nep-ino New Economics Papers
on Innovation
Issue of 2012‒07‒08
sixteen papers chosen by
Steffen Lippert
University of Otago, Dunedin

  1. Innovative and absorptive capacity effects of education in a small open economy By Brita Bye and Taran Fæhn
  2. Non-Tradeable Pollution Permits as Green R&D Incentives By Mehdi Fadaee; Luca Lambertini
  3. The territorial dynamics of innovation in China and India By Riccardo Crescenzi; Andrés Rodríguez-Pose; Michael Storper
  4. Horizontal Agreements and R&D Complementarities: Merger versus RJV By Ben Ferrett; Joanna Poyago-Theotoky
  5. Distal embedding as a technology innovation network formation strategy By Paredes-Frigolett, Harold; Pyka, Andreas
  6. Wage-Setting Institutions and R&D Collaboration Networks By Ben Ferrett; Vasileios Zikos
  7. Value for money? New microeconometric evidence on public R&D grants in Flanders By Czarnitzki, Dirk; Lopes-Bento, Cindy
  8. Exports, R&D and Productivity: A test of the Bustos-model with German enterprise data By Joachim Wagner
  9. R&D Competition in an Asymmetric Cournot Duopoly: The Welfare Effects of Catch-Up by the Laggard Firm By Ben Ferrett
  10. University Technology Transfer: How (in-)efficient are French universities? By Claudia Curi; Cinzia Daraio; Patrick Llerena
  11. Biotechnology Adoption, Industrial Structure and Its Effect on Small-Market Crops By Subramaniam, Vijay; Chambers, Orlando D.; Reed, Michael R.
  12. Absorptive Capacity and Efficiency: A Comparative Stochastic Frontier Approach Using Sectoral Data By Letizia Montinari; Michael Rochlitz
  13. The Effect of U.S. Health Insurance Expansiosn on Medical Innovation By Jeffrey Clemens
  14. Valuing patents using renewal data : an inquiry into the feasability of an automated patent scoring method By Marc Baudry; Béatrice Dumont
  15. Market concentration and productivity in the United States corn sector: 2002-2009 By Nolan, Elizabeth; Santos, Paulo; Shi, Guanming
  16. Public Expenditures, Private Incentives, and Farmer Adoption: The Economics of Hybrid Rice in South Asia By Spielman, David J.; Kolady, Deepthi; Cavalieri, Anthony

  1. By: Brita Bye and Taran Fæhn (Statistics Norway)
    Abstract: Evidence points to relatively low supply elasticities for workers skilled for research and development (R&D), which can hamper innovation and growth. Increasing the supply of R&D skills will expand an economy's innovative capacity. A simultaneous effect of increased education, which is particularly important for small, open economies, is to raise final goods producers’ capacity to absorb cross-border knowledge spillovers. In a calibrated endogenous growth model for Norway, we find that increasing the share of highly educated workers has pronounced absorptive capacity effects that partially crowd out R&D-based innovation. Both innovative and absorptive capacity expansions contribute to higher growth and welfare.
    Keywords: Absorptive capacity; Computable general equilibrium model; Endogenous growth; Human capital; Innovation; Research and Development
    JEL: O30 O41
    Date: 2012–06
  2. By: Mehdi Fadaee (Department of Economics, University of Bologna, Italy); Luca Lambertini (Department of Economics, University of Bologna, Italy; ENCORE, University of Amsterdam, The Netherlands; The Rimini Centre for Economic Analysis, Italy)
    Abstract: Acquired wisdom has it that the allocation of pollution rights to firms hinders their willingness to undertake uncertain R&D projects for environmental-friendly technologies. We revisit this issue in a model where firms strategically choose whether to participate in a lottery to attain pollution permits, or instead invest in green R&D, to show that, somewhat counterintuitively, a desirable side effect of the pollution permit is in fact that of fostering environmental R&D in an admissible range of the model parameters.
    Keywords: environmental externalities, pollution rights, pollution-reducing innovation
    JEL: L13 O31 Q55
    Date: 2012–06
  3. By: Riccardo Crescenzi; Andrés Rodríguez-Pose; Michael Storper
    Abstract: This paper analyses the geography of innovation in China and India. Using a tailor-made panel database for regions in these two countries, we show that both countries exhibit increasingly strong polarisation of innovative capacity in a limited number of urban areas. But the factors behind this polarisation and the strong contrasts in innovative capacity between the provinces and states within both countries are quite different. In China, the concentration of innovation is fundamentally driven by agglomeration forces, linked to population, industrial specialisation and infrastructure endowment. Innovative areas in China, rather than generate knowledge spillovers, seem to produce strong backwash effects. In India, by contrast, innovation is much more dependent on a combination of good local socioeconomic structures and investment in science and technology. Indian innovation hubs also generate positive knowledge spillovers to other regions.
    Keywords: Innovation; R&D; socioeconomic conditions; geography; regions; China; India
    JEL: R11 R12 O32 O33
    Date: 2012–06–22
  4. By: Ben Ferrett (School of Business and Economics, Loughborough University, UK); Joanna Poyago-Theotoky (School of Economics, La Trobe University, Australia)
    Abstract: We study the decision of two firms within an oligopoly concerning whether to enter into a horizontal agreement to exploit complementarities between their R&D activities and, if so, whether to merge or form a research joint venture (RJV). In contrast to horizontal merger, there is a probability that an RJV contract will fail to enforce R&D sharing. We find, first, that a horizontal agreement always arises. The insiders’ merger/RJV choice involves a trade-off. While merger offers certainty that R&D complementarities will be exploited, it leads to a profit-reducing reaction by outsiders on the product market, where competition is Cournot. Greater brand similarity and contract enforceability (“quality”) both favour RJV, while greater R&D complementarity favours merger. Interestingly, the insiders may choose to merge even when RJV contracts are always enforceable, and they may opt to form an RJV even when the likelihood of enforceability is negligible.
    Keywords: horizontal merger, research joint venture (RJV), contract enforceability, process R&D, R&D complementarity
    JEL: O30 L13 D43
    Date: 2012–04
  5. By: Paredes-Frigolett, Harold; Pyka, Andreas
    Abstract: Although the area of innovation economics dates back to the early twentieth century with the seminal contributions of Schumpeter (1911), it is only recently that governments have understood the role of a comprehensive approach towards public sector economics that puts innovation systems in the eye of public policy decision makers. Although well researched in academia in recent years, the role that innovation networks play in driving successful processes of innovation and entrepreneurship has been less understood by policy makers. Indeed, so far public policy makers have been concerned with the macro level of public policy in a way that has been rather disconnected from the meso level of innovation networks. Not surprisingly, overall strategies for innovation network formation have not been on the radar screen of public policy. The academic community, on the other hand, has been devoting more attention to the study of innovation networks in an attempt to understand the role they play as a catalyst of innovation and entrepreneurship. By and large in the research community, the process of innovation network formation has been left rather unattended. Indeed, the question of how these networks are formed and what strategies can be developed to ignite processes of innovation network formation has been largely absent from the academic debate. In this article, we make a contribution in this area and present distal embedding as one of three generic innovation network formation strategies. We also show why distal embedding'' is particularly well suited for emerging regions of innovation and entrepreneurship. Our contributions lie at the macro-meso interface and can shed light on public policy at the macro level aiming to have a direct impact at the meso level of innovation network formation. --
    Keywords: entrepreneurship,innovation networks,innovation network strategy formation
    Date: 2012
  6. By: Ben Ferrett (School of Business and Economics, Loughborough University, UK); Vasileios Zikos (University of Surrey, Guildford, UK)
    Abstract: We analyse how union structures that differ in the degree of wage-setting centralization affect the pattern of R&D network formation. Within the context of a three-firm industry, a central union that sets a uniform wage is shown to induce a partial R&D network that includes two firms but excludes the third. In contrast, we find that, under less centralized union structures, firms have incentives to form R&D networks with a larger number of alliances. This result is consistent with the stylised facts for industrialised countries: recent decades have seen an upsurge in R&D alliances along with labour market deregulation towards more flexible wage-setting institutions.
    Keywords: Networks, R&D collaboration, unionisation structures.
    JEL: L13 J50
    Date: 2012–04
  7. By: Czarnitzki, Dirk; Lopes-Bento, Cindy
    Abstract: A significant amount of money is spent on programs to stimulate innovative activities. In this paper, we review the effects of a specific government-sponsored commercial R&D program from various angles. We start by evaluating whether we find positive effects of subsidies on R&D investment and R&D employment. Then, we analyze how the observed effects of subsidies on R&D intensity and employment vary over time, vary if the firm receives also support from other sources, vary depending on how many supported projects a single firm has at the same time or vary if a firm gets support consecutively. Finally, we estimate the macroeconomic impact of these grants in terms of R&D employment. We conclude that (i) the policies are not subject to full crowding out, (ii) the treatments effects are stable over time, (iii) receiving subsidies from other sources in addition to the program under evaluation does not decrease the estimated treatment effect, and (iv) receiving grants repeatedly does not decrease the magnitude of the treatment effects either. Using a back-of-the envelope calculation, we estimate that, on average, five R&D jobs are created (or maintained) per supported project in the Flemish economy. --
    Date: 2012
  8. By: Joachim Wagner (Leuphana University Lueneburg, Germany)
    Abstract: This paper presents the first empirical test with German firm level data of a hypothesis derived by Bustos (AER 2011) in a model that explains the decision of heterogeneous firms to export and to engage in R&D. Using a non-parametric test for first order stochastic dominance it is shown that, in line with this hypothesis, the productivity distribution of firms with exports and R&D dominates that of exporters without R&D, which in turn dominates that of firms that neither export nor engage in R&D. These results are in line with findings for Argentina. The model, therefore, seems to be useful to guide empirical work on the relation between exports, R&D and productivity.
    Keywords: Exports, R&D, productivity, Germany
    JEL: F14
    Date: 2012–06
  9. By: Ben Ferrett (School of Business and Economics, Loughborough University, UK)
    Abstract: The substantial within-industry variation in firm productivity typically observed in the data suggests that there is ample scope for catch-up by laggard firms. We analyse the normative effects of such catch-up. In the short run, where firms’ process technologies are fixed, catch-up can reduce social welfare if the initial unit-cost gap between firms is sufficiently large (the Lahiri/Ono effect). However, in the long run, where firms invest in process R&D to maximize profits, social welfare jumps upwards following catch-up if it causes the major firm’s R&D spending lead to grow. Both qualitative insights appear quite general.
    Keywords: asymmetric duopoly, catch-up, social welfare, process R&D.
    JEL: D61 L13 O33
    Date: 2012–04
  10. By: Claudia Curi; Cinzia Daraio; Patrick Llerena
    Abstract: This paper assesses the efficiency of the technology transfer operated by the French university system and its main determinants. The analysis is based on a detailed and original database of 51 TTOs, categorized by type of university, over the period 2003-2007. Overall, we find low-level of efficiency and both intra-category and inter-categories efficiency variation. The analysis of determinants shows that French TTOs efficiency depends extensively on the nature of the category (with universities specialised in science and engineering resulting the most efficient ones), on institutional and environmental characteristics. We found that both the seniority of TTO and size of the university have a positive effect. In terms of environmental variables, the intensity of R&D activity (both private and public) has a positive impact; however, in terms of growth rate, only the Private R&D activity seems to be the main driver. Lastly, having a medical school related to a hospital is a source of inefficiency.
    Keywords: Technology Transfer Offices (TTOs), French University System, Technical Efficiency, DEA, Bootstrap.
    JEL: C34 C44 D24
    Date: 2012
  11. By: Subramaniam, Vijay; Chambers, Orlando D.; Reed, Michael R.
    Keywords: Biotechnology, Technology Adoption, Biotech Firms, Small-Market Biotech Crops, Crop Production/Industries, Research and Development/Tech Change/Emerging Technologies,
    Date: 2012
  12. By: Letizia Montinari (IMT Lucca Institute for Advanced Studies); Michael Rochlitz (IMT Lucca Institute for Advanced Studies)
    Abstract: In this paper, we investigate differences in and determinants of technical efficiency across three groups of OECD, Asian and Latin American countries. As technical efficiency determines the capacity with which countries absorb technology produced abroad, these differences are important to understand differences in growth and productivity across countries, especially for developing countries which depend to a large extend on foreign technology. Using a stochastic frontier framework and data for 22 manufacturing sectors for 1996-2005, we find notable differences in technical efficiency between the three country groups we examine. We then investigate the effect of human capital and domestic R&D, proxied by the stock of patents, on technical efficiency. We find that while human capital has always a strongly positive effect on efficiency, an increase in the stock of patents has positive effects on efficiency in high-tech sectors, but negative effects in low-tech sectors.
    Keywords: absorptive capacity, efficiency, stochastic frontier analysis
    JEL: C33 O14 O33
    Date: 2012–06
  13. By: Jeffrey Clemens (Stanford Institute for Economic Policy Research)
    Abstract: I study the effect of health insurance expansions on medical innovation. Practitioner dominated innovation (Roberts, 1988) creates an important role for the incentives in “local” payment systems as drivers of medical technology development. I show that, over the 15 years following Medicare and Medicaid’s passage, U.S.-based patenting shifted towards medical equipment by nearly 1.5 percentage points (50 percent) more than foreign patenting. This did not reflect a more general, U.S.-specific trend towards health-sector innovation; no such increase occurred among pharmaceutical patents, the markets for which were unaffected. Subsequent decreases in cost-sharing for all health spending are also associated with increases in U.S.-based patenting relative to foreign patenting in the relevant areas. Back-of-the-envelope calculations suggest that the dynamic effect of U.S. insurance expansions may account for around 25 percent of global medical-equipment innovation and 15 percent of the rise in U.S. health spending in hospitals, physicians’ offices, and other clinical settings from 1960 to 2010.
    JEL: O38 O31 H51 I11
    Date: 2012–06
  14. By: Marc Baudry; Béatrice Dumont
    Abstract: In this paper, we address the problem of patent valuation. With this aim in view, we focus on the feasibility of a patent rating system. This leads us to develop a structural model of patent renewal decisions based on real options that links patent renewals and patent value and to estimate it on micro level data. Results for a sample of European patents show that unobserved heterogeneity is too high to efficiently discriminate among patents and cast some doubt on the possibility to develop a reliable rating system based only on patent metrics.
    Date: 2012
  15. By: Nolan, Elizabeth; Santos, Paulo; Shi, Guanming
    Abstract: There is a large literature which investigates the relationship between market concentration and innovation. It is difficult to find a suitable measure for innovative output. We use a rich dataset based on university trials of corn hybrids to estimate, using fixed effects, a production function. We predict the fixed effects, by year and Crop Reporting District (CRD), for each hybrid to identify the amount of yield that is directly related to the genetics of the hybrids. We combine this dataset with one which provides information for market concentration, and find, using two stage least squares, that there is a positive relationship between market concentration and innovation.
    Keywords: corn hybrids, innovation, instrumental variables, market concentration., Industrial Organization, Production Economics, Productivity Analysis,
    Date: 2012
  16. By: Spielman, David J.; Kolady, Deepthi; Cavalieri, Anthony
    Abstract: The rapid expansion of hybrid rice cultivation in China has contributed significantly to improving food security in the country since the 1980s. However, few other Asian countries have seen similar expansions in hybrid rice cultivation or the associated yield and output gains. This paper examines the technical challenges, market opportunities, and policy constraints related to hybrid rice in Asia, with specific emphasis on India and Bangladesh. The paper sets the discussion within a novel analytical approach to agricultural science, technology, and innovation that focuses on improving the efficiency with which new technologies are transformed into economically relevant products and services.
    Keywords: Hybrid rice, agricultural research and development, technological change, innovation, South Asia, Agricultural and Food Policy, Q16, Q18, O31, O33,
    Date: 2012

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