innovation markets, or raise prices on goods that compete with the pooled patents. In synthesizing the ideas advanced in the economic literature, this paper explores whether these antitrust concerns apply to pools with complementary patents. Special attention is given to the U.S. Department of Justice-Federal Trade Commission Guidelines for the Licensing of Intellectual Property (1995) and its application to recent patent pool cases.
    Keywords: Patent pools, intellectual property, antitrust economics
    Date: 2010–11–17
  3. By: Tomaso Duso (Humboldt University and Wissenschaftszentrum Berlin (WZB)); Lars-Hendrik Röller (European School of Management and Technology (ESMT) and Humboldt University Berlin); Jo Seldeslachts (University of Amsterdam)
    Abstract: This paper tests whether upstream R&D cooperation leads to downstream collusion. We consider an oligopolistic setting where firms enter in research joint ventures (RJVs) to lower production costs or coordinate on collusion in the product market. We show that a sufficient condition for identifying collusive behavior is a decline in the market share of RJV-participating firms, which is also necessary and sufficient for a decrease in consumer welfare. Using information from the US National Cooperation Research Act, we estimate a market share equation correcting for the endogeneity of RJV participation and R&D expenditures. We find robust evidence that large networks between direct competitors – created through firms being members in several RJVs at the same time – are conducive to collusive outcomes in the product market which reduce consumer welfare. By contrast, RJVs among non-competitors are efficiency enhancing.
    Keywords: Research Joint Ventures, Innovation, Collusion, NCRA
    JEL: K21 L24 L44 O32
    Date: 2010–11
  4. By: Rainer Kattel; Erkki Karo
    Abstract: This paper proposes an analytical framework for analysing innovation policies in catching-up economies. The framework combines two dynamic trajectories that affect innovation policy . policy content and policy governance context . and builds an approach that looks at innovation policy governance through a multi-level concept of policy coordination. The paper argues that for understanding and analysing innovation-policy governance systems, the comprehension of the developments in the field of public-administration-and-management research and practice is as necessary as understanding developments in the field of innovation policy research and practice because the developments in the former partly condition what are the feasible models for increasing the effectiveness of innovation-policy governance. The paper applies the framework to two stylised case studies . Estonia and Brazil . and shows that the framework is useful for revealing the complexities of innovation-policy governance that are overlooked in narrow innovation policy analysis and shows that innovationpolicy governance challenges may be more complex than usually presumed.
    Date: 2010–11
  5. By: Li Shu (Faculdade de Economia, Universidade do Porto); Aurora A.C. Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC Porto; OBEGEF)
    Abstract: Studies on the impact of Foreign Direct Investment (FDI) on the Chinese economy have essentially focused on the relationship between FDI, productivity and economic growth, revealing a tendency toward sectoral and macroeconomic empirical studies. This work aims to complement these approaches and contribute to the rather limited literature on the relationship between FDI, Human Capital and Innovation at a corporate level. Based on a set of large and innovative firms (national and foreign capital) located in China, we have concluded that: i) the direct impact of foreign capital on the level of human capital in firms is negative, that is, no evidence was found suggesting that FDI has a positive influence on their human capital; ii) in indirect terms, by means of investment in R&D activities, FDI has a positive impact on general human capital (i.e., formal education). These results suggest that for China to benefit from FDI, it is necessary to implement a selective policy to attract FDI, taking into account more technologically advanced projects.
    Keywords: Foreign Direct Investment; Multinational firms; Human Capital; R&D; China
    JEL: F21 F23 J24 O32
    Date: 2010–11
  6. By: Catarina Roseira (Faculdade de Economia, Universidade do Porto); Carlos Brito (Faculdade de Economia, Universidade do Porto); Stephan C. Henneberg (Manchester Business School, University of Manchester)
    Abstract: Cooperation and collaboration between companies represents a key issue within the conceptual framework developed by the IMP Group. However, little attention has been paid to a phenomenon which can result from such collaboration, i.e. collective action. This involves cooperative activities undertaken by a significant number of actors sharing a common aim. This research uses the concept of issue-based net to open new avenues to understand collective action in the context of innovation activities, specifically by analyzing a case study of an innovation-based net in the automotive industry. Two main objectives are addressed in this study: Related to this discussion of different development paths of collective actors, the case study analysis focuses on how issue-based nets emerge and evolve in situations of innovation, specifically, what kind of structure and process issues characterize a heterarchization development path. Furthermore, the analysis addressed how issue-based nets change the positioning of individual member firms, a well as that of the collective actor within the overall network.
    Keywords: Innovation, collective actor, issue-based nets, heterarchization, case study, automotive industry
    JEL: M19 M39
    Date: 2010–11
  7. By: Alexander Raskovich (Economic Analysis Group, Antitrust Division, U.S. Department of Justice); Nathan H. Miller
    Abstract: We model a “new economy” industry where innovation is sequential and monopoly is persistent but the incumbent turns over periodically. In this setting we analyze the effects of “extraction” (e.g., price discrimination that captures greater surplus) and “extension” (conduct that simply delays entry of the next incumbent) on steady-state equilibrium innovation, welfare and growth. We find that extraction invariably increases innovation and welfare growth rates, but extension causes harm under plausible conditions. This provides a rationale for the divergent treatment of single-firm conduct under U.S. law. Our analysis also suggests a rule-of-thumb, consistent with antitrust practice, that innovation proxies welfare.
    Date: 2010–09
  8. By: Guido Bünstorf (University of Kassel, Department of Economics,); Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Luis F. Medrano (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: We analyze the emergence and spatial evolution of the German laser systems industry. Regional knowledge in the related field of laser sources, as well as the presence of universities with physics or engineering departments, is conducive to the emergence of laser systems suppliers. The regional presence of source producers is also positively related to entry into laser systems. One important mechanism behind regional entry is the diversification of upstream laser source producers into the downstream systems market. Entry into the materials processing submarket appears to be unrelated to academic knowledge in the region, but the presence of laser source producers and the regional stock of laser knowledge are still highly predictive in this submarket.
    Keywords: Innovation, regional knowledge, laser technology, emerging industries, diversification
    JEL: L22 L69 R11 O52
    Date: 2010–11–15
  9. By: Tom Holden
    Abstract: This paper builds a dynamic stochastic general equilibrium (DSGE) model of endogenous growth that is capable of generating substantial degrees of endogenous persistence in productivity. When products go out of patent protection, the rush of entry into their production destroys incentives for process improvements. Consequently, old production processes are enshrined in industries producing non-protected products, resulting in aggregate productivity persistence. Our model also generates sizeable delayed movements in productivity in response to preference shocks, providing a form of endogenous news shock. Finally, if we calibrate our model to match a high aggregate mark-up then we can replicate the negative response of hours to a positive technology shock, even without the inclusion of any frictions.
    Keywords: Productivity persistence, patent protection, oligopoly, research and development
    JEL: E32 E37 L16 O31 O33 O34
    Date: 2010
  10. By: Carlos E. Laciana; Santiago L. Rovere
    Abstract: The well-known Ising model used in statistical physics was adapted to a social dynamics context to simulate the adoption of a technological innovation. The model explicitly combines (a) an individual's perception of the advantages of an innovation and (b) social influence from members of the decision-maker's social network. The micro-level adoption dynamics are embedded into an agent-based model that allows exploration of macro-level patterns of technology diffusion throughout systems with different configurations (number and distributions of early adopters, social network topologies). In the present work we carry out many numerical simulations. We find that when the gap between the individual's perception of the options is high, the adoption speed increases if the dispersion of early adopters grows. Another test was based on changing the network topology by means of stochastic connections to a common opinion reference (hub), which resulted in an increment in the adoption speed. Finally, we performed a simulation of competition between options for both regular and small world networks.
    Date: 2010–11
  11. By: Gerald A. Carlino; Jake Carr; Robert M. Hunt; Tony E. Smith
    Abstract: The authors document the spatial concentration of more than 1,000 research and development (R&D) labs located in the Northeast corridor of the U.S. using point pattern methods. These methods allow systematic examination of clustering at different spatial scales. In particular, Monte Carlo tests based on Ripley's (1976) K-functions are used to identify clusters of labs — at varying spatial scales — that represent statistically significant departures from random locations reflecting the underlying distribution of economic activity (employment). Using global K-functions, they first identify significant clustering of R&D labs at two different spatial scales. This clustering is by far most significant at very small spatial scales (a quarter of a mile), with significance attenuating rapidly during the first half mile. The authors also observe statistically significant clustering at distances of about 40 miles. This corresponds roughly to the size of the four major R&D clusters identified in the second stage of their analysis — one each in Boston, New York-Northern New Jersey, Philadelphia-Wilmington, and Virginia (including the District of Columbia). In this second stage of the analysis, explicit clusters are identified by a new procedure based on local K-functions, which they designate as the multiscale core-cluster approach. This new approach yields a natural nesting of clusters at different scales. The authors' global finding of clustering at two spatial scales suggests the possibility of two distinct forms of spillovers. First, the rapid attenuation of significant clustering at small spatial scales is consistent with the view that knowledge spillovers are highly localized. Second, the scale at which larger clusters are found is roughly comparable to that of local labor markets, suggesting that such markets may be the source of additional spillovers (e.g., input sharing or labor market matching externalities).
    Keywords: Research and development ; Cities and towns ; Industrial location
    Date: 2010
  12. By: Chiara Balderi (Lab. MaIn – Scuola Superiore Sant’Anna, Pisa); Andrea Piccaluga (Lab. MaIn – Scuola Superiore Sant’Anna, Pisa)
    Abstract: The aim of this paper is to contribute to the current debate about the growth patterns of academic spin-offs by focusing on the Italian context. In order to identify some growth determinants, we study the initial resource base, the firms’ market strategy and their network of relationships with the parent Public Research Organisations (PROs), by controlling for industry, competitive forces, local context, firms’ age and size. In consideration of the complexity of growth phenomena, we study three growth measures, namely employment, revenues and total asset growth. Our multivariate analysis shows that the bundle of initial assets lying at the heart of the firms’ growth prospects include the formal involvement of an industrial shareholder, the targeting of a large and broadly-defined market and the availability of a strong network of formal relationships with the parent PROs. On the contrary, the volume of the Intellectual Property Rights (IPRs) portfolio, the experience previously ripened by the promoting partners in R&D and production functions and the availability of informal support mechanisms from the parent PROs do impact negatively and significantly on growth processes with regard to total assets. Finally, the specific New Product Development (NPD) stage, the amount of the starting capital, the formal involvement of a Venture Capital (VC), the experience previously ripened by the promoting partners in commercial and managerial functions and the breadth of the target market do not significantly affect growth processes.
    Date: 2010–04–01
  13. By: Gupta, Anil K
    Abstract: The concern for making services of public systems accessible, accountable and affordable for the disadvantaged people has been there since independence of the country. However, after recognising the limitations of trickle down theory despite witnessing economic growth for a decade, government has realised the need for more inclusive approach. The disparities have increased just as they had in the post green revolution era. The declaration of this decade as the ?decade of innovation? by the Prime Minister and the President of India has underlined the concern for inclusiveness. On Civil Service Day, April 24, 2010, I had the opportunity to witness the awards to the outstanding civil servants and also share my thoughts in a panel having concerned Minster and former Cabinet Secretary and Advisor to Prime Minister. I have argued that the urgent concern is not so much about triggering new innovations as about learning from existing innovations. I also refer to the efforts of 13th Finance Commission in this regard. Two major changes were enacted on the advice of Finance Commission based on the background papers prepared by NIF. The Commission has recommended in the paras 12.92 and 12.96 setting up of ?Centre for Innovations in Public Systems to identify, document and promote innovations in public services across states?. A grant of Rs.20 crore has been recommended for the purpose. In addition, ?a second grant of Rs.1 crore per district is for the creation of District Innovation Fund [DIF] aimed at increasing the efficiency of capital assets already created.? I hope that the paper will trigger discussion about the need for a more systematic cataloguing of innovation in public system so that the benefits thereof can reach the masses rapidly.
    Date: 2010–10–06

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