nep-ino New Economics Papers
on Innovation
Issue of 2011‒03‒05
eleven papers chosen by
Steffen Lippert
Massey University, Albany

  1. Does intellectual monopoly stimulate or stifle innovation? By Chu, Angus C.; Cozzi, Guido; Galli, Silvia
  2. Competition and R&D Cooperation with Universities and Competitors By Thomas Bolli; Martin Woerter
  3. Innovation and Entrepreneurship: A first look at linkage data of Japanese patent and enterprise census By MOTOHASHI Kazuyuki
  4. Export and Innovation in SMEs and Large Firms: The main determinants By Ana Rita Gomes; Horácio Crespo Faustino
  5. Assessing the effect of the CAP on farm innovation adoption. An analysis in two French regions By Bartolini, Fabio; Latruffe, Laure; Viaggi, Davide
  6. The Need for Innovation Support Services unraveled. The ³case of New Technology Based Firms By M. KNOCKAERT; E. VANDENBROUCKE; A. HUYGHE
  7. Examining the University Industry Collaboration Policy in Japan: Patent analysis By MOTOHASHI Kazuyuki; MURAMATSU Shingo
  8. R&D Projects Fostering Small Firmsâ Market-Sensing and Customer-Linking Capabilities: A Multivariate Statistics Approach By Dentoni, Domenico; English, Francis
  9. Do We Need to Protect Intellectual Property Rights? By Vladimir Popov
  10. Product innovation when consumers have switching costs By Salies, Evens
  11. An Economic Evaluation of the U.S. Department of Energy’s Investments in Vehicle Combustion Engine R&D By Link, Albert N

  1. By: Chu, Angus C.; Cozzi, Guido; Galli, Silvia
    Abstract: This study develops an R&D-based growth model that features both vertical and horizontal innovation to shed some light on the current debate on whether patent protection stimulates or stifles innovation. Specifically, we analyze the growth and welfare effects of patent protection in the form of profit division between sequential innovators along the quality ladder. We show that patent protection has asymmetric effects on vertical innovation (i.e., quality improvement) and horizontal innovation (i.e., variety expansion). Maximizing the incentives for vertical (horizontal) innovation requires a profit-division rule that assigns the entire flow profit to the entrant (incumbent) of a quality ladder. In light of this finding, we argue that in order to properly analyze the growth and welfare implications of patent protection, it is important to disentangle its different effects on vertical and horizontal innovation.
    Keywords: economic growth; innovation; intellectual property rights
    JEL: O34 O31 O40
    Date: 2010–11
  2. By: Thomas Bolli (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Martin Woerter (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: This paper analyzes the relationship between competition and R&D cooperation with universities and competitors. Our simple model predicts that more competitors reduce the incentives for horizontal cooperation as it diminishes the gains from “collusion”. Assuming that the value of synergies and spillovers created by cooperation depends on competition intensity reveals two distinct and opposing incentives for cooperation. While synergies foster R&D cooperation, spillovers may hinder cooperation. We mainly hypothesize that university cooperation corresponds to product innovation and hence quality competition, while horizontal cooperation lead to process innovations and therefore relates to price competition. We test these hypotheses based on Swiss firm-level panel data controlling for simultaneity of cooperation decisions and endogeneity of competition. Our empirical analysis supports the relevance of distinguishing between competition dimensions and cooperation partners, respectively. We find that price competition matters for both university and horizontal cooperation and it takes the form of an inverted U-shape. On the contrary, quality competition only matters for university cooperation and the relationship shows a U-form. Moreover we see that the number of principal competitors is significantly related only to cooperation between competitors and the relationship shows an inverted U-form. Hence, markets with a medium number of competitors are more receptive for horizontal cooperation. In sum these findings advance our understanding of the relationship between innovation and competition policy.
    Keywords: innovation cooperation, university cooperation, horizontal cooperation, number of competitors, price competition, quality competition, synergy, knowledge spillover, collusion
    JEL: O3
    Date: 2011–02
  3. By: MOTOHASHI Kazuyuki
    Abstract: This paper presents the results of a comprehensive analysis of the innovative activities of the entire population of Japanese firms by using a linked dataset of Establishment and Enterprise Census and the IIP Patent Database (JPO patent application data). As of 2006, it was found that about 1.4% of about 4.5 million firms filed patents, and substantial patenting activities were found not only in the manufacturing field but also in a wide range of fields such as B2B services and financial sectors. In addition, a firmfs survival and growth are regressed with patenting and open innovation (measured by joint patent application with other firms and universities), and it is shown that innovative activities measured by patenting are positively correlated with such firm performance. It is also found that the relationship between patents and the survival rate is stronger for larger firms, while that between patents and firm growth is stronger for smaller firms.
    Date: 2011–02
  4. By: Ana Rita Gomes; Horácio Crespo Faustino
    Abstract: This study analyses the main determinants of exports and research and development (R&D) expenses of small and medium enterprises (SME) and large companies operating in Portugal during the period 2004- 2008. From a sample of 200 SMEs and 30 major exporting companies, the study uses a panel data analysis and fixed-effects and random-effects estimators to estimate the effects on exports and on R & D. Regarding exports, the study found a positive effect in terms of increased productivity and R & D in both SMEs and large companies. The results also suggest that SMEs that are owned by foreign enterprises export more than national SMEs. In relation to the determinants of spending on R & D, the study concludes that the increase in equity and net income has a positive effect on R & D spending in large companies, while in SMEs, increased expenditure on R & D is a consequence of increasing exports, whereas the increase in net income has a negative effect on R& D
    Keywords: Exports, R & D, Enterprise, SME, Panel Data, Portugal
    Date: 2011–01
  5. By: Bartolini, Fabio; Latruffe, Laure; Viaggi, Davide
    Abstract: Literature on innovation adoption mechanism has emphasised the positive effect of Single Farm Payments (SFP) and Rural Development Payments on adoption of new technologies. In this context, the expected process of CAP reforming after 2013 is likely to strengthen the role of innovation in the European Union (EU). The objective of this paper is to identify the determinants of the adoption of future innovation, in particular in connection to past innovation, and to assess the role of agricultural policy in the promotion of innovation adoption. The analysis is applied to two regions (Centre and Midi-Pyrénées) in France. Two separate Count models are developed in order to explain famersâ stated intention concerning different intensities of innovation adoption under two different policy scenarios. Preliminary results highlight that the CAP strongly affects the decision to innovate and the innovation intensity, even if there is no statistical significance for the variable connected to the amount of payments or the level of payment per hectare.
    Keywords: innovation, sequences of innovation, CAP, zero inflated Poisson model, Agricultural and Food Policy, Q12, Q18,
    Date: 2011–02–10
    Abstract: New Technology Based Firms (NTBFs) are considered to contribute significantly to the economy. As a result, these firms have received extensive attention from academics over the past decades. Given that NTBFs are faced with many challenges and liabilities, the academic literature has tried to identify how public policy measures could help to overcome challenges related to innovation, amongst others by identifying NTBFs’ needs for innovation support services. Our study contributes to this stream of research by exploring the determinants of the need for innovation support services. We find that technology-related services are highly needed by VC-backed companies, whereas market-related services are searched for by NTBFs in an early development stage pursuing a strategy of playing on the product market. Further, financial-related services were needed by NTBFs with a high level of informal protection, in an early development stage and targeting at playing on a technology market. Finally, soft services were looked for by teams with high levels of technical human capital, in an early development stage, and pursuing a product market strategy.
    Date: 2011–01
  7. By: MOTOHASHI Kazuyuki; MURAMATSU Shingo
    Abstract: This study is a quantitative analysis of Japanese patent information to examine the changes in the nature and the outcome of university-industry collaborations (UICs) following the enactment of UIC policies in the late 1990s. By considering UIC patents not only in joint university-industry patent applications but also in joint inventions organized by university personnel and corporate researchers, we discuss the status of UICs before the incorporation of national universities. Our analysis indicates that these policies increased the number of UIC patents in the late 1990s. However, strong IP policies pursued by universities may reduce the incentive for firms to commercialize inventions resulting from UIC collaborations.
    Date: 2011–02
  8. By: Dentoni, Domenico; English, Francis
    Abstract: A large number of empirical studies have recently explored the processes and the conditions under agri-food companies acquire and develop market orientation (e.g. Martin et al. 2009), entrepreneurship (e.g. Holster 2008) and innovation (e.g. Verhees 2005), which have been proven to have a positive relationship with their performance (e.g. Micheels and Gow 2008). A much smaller number of studies focused on how agri-food firms can acquire the capabilities that are necessary to become market-oriented and innovative (e.g. Anderson & Narus 2007), specifically market sensing and customer linking (Day 1994). As a number of public-private partnership projects are attempting to enhance agri-food companies' market orientation and innovation, it is useful to identify which research and dissemination methods effectively develop these capabilities and under which conditions. To attempt to start filling this gap, this study analyses under which conditions public-private projects based on research and dissemination manage to foster market-sensing and customer-linking capabilities of small agri-food firms. Fostering these capabilities in small firms is particularly challenging, as they have limited resources to absorb the new information, learn and apply strategic changes as a result of the learning process. The case of five knowledge-building Seafood Cooperative Research Centre projects based on supply chain mapping and benchmarking methods with the oyster, wild prawn, farmed prawn and finfish industries provides the instrumental cases to the study. We collected data both quantitatively and qualitatively to gain more insight on the cause-effect relationship among variables (Eisenhardt 1989). Then, we analysed data with a structural equation model, whose multivariate statistic approach allows a rigorous analysis of the relationships between latent variables such as market-sensing and customer-linking capabilities and attitudes. Preliminary results can be summarized as follows. First, an estimation of profit margins that different customers make along the chain and an assessment of customers' needs, when customers'concentration and rivalry along the chain is low, are crucial to foster small farms' capabilities. Second, informal networks play a key role for fostering these capabilities from few small firms to the majority of the target.
    Keywords: Agribusiness, Marketing,
    Date: 2011
  9. By: Vladimir Popov (New Economic School, Moscow)
    Abstract: Strict protection of IPR can have a negative effect on economic development. Regression of economic growth on these indices produces conventional results (positive effect of stricter protection of IPR on growth) only if indices of institutional capacity (government effectiveness, control over corruption) are not included into the right hand side. If they are included, they kill the effect of IPR protection (because they are very much correlated with the IPR protection indices), so it is hardly possible to separate the effects of stricter IPR protection from the impact of the general strength of institutions. The same procedure was used to evaluate the impact of the IPR protection regime on the average share of R&D expenditure in GDP and the results were largely the same: without control for the institutional capacity, IPR protection seems to stimulate R&D, but after controlling for the institutional indices the effect disappears. There is also a strong negative effect of stricter regime of protection of IPR on the proliferation of the most crucial technology of recent decades – computers. The increase in the total number of PCs in 1995-2005, after controlling for the level of development, the size of the country and the institutional index, is negatively correlated with the IPR protection index. If piracy of intellectual products allows to overcome the negative impact of IPR protection on the dissemination of new technologies, it is reasonable to talk not about costs of piracy, but about the benefits of piracy and the costs of stricter IPR protection.
    Date: 2010–05
  10. By: Salies, Evens
    Abstract: Economists have long recognized that in free markets, incentives to innovate will be diluted unless some factors grant innovators with a temporary monopoly. Patenting is the most cited factor in the economic literature. This survey concentrates on another factor that confers innovators with first-mover advantage over their competitors, namely consumer switching costs, whereby a consumer makes an investment specific to her current seller, that must be duplicated for any new seller. In this survey, we list several components of switching costs that are relevant as regards to firm innovation behaviour. The aim of this classification is twofold. First, consumer switching cost theory has matured to the point that some classification of switching costs for both understanding innovative firm behaviour and building policy-oriented models is necessary. Second, the classification included in this paper addresses the confusion that has been existing so far regarding the distinction between ‘good’ or ‘bad’ switching costs, perceived or paid switching costs, and between switching and search costs. This paper then surveys the existing literature on the effect of switching costs on product innovation by firms and the way they compete for consumers. We also raise several important regulation and competition policy questions, using examples from the real world.
    Keywords: Consumer switching costs; Search costs; Product innovation; Competition policy; Economic methodology
    JEL: L14 L96 B21 L13 L52 D83 D4
    Date: 2010–09–17
  11. By: Link, Albert N (University of North Carolina at Greensboro, Department of Economics)
    Abstract: The Government Performance and Results Act (GPRA) of 1993 was legislated in the United States to, among other things, hold Federal agencies accountable for achieving program results, and through systematic program evaluations to improve Congressional decision making. Two technologies funded by the U.S. Department of Energy (DOE) that are related to improved fuel efficiency in new heavy-duty diesel trucks are studied in this paper—laser diagnostics and optical engine technologies, and combustion modeling. Based on DOE cost data, and benefit data derived from field-based interviews, economic evaluation metrics are calculated. They suggest that DOE’s investments in these two technologies have been socially valuable.
    Keywords: innovation; program evaluation; social rate of return
    JEL: H42 O31 O33 O38
    Date: 2011–02–23

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