nep-ino New Economics Papers
on Innovation
Issue of 2012‒11‒17
twelve papers chosen by
Steffen Lippert
University of Otago, Dunedin

  1. Foreign subsidiaries and technology sourcing in Spain By Holl, Adelheid; Rama, Ruth
  2. Are Research Spin-Offs More Innovative? Evidence from a Matching Analysis By Stephan, Andreas
  3. The Nexus between Labor Diversity and Firm's Innovation By Parrotta, Pierpaolo; Pozzoli, Dario; Pytlikova, Mariola
  4. A Comment on the Environment and Directed Technical Change By Mads Greaker and Tom-Reiel Heggedal
  5. The Role of the South African Government in Developing the Biotechnology Industry – from Biotechnology Regional Innovation Centres to the Technology Innovation Agency By Ramazan Uctu; Hassan Essop
  6. Environmental policies, product market regulation and innovation in renewable energy By Lionel Nesta; Francesco Vona; Francesco Nicolli
  7. Trends in Financial Innovation and Their Welfare Impact: An Overview By Franklin Allen
  8. The adoption of innovative cropping systems under price and production risks: a dynamic model of crop rotation choice By Aude Ridier; Karim Chaib; Caroline Roussy
  9. Network Broadening and Reinforcing for Facilitating Innovation: Value creation networks in the Japanese music industry (Japanese) By INOUE Tatsuhiko; NAGAYAMA Susumu
  10. Intangible assets dynamics and firm behaviour By A. Arrighetti; F. Landini; A. Lasagni
  11. Social networks and the process of "globalization" By Dürnecker, Georg; Vega-Redondo, Fernando
  12. Standing on the Shoulders of Babies: Dominant Firms and Incentives to Innovate By Luis Cabral; Ben Polak

  1. By: Holl, Adelheid; Rama, Ruth
    Abstract: Firms acquire external technological knowledge via different channels. In this paper we compare the technology sourcing via R&D outsourcing, R&D outsource offshoring, domestic cooperation for innovation and international cooperation for innovation of foreign subsidiaries and domestic firms. Because the different technology sourcing choices are potentially correlated we apply a multivariate probit specification which allows for systematic correlations among the different choices. The results show that the different technology sourcing choices are indeed interdependent and that foreign subsidiaries show a different pattern of external technology sourcing. Compared to affiliated domestic companies, foreign subsidiaries show a smaller propensity for external technology sourcing via R&D outsourcing from independent firms in the host country, for R&D outsource offshoring, and for international cooperation for innovation. In contrast, foreign subsidiaries show a greater propensity for domestic cooperation for innovation.
    Keywords: Multinational enterprise; foreign subsidiaries; R&D outsourcing; cooperation for innovation; multivariate probit model
    JEL: F23 O32
    Date: 2012–10–30
  2. By: Stephan, Andreas (Jönköping International Business School, CESIS Stockholm, DIW Berlin)
    Abstract: The purpose of the paper is to analyze whether research spin-offs, that is, spinoffs from either research institutes or universities, have greater innovation capabilities than comparable knowledge-intensive firms created in other ways. Using a sample of about 1,800 firms from high-innovative sectors, propensity score matching is used to create a sample of control firms that are comparable to the group of spin-offs. The paper provides evidence that the investigated 123 research spin-offs have more patent applications and more radical product innovations on average compared to similar firms. The results also show that research spin-offs’ superior innovation performance can be explained by their high level of research cooperation activities and by location effects. Being located in an urban region and proximity to parent institutions is conducive for innovation productivity.
    Keywords: Spin-Offs; Innovation Performance; Propensity Score Matching; Locational Factors; Cooperation
    JEL: M13 O18 R30
    Date: 2012–11–05
  3. By: Parrotta, Pierpaolo (Aarhus School of Business); Pozzoli, Dario (Aarhus University); Pytlikova, Mariola (Aarhus School of Business)
    Abstract: In this paper we investigate the nexus between firm labor diversity and innovation using a linked employer-employee data from Denmark. Specifically, exploiting information retrieved from this comprehensive database and implementing proper instrumental variable strategies, we are able to identify the contribution of workers' diversity in cultural background, education and demographic characteristics to valuable firm's innovation activity. The latter is measured by: (1) the firm's propensity to apply for a patent, (2) the number of patent applications (intensive margin) and (3) the firm's ability to patent in different technological areas (extensive margin). We find that ethnic diversity plays an important role in propelling firm's innovation outcomes.
    Keywords: labor diversity, ethnic diversity, patenting activity, extensive and intensive margins
    JEL: J15 J16 J24 J61 J82 O32
    Date: 2012–10
  4. By: Mads Greaker and Tom-Reiel Heggedal (Statistics Norway)
    Abstract: The major claim in Acemoglu, Aghion, Bursztyn & Hemous (2012) (AABH) is that subsidies for research and development of clean technologies are more important than carbon taxes when dealing with climate change. However, they – unconventionally – assume that a patent only lasts for one period. In this note we introduce long-lived patents into the AABH model. This makes the role of a research subsidy for clean technologies in AABH far less crucial and reestablishes the role of the carbon tax. This is good news as it is far easier to tax emissions than to pick the right technologies to subsidize.
    Keywords: Environment; directed technological change; innovation policy
    JEL: O30 O31 O33
    Date: 2012–11
  5. By: Ramazan Uctu (Department of Economics, University of Stellenbosch); Hassan Essop (Department of Economics, University of Stellenbosch)
    Abstract: Biotechnology has been identified as one of the key sectors for future economic growth in many countries, with South Africa being no exception. Consequently, the South African government introduced the National Biotechnology Strategy (NBS) in 2001 whilst trying to modernize the government’s biotech institutions and methods to develop the biotechnology industry given a changing political and technical environment. An important product of the NBS was the establishment of Biotechnology Regional Innovation Centres (BRICs) in 2002, which aimed to develop and commercialise the biotechnology industry. This was followed by the establishment of the Technology Innovation Agency (the TIA) in 2008. The latter institute’s aims are to develop South Africa’s ability in transferring a larger percentage of local research and development (R&D) into commercial products and services. This paper will explore and highlight recent changes in the role of the South African government in its attempts to support and develop the biotechnology industry firstly via BRICs and thereafter the TIA.
    Keywords: Biotechnology, Biotechnology Regional Innovation Centres (BRICs), TIA, South Africa
    JEL: L6 L65
    Date: 2012
  6. By: Lionel Nesta (Ofce sciences-po); Francesco Vona (Observatoire Francais des Conjonctures Economiques Author-Workplace-Postal :69, quai d'Orsay, Paris 75007, France); Francesco Nicolli (University of Ferrara)
    Abstract: We investigate the effectiveness of policies in favor of innovation in renew- able energy under dierent levels of competition. Using information regarding renewable energy policies, product market regulation and high-quality green patents for OECD countries since the late 1970s, we develop a pre-sample mean count-data econometric specification that also accounts for the endogeneity of policies. We nd that renewable energy policies are significantly more effective in fostering green innovation in countries with deregulated energy markets. We also nd that public support for renewable energy is crucial only in the genera- tion of high-quality green patents, whereas competition enhances the generation of green patents irrespective of their quality.
    Keywords: renwable energy technology, patents,environmental policies, product market regulation,policy complementarity
    JEL: Q55 Q58 Q42 Q48 O34
    Date: 2012–10
  7. By: Franklin Allen
    Abstract: There is a fair amount of evidence that financial innovations are sometimes undertaken to create complexity and exploit the purchaser. Thus financial innovation does have a dark side. As far as the financial crisis that started in 2007 is concerned, securitization and subprime mortgages may have exacerbated the problem. However, financial crises have occurred in a very wide range of circumstances, where these and other innovations were not important. There is evidence that in the long run financial liberalization has been more of a problem than financial innovation. There are also many financial innovations that have had a significant positive effect. These include venture capital and leveraged buyout funds to finance businesses. In addition, financial innovation has allowed many improvements in the environment and in global health. On balance it seems likely its effects have been positive rather than negative.
    Date: 2012–10
  8. By: Aude Ridier; Karim Chaib; Caroline Roussy
    Abstract: We investigate the role played by both production and market risks on farmers’ decision to adopt long rotations considered as innovative cropping systems. We build a multi-period dynamic farm model which arbitrates each year between conventional and innovative rotations. With discrete stochastic programming, the production risk is accounted for as an intra-year risk, yearly farming operations being declined according to a decision tree where probabilities are assigned. The simulations for a sample of 13 farmers who are currently experimenting this innovation in south-western France, show that substantive sunk costs act as incentives to remain in the long rotation when the farmer is supported for his engagement. They also show that both a high risk aversion and a highly positive market trend tend to slow down the conversion towards innovative systems.
    Keywords: innovative cropping systems, dynamic model, crop rotation decision, risk, subjective probabilities
    JEL: C61 D0 Q12 Q55
    Date: 2012
  9. By: INOUE Tatsuhiko; NAGAYAMA Susumu
    Abstract: This study shows empirical research regarding the value creation network as it relates to facilitating product innovation. What kind of influence does "network broadening" with new players or "network reinforcing" with existing players have on value creation and innovation generation? Furthermore, what kind of environmental change causes network reinforcing and network broadening? This paper attempts a network analysis of the Japanese music industry; a case considered to be at the forefront even in the contents industry, which has been receiving attention in recent years from movements such as the Cool Japan policy. We gave particular attention to the value creation network consisting of multiple players, each of whom possesses varying business models. Due to the differences in the method of revenue generation, it is predicted that, given the environmental uncertainty, relationship building would vary. The result shows that because of factors such as the differences in business models between music production related factors and the investment related factors in shared copyright, there are contrasting relationship building patterns in a context of environmental uncertainty. In addition, the study indicates that product innovation is stimulated through network broadening by the production related factors and that value creation is prompted by network reinforcing of investment related factors.
    Date: 2012–11
  10. By: A. Arrighetti; F. Landini; A. Lasagni
    Abstract: We study the adoption of different intangible investment strategies in manufacturing firms. Contrary to most of the previous literature, we find such strategies to be highly differentiated. In particular we identify three types of investment behaviour: high and persistent, low and persistent, discontinuous. Using as a reference the capability-based view of the firm, we define and provide support for a set of hypotheses on the determinants of such behaviours. We obtain the following results: first, absorptive capacity led by R&D expenditures is a key competence in sustaining the adoption of an intangible investment strategy, which may be either persistent or discontinuous; second, the implementation of a persistent intangible investment strategy necessarily requires specific investments in the quality of human resources to be made; third, firms with a greater propensity to operate in international markets are more likely to adopt a persistent intangible investment strategy than they are to adopt a discontinuous one; fourth, firms that undertake a growth path that is based on highly uncertain demand segments and high organisational flexibility are likely to adopt a discontinuous intangible investment strategy; and five, the historical intangible asset base represents an important constraint on firms’ investment behaviour.
    Keywords: : intangibles, firm behaviour, asset accumulation, organisational capabilities, R&D, investment strategy
    JEL: D22 L21 L25 O32
    Date: 2012
  11. By: Dürnecker, Georg; Vega-Redondo, Fernando
    Abstract: We propose a stylised dynamic model to understand the role of social networks in the phenomenon we call "globalization." This term refers to the process by which even agents who are geographically far apart come to interact, thus being able to overcome what would otherwise be a fast saturation of local opportunities. A key feature of our model is that the social network is the main channel through which agents exploit new opportunities. Therefore, only if the social network becomes global (heuristically, it "reaches far in few steps") can global interaction be steadily sustained. To shed light on the conditions under which such a transformation may, or may not, take place is the main objective of the paper. One of the main insights arising from the model is that, in order for the social network to turn global, the economy needs to display a degree of "geographical cohesion" that is neither too high (for then global opportunities simply do not arise) nor too low (then the meeting mechanism displays too little structure for the process to take off). But if globalization does materialize, we show that it is a robust state of affairs that often arises abruptly as key parameters change. This occurs, in particular, as the rate of arrival of ideas rises, or when there is a high enough increase in the range at which the network transmits information.
    Keywords: Social networks , Globalization , Search , Cooperation , Social Cohesion , Innovation
    JEL: D83 D85 C73 O17 O43
    Date: 2012
  12. By: Luis Cabral; Ben Polak
    Date: 2012

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