nep-ino New Economics Papers
on Innovation
Issue of 2011‒05‒14
23 papers chosen by
Steffen Lippert
Massey University, Albany

  1. Materialistic Genius and Market Power: Uncovering the best innovations By Tirole, Jean; Weyl, Glen
  2. Europe's missing yollies By Reinhilde Veugelers
  3. Young leading innovators and EUÂ?s R&D intensity gap By Michele Cincera; Reinhilde Veugelers
  4. Boosting innovation in Europe By Mathias Dewatripont; André Sapir; Bruno van Pottelsberghe; Reinhilde Veugelers
  5. Corporate governance practices and companiesÂ? R&D orientation: Evidence from European countries. By Bruno van Pottelsberghe
  6. The quality factor in patent systems By Bruno van Pottelsberghe
  7. Immigration and Innovation By Maré, David C.; Fabling, Richard; Stillman, Steven
  8. Immigration and Innovation in European Regions By Ozgen, Ceren; Nijkamp, Peter; Poot, Jacques
  9. Organizational paths of commercializing patented inventions: The effects of transaction costs, firm capabilities, and collaborative ties By Taehyun Jung; John P. Walsh
  10. The strategic timing of R&D agreements. By Marco Marini; Maria Luisa Petit; Roberta Sestini
  11. Can Medical Progress be Sustained? Implications of the Link Between Development and Output Markets By Anup Malani; Tomas J. Philipson
  12. Synergistic effects of organizational innovation practices and firm performance By MOTHE Caroline; NGUYEN Thi Thuc Uyen; NGUYEN-VAN Phu
  13. The impact of science and technology parks on firms´ product innovation: empirical evidence from Spain By Vásquez Urriago, Ángela Rocio; Barge-Gil, Andrés; Modrego Rico, Aurelia; Paraskevopoulou, Evita
  14. The impact of foreign R&D activities on the MNC’s performance at home: Evidence from the Case of Swiss Manufacturing firms By Lamia Ben Hamida
  15. CSR firm profiles and innovation: An empirical exploration with survey data By Rachel Bocquet; Christian Le Bas; Caroline Mothe; Nicolas Poussing
  16. Individual Preferences, Organization, and Competition in a Model of R&D Incentive Provision By Nicola Lacetera; Lorenzo Zirulia
  17. Business Groups, Networks, And Embeddedness: Innovation And Implementation Alliances In Japanese Electronics, 1985-1998 By Lincoln, James R.; Guillot, Didier
  18. Environmental Regulations, Market Structure and Technological Progress in Renewable Energy Technology — A Panel Data Study on Wind Turbines By Dirk Rübbelke; Pia Weiss
  19. A Green Venture Fund to Finance Clean Technology for Developing Countries By Darius Nassiry; David Wheeler
  20. Anti-takeover Provisions as a Source of Innovation and Value Creation By Humphery-Jenner, M.
  21. Technological Advance in Cooling Systems at U.S. Power Plants By Bellas, Allen S.; Finney, Duane; Lange, Ian
  22. From Laboratory to Market: On the Propensity of Young Inventors to Form a New Business By Link, Albert N.; Welsh, Dianne H. B.
  23. Environmental Innovations, Local Networks and Internationalization By Giulio Cainelli; Massimiliano Mazzanti; Sandro Montresor

  1. By: Tirole, Jean (University of Toulouse); Weyl, Glen (Harvard University)
    Abstract: What is the best way to reward innovation? While prizes avoid deadweight loss, intellectual property screens out projects generating low consumer surplus per unit sold. We build a model that formalizes this trade-off and develop tools for solving the resulting multidimensional screening problem. Optimal policy generally calls for some market power but never full monopoly pricing. The appropriate degree of market power is determined by a value-weighted average of the innovation supply elasticity multiplied by the log-variance of innovation quality. This quantifies the value of the materialistic genius long associated with entrepreneurship, opening it to empirical calibration. Our results also apply to the pricing of platforms and public infrastructure.
    Date: 2010–08–15
  2. By: Reinhilde Veugelers
    Abstract: In this Policy Brief, Bruegel Senior Fellow Reinhilde Veugelers and Michele Cincera, Professor at ULB, draw our attention to young leading innovators ('yollies'). They explain why the European Union's business research and development deficit, relative to the United States, can be attributed to the EU having fewer yollies, especially those that are less R&D intensive. This paper raises important and timely questions about the EU's innovation policy. The authors argue why policy makers should pay attention to the heterogeneity across young sectors and design sector-specific measures to boost innovation and growth in the EU.
    Date: 2010–08
  3. By: Michele Cincera; Reinhilde Veugelers
    Abstract: Innovation in the European Union remains weak and there are relatively few signs of progress. In this policy contribution, Reinhilde Veugelers and Michele Cincera give evidence to show that compared to the US, the EU has fewer young firms among its leading innovators and the primary driver of this private R&D gap is due to the fact that young leading innovators in the EU are less R&D intensive than their US counterparts. This paper complements the Bruegel policy brief, EuropeÂ?s missing yollies.
    Date: 2010–09
  4. By: Mathias Dewatripont; André Sapir; Bruno van Pottelsberghe; Reinhilde Veugelers
    Abstract: Innovation is key to the future of Europe. This Policy Contribution, written together by Mathias Dewatripont, Solvay Brussels School of Economics and Management; Bruno van Pottelsberghe and André Sapir, Senior Fellows at Bruegel and professors at ULB; and Reinhilde Veugelers, senior fellow at Bruegel and professor at Katholieke Universiteit Leuven, makes suggestions based on three principles: to give primacy to merit-based selection of projects at the European level, to strengthen the single market to make it conducive for research and innovation and to remove barriers that hinder dynamic restructuring. This paper is addressed to the July 2010 informal Competitiveness Council (Research) under the Belgian Presidency.
    Date: 2010–06
  5. By: Bruno van Pottelsberghe
    Abstract: This working paper empirically investigates if corporate governance practices affect the resources firms devote to R&D. The authors Florence Honoré, Federico Munari and Bruno van Pottelsberghe found that an executive remuneration system that is linked to the firm�s financial performance has a particularly strong negative impact on R&D. This confirms the hypothesis that incentive mechanisms lead managers to focus on more predictable and easily measurable short-term activities,ultimately hampering the commitment to innovative projects.
    Date: 2011–01
  6. By: Bruno van Pottelsberghe
    Abstract: In this paper, Bruegel senior Fellow Bruno van Pottelsberghe develops a methodology to compare the quality of examination services in different patent offices. Quality is defined as the extent to which patent offices comply with their patentability conditions in a transparent way. The methodology consists of a two-layer analytical framework encompassing 'legal standards' and their 'operational design', which includes several interdependent components that affect the stringency and transparency of the filtering process.
    Date: 2010–07
  7. By: Maré, David C. (Motu Economic and Public Policy Research Trust); Fabling, Richard (Reserve Bank of New Zealand); Stillman, Steven (Motu Economic and Public Policy Research Trust)
    Abstract: We combine firm-level innovation data with area-level Census data to examine the relationship between local workforce characteristics, especially the presence of immigrants and local skills, and the likelihood of innovation by firms. We examine a range of innovation outcomes, and test the relationship for selected subgroups of firms. We find a positive relationship between local workforce characteristics and average innovation outcomes in labour market areas, but this is accounted for by variation in firm characteristics such as firm size, industry, and research and development expenditure. Controlling for these influences, we find no systematic evidence of an independent link between local workforce characteristics and innovation.
    Keywords: local labour market, immigration, innovation
    JEL: O31 R30
    Date: 2011–04
  8. By: Ozgen, Ceren (VU University Amsterdam); Nijkamp, Peter (VU University Amsterdam); Poot, Jacques (University of Waikato)
    Abstract: The concentration of people with diverse socio-cultural backgrounds in particular geographic areas may boost the creation of new ideas, knowledge spillovers, entrepreneurship, and economic growth. In this paper we measure the impact of the size, skills, and diversity of immigration on the innovativeness of host regions. For this purpose we construct a panel of data on 170 regions in Europe (NUTS 2 level) for the periods 1991-1995 and 2001-2005. Innovation outcomes are measured by means of the number of patent applications per million inhabitants. Given the geographical concentration and subsequent diffusion of innovation activity, and the spatial selectivity of immigrants' location choices, we take account of spatial dependence and of the endogeneity of immigrant settlement in our econometric modelling. We use the location of McDonald's restaurants as a novel instrument for immigration. The results confirm that innovation is clearly a function of regional accessibility, industrial structure, human capital, and GDP growth. In addition, patent applications are positively affected by the diversity of the immigrant community beyond a critical minimum level. An increase in the fractionalization index by 0.1 from the regional mean of 0.5 increases patent applications per million inhabitants by about 0.2 percent. Moreover, the average skill level of immigrants (proxied by global regions of origin) also affects patent applications. In contrast, an increasing share of foreigners in the population does not conclusively impact on patent applications. Therefore, a distinct composition of immigrants from different backgrounds is a more important driving force for innovation than the sheer size of the immigrant population in a certain locality.
    Keywords: innovation, economic growth, cultural diversity, immigration, spatial autocorrelation
    JEL: J61 O31 R23
    Date: 2011–04
  9. By: Taehyun Jung; John P. Walsh
    Abstract: This study examines the factors affecting modes of commercializing patented inventions using a novel dataset based on a survey of U.S. inventors. We find that technological uncertainty and possessing complementary assets raise the propensity for internal commercialization. We find that R&D collaboration with firms in a horizontal relationship is likely to increase the propensity to license the invention. In addition, the paper shows that macro-level environment conditions that affect exchange conditions, such as technology familiarity, influence the effects of capabilities on governance choice.
    Keywords: transaction cost economics; knowledge-based view; collaboration ties; commercialization; innovation; patent
    Date: 2011–04
  10. By: Marco Marini (Department of Economics, Society & Politics, Università di Urbino "Carlo Bo"); Maria Luisa Petit (Department of Computer and System Sciences "Antonio Ruberti", Università di Roma "La Sapienza"); Roberta Sestini (Department of Computer and System Sciences "Antonio Ruberti", Università di Roma "La Sapienza")
    Abstract: We present a model of endogenous formation of R&D agreements among firms in which also the timing of R&D investment is made endogenous. The purpose is to bridge two usually separate streams of literature, the noncooperative formation of R&D alliances and the endogenous timing literature. Our approach allows to consider the formation of R&D agreements over time. It is shown that, when both R&D spillovers and investment costs are sufficiently low, firms may find difficult to maintain a stable R&D agreement due to the strong incentive to invest noncooperatively as leaders. In such a case, to be stable a R&D agreement requires that the joint investment occurs at the initial stage, avoiding any delay. When instead R&D spillover rates are sufficiently high, the cooperation in R&D constitutes a profitable option, although firms also possess the incentive to sequence their investment over time. Finally, when spillovers are asymmetric and the knowledge leaks mainly from the leader to the follower, to invest as follower becomes extremely profitable, making R&D alliances hard to sustain unless firms strategically delay their joint investment in R&D.
    Keywords: R&D investment, Spillovers, Endogenous Timing.
    JEL: C72 D43 L11 L13 O30
    Date: 2011
  11. By: Anup Malani; Tomas J. Philipson
    Abstract: Improvements in health have been a major contributor to gains in overall economic welfare. In this paper, we argue that previous economic research on R&D has overlooked an important difference between medical R&D and R&D in other sectors. The health care sector exhibits a unique linkage between product development and output markets. Participants in clinical trials for new medical products are also potential consumers of existing approved medical products. This overlap between input supply and output demand has non-standard effects on innovative returns over time and across geography. First, medical R&D has a self-limiting effect. Contemporary innovation discourages trial participation and slows down development necessary for future innovation. Thus, medical R&D suffers increasing costs over time, driven by improvements in the standard of care. Second, policies that affect output markets, such as universal coverage and price controls, affect the returns to innovation, not only by altering the firm’s variable profits, but also by increasing the length and cost of development. Third, the amount of medical R&D in a location is driven, not only by the local relative R&D talent, but also by consumer demographics and output market policies in that location. We provide evidence of the input-output linkage for the break-through HIV therapies introduced in 1996. We document the substantial drop in trial recruitment induced by these new innovations and argue that this has slowed down development and lowered returns to subsequent HIV-related innovations.
    JEL: I1 I11
    Date: 2011–05
  12. By: MOTHE Caroline; NGUYEN Thi Thuc Uyen; NGUYEN-VAN Phu
    Abstract: Organizational innovation has been shown to be favourable for technological innovation. However, the question of which organizational practices should be combined – and thus of their compatibility – remains unanswered. We here empirically investigate the complementarities between different organizational practices (business practices, knowledge management, workplace organization and external relations). Firm-level data were drawn from the Community Innovation Survey (CIS) carried out in 2008 in Luxembourg. Supermodularity tests provide evidence of the impact of complementary asset management to raise firms’ innovative performance. The organizational practices’ combinations differ according to whether the firm is in the first step of the innovation process (i.e. being innovative) or in a later step (i.e. performing as far as innovation is concerned). When adopting organizational practices, managers should therefore be aware of their effects on technological innovation. These results also have implications for public policies in terms of innovation support.
    Keywords: Complementarities; Organizational innovation; Technological innovations; Supermodularity; Innovative performance
    Date: 2011–05
  13. By: Vásquez Urriago, Ángela Rocio; Barge-Gil, Andrés; Modrego Rico, Aurelia; Paraskevopoulou, Evita
    Abstract: Science and Technology Parks (STP) are one of the most important and extensive innovation policy initiatives introduced in recent years. This work evaluates the impact of STP on firm product innovation in the Spanish context. Spain is less developed than most of the advanced countries, and regional and national governments are prioritizing STP initiatives. The large firm sample for our study is from the Spanish Technological Innovation Survey, provided by the National Statistical Institute. We focus on average treatment effects for firms located in 22 Spanish STP. Our results show that Spanish STP have a strong and positive impact on the probability and amount of product innovation achieved by STP located firms. These results hold for different assumptions about the mechanisms underlying location in a STP.
    Keywords: Science and Technology Parks; product innovation; treatment effects; regional development policies.
    JEL: R53 L25 O25 O18 L38 O30 H76
    Date: 2011–02–25
  14. By: Lamia Ben Hamida (Institute of Management and Information Systems, University of Applied Sciences, Haute Ecole de Gestion ARC)
    Abstract: This paper examines the impact of the MNCs’ internationalisation of R&D activities on their performances/productivity at home. Specifically, using detailed firm-level data for Swiss manufacturing firms, we find that foreign R&D activity of Swiss MNCs is a valuable source of knowledge which improves their productivity performance at home, but only when firms invest in knowledge-seeking activities. Conversely, R&D activities conducted abroad with knowledge exploiting purposes seem to weaken the MNC’s productivity at home.
    Keywords: internationalization, R&D, knowledge, seeking, exploiting, productivity
    JEL: F23
    Date: 2010–07
  15. By: Rachel Bocquet (IREGE - Institut de Recherche en Gestion et en Economie - Université de Savoie); Christian Le Bas (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon); Caroline Mothe (IREGE - Institut de Recherche en Gestion et en Economie - Université de Savoie); Nicolas Poussing (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen)
    Abstract: This paper explores the relationship between different Corporate Social Responsibility (CSR) strategies and innovation. Using a survey carried out on CSR behavior of Luxembourg firms, we found two types of firms as far as CSR practices are concerned. Cluster 1 firms adopted CSR practices to achieve economic goals without resorting to the formalization of these practices. In contrast, cluster 2 firms "learn CSR by doing" and by establishing CSR procedures and tools. Then  we match Community Innovation Survey (CIS) data and specific data collected on CSR clusters. We estimate Logit models to explain the different types of innovation (product, process, organizational). In comparison with the firms which don't adopt CSR, firms in Cluster 1 are more innovative in  terms of product and process once we control for firm characteristics and innovation drivers while firms in cluster 2 tend to reject innovation in process and adopt organizational innovation. These results, which show the link between the various CSR practices and innovation types, have important consequences in terms of managerial recommendations and public policy support for innovation.
    Keywords: Corporate Social Responsibility; Innovation; Organizational; Practices; Product; Process
    Date: 2011
  16. By: Nicola Lacetera; Lorenzo Zirulia
    Abstract: Understanding the organization of R&D activities requires the simultaneous consideration of scientific workers' talent and tastes, companies' organizational choices, and the characteristics of the relevant industry. We develop a model of the provision of incentives to corporate scientists, in an environment where (1) scientists engage in multiple activities when performing research; (2) knowledge is not perfectly appropriable; (3) scientists are responsive to both monetary and non-monetary incentives; and (4) firms compete on the product market. We show that both the degree of knowledge spillovers and of market competition affect the incentives given to scientists, and these effects interact. First, high knowledge spillovers lead firms to soften incentives when product market competition is high, and to strengthen incentives when competition is low. Second, the relationship between the intensity of competition and the power of incentives is U-shaped, with the exact shape depending on the degree of knowledge spillovers. We also show that the performance-contingent pay for both applied and basic research increases with the non-pecuniary benefits that scientists obtain from research. We relate our findings to the existing empirical research, and also discuss their implications for management and public policy.
    JEL: L1 L22 M12 O31 O32
    Date: 2011–05
  17. By: Lincoln, James R.; Guillot, Didier
    Abstract: This paper examines the changing process of strategic alliance formation in the Japanese electronics industry between 1985 and 1998. With data on 123-135 Japanese electronics/electrical machinery makers, we use a dyad panel regression methodology to address a series of hypotheses drawn largely from embeddedness theory on how the firms’ horizontal and vertical keiretsu business group affiliations and prior alliance networks supported and constrained partner choice in new R&D (innovation) and nonR&D (implementation) domestic economy alliances. We find that in the first half of our series (1985-91; the “preburst†period) keiretsu served as infrastructure or platform for new strategic alliances that had both innovation and implementation goals. In the second half of our series (1992-98, the “postbubble†period) the keiretsu effects on innovation alliance formation were gone, but the groups’ role in nonR&D or implementation alliances, the purpose of which was often cost reduction, had expanded. Our results suggest that Japanese electronics firms over this interval of time adapted rationally to the heightened uncertainty and stringency of the Japanese domestic economic environment by searching outside their preexisting networks for innovation alliances while at the same time exploiting those networks for implementation alliances addressed to cost-reduction and other operational aims. The study speaks to embeddedness theory in showing that economic actors are not deterministically constrained by business group or other preexisting network ties but may in rational fashion exploit or abandon those ties with an eye to advancing corporate and alliance goals.
    Keywords: Organizational Behavior and Theory
    Date: 2011–05–02
  18. By: Dirk Rübbelke (Basque Centre for Climate Change (BC3) and IKERBASQUE, Basque Foundation for Science); Pia Weiss (Nottingham University Business School)
    Abstract: We study the impact of environmental regulations on the patent activities for wind turbines between 1980 and 2008. We explicitly control for energy market liberalisation and take a potential interaction between liberalisation and policy instruments into account. We find a strong and highly significant effect of environmental tax revenues, which we regard as a proxy for the extent to which energy prices changed in favour of renewable energies, as well as foreign demand for wind turbines on innovation activities. In addition, we find that price-based policy instruments are more effective in fostering innovations in the wind turbine technology when energy markets are fully open to competition. In contrast, non-price-based policy instruments such as grants or low interest rate loans are largely independent from whether or not energy markets are liberalised.
    Keywords: Environmental Policy, Renewable Energy, Market Structure, Wind Turbines, Innovation, Patents, Technological Change
    JEL: Q55 Q58 O34 O38
    Date: 2011–04
  19. By: Darius Nassiry; David Wheeler
    Abstract: A structure for the green venture fund (GVF) and explain the design rationale, operating principles and key parameters for two funds of funds for technology innovation and deployment is proposed. Some key issues to be considered, including differential treatment of public and private investors and possible approaches to setting technology priorities are highlighted. [Working Paper No.245]. URL:[ ations/detail/1424899].
    Keywords: green venture fund, GVF, technology, public, private, investors, priorites, venture capital, financing, development, commercialization, risk capital, deployment, developing countries, energy, africa
    Date: 2011
  20. By: Humphery-Jenner, M. (Tilburg University, Center for Economic Research)
    Abstract: Managers are risk averse. Excessive risk-aversion can destroy shareholder wealth. A key source of risk is the threat of an opportunistic takeover designed to take advantage of depressed market prices. This is especially the case in innovative or hard-to-value (`HtV') companies whose price may be depressed due to valuation difficulties rather than managerial under-performance. For these HtV firms, the threat of an opportunistic takeover can destroy value by inducing agency con icts of managerial risk aversion. managers and regulators argue that ATPs can ameliorate this problem. This article presents a theoretical model and empirical results that show that for HtV firms, ATPs encourage managers to make value-creating takeovers and increase innovation and do not induce agency con icts of managerial entrenchment. This implies that for innovative or hard-to-value firms, ATPs can ameliorate managerial risk aversion and encourage value-creation.
    Keywords: Takeovers;Acquisitions;Valuation;Governance;Managerial;Risk Aversion;Innovation.
    JEL: G34 O31 O32
    Date: 2011
  21. By: Bellas, Allen S.; Finney, Duane; Lange, Ian
    Abstract: Prior to adoption of the 1972 Clean Water Act (CWA) most U.S. power plants used once-through cooling water systems that discharged large quantities of warm water and resulted in significant amounts of thermal pollution in neighboring bodies of water. The CWA essentially mandated recirculating systems for most new facilities. This paper investigates whether there was either cost-saving or performance enhancing technological advance in cooling systems and how these advances are related to imposition of the CWA.
    Keywords: Environmental Policy; Water Cooling: Innovation; Electricity Generatio n
    Date: 2011–03
  22. By: Link, Albert N. (University of North Carolina at Greensboro, Department of Economics); Welsh, Dianne H. B. (University of North Carolina at Greensboro, Department of Economics)
    Abstract: Many researchers have studied correlates of business formations. Through the case-based and statistical literature several broad categories of influence on the entrepreneurial decision to start a new business have been identified. We contribute to this literature though our statistical analysis of a unique database of young inventive scientists and engineers and their propensity toward a new business formation. Our particular focus is on young inventors starting a business based on their creative achievements. Among this group do not find empirical support for the influence of traditional variables—such as age, education, and gender—on the propensity to start a new business. Rather, we find that their entrepreneurial experience as a new business proprietor is driven by dimensions of their university laboratory research experience.
    Keywords: Entrepreneurship; business formation; patents
    JEL: L26
    Date: 2011–05–03
  23. By: Giulio Cainelli (University of Padova); Massimiliano Mazzanti (University of Ferrara); Sandro Montresor (University of Bologna)
    Abstract: This paper investigates the drivers of the environmental innovations (EI) introduced by firms in local production systems (LPS). The role of firm network relationships, agglomeration economies and internationalization strategies is analysed for a sample of 555 firms in the Emilia-Romagna region, North-East of Italy. Cooperating with ‘qualified’ local actors – i.e. universities and suppliers – is the most important driver of EI for most firms, along with their training policies and IT innovations. The role of agglomeration economies is less clear and seems to depend on the EI propensity of more locally oriented firms playing in district areas, which might even turn agglomeration into dis-economies. Networking effects and agglomeration economies are instead found to strongly promote the adoption of EI by multinational firms, thus highlighting the importance of local-global interactions. We provide some interesting findings for particular kinds of challenging EI in fields as CO2 abatement and ISO labelling, generally extending the analysis EI driver by joining local and international factors.
    Keywords: Eco-Innovation, Foreign Ownership, Networking, District, Agglomeration Economics, Local Production Systems
    JEL: C21 L60 O13 O30 Q20 Q58 F23
    Date: 2011–02

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