nep-ino New Economics Papers
on Innovation
Issue of 2012‒11‒24
twenty papers chosen by
Steffen Lippert
University of Otago, Dunedin

  1. Collaboration between firms and universities in Italy: the role of a firm’s proximity to top-rated departments By Davide Fantino; Alessandra Mori; Diego Scalise
  2. Buyer power and suppliers' incentives to innovate By Köhler, Christian; Rammer, Christian
  3. Commercialization of publicly funded research and development (R&D) in Russia : scaling up the emergence of spinoff companies By Gutierrez, Juan Julio; Correa, Paulo
  4. Factors affecting productivity of research-based pharmaceutical companies following mergers and acquisitions By Tjandrawinata, Raymond R.; Simanjuntak, Destrina Grace
  5. Parameters of Regional Cooperative Behavior in the German Biotech Industry – A Quantitative Social Network Analysis By Timo Mitze; Falk Strotebeck
  6. University autonomy, IP legislation and academic patenting: Italy, 1996-2007 By Francesco LISSONI (GREThA, CNRS, UMR 5113); Michele PEZZONI (KITeS, University of Bocconi); Bianca POTI (CERIS-CNR); Sandra ROMAGNOSI (Parco Scientifico Università \"Tor Vergata\")
  7. Analysing agricultural innovation systems: a multilevel mixed methods approach By Konig, Bettina; Kuntosch, Anett; Bokelmann, Wolfgang; Doernberg, Alexandra; Schwerdtner, Wim; Busse, Maria; Siebert, Rosemarie; Koschatzky, Knut; Stahlecker, Thomas
  8. A Systemic Innovation Policy Framework: The Cases of Scottish and Dutch Agrifood Innovation Systems By Lamprinopoulou, Chrysa; Renwick, Alan W.; Klerkx, Laurens; Hermans, Frans; Islam, Md. Mofakkarul; Roep, Dirk
  9. Buyer-Supplier Relationships, Internationalization and Product Innovation By Massimiliano Bratti; Giulia Felice
  10. Efficient Innovation in Dairy Production - Empirical Findings for Germany By Sauer, Johannes; Latacz-Lohmann, Uwe
  11. Dynamics of Innovation in Livestock Genetics in Scotland: An Agricultural Innovation Systems Perspective By Islam, Md. Mofakkarul; Renwick, Alan W.; Lamprinopoulou-Kranis, Chrysa; Klerkx, Laurens
  12. Open innovation in the Hungarian wine sector By Dries, Liesbeth; Pascucci, Stefano; Torok, Aron; Toth, Jozsef
  13. Market size, institutions, and the value of rights provided by patents By Bas Straathof; Sander van Veldhuizen
  14. Le système des brevets: idées reçues et critiques By David Encaoua; Thierry Madiès
  15. Multi-Factor Optimization and Factor Interactions during Product Innovation By Hron, Jan; Macak, Tomas
  16. Induced Innovation in Canadian Agriculture By Clark, J. Stephen; Cechura, Lukas
  17. Innovation and Power in Food Supply Chains: The Case of the Potato Sector in the UK By Revoredo-Giha, Cesar; Leat, Philip M.K.; Renwick, Alan W.; Lamprinopoulou-Kranis, Chrysa
  18. A development model for the internationalization of SME agro-food of Puglia: the ISCI project By Contò, Francesco; Fiore, Mariantonietta; Antonazzo, Anna Paola; La Sala, Piermichele
  19. Assessing of the Projects Promoting Innovations in Rural Areas in the Czech Republic By Pechrova, Marie; Kolarova, Alena
  20. Intellectual Property Rights and Efficient Firm Organization By Giacomo Ponzetto

  1. By: Davide Fantino (Bank of Italy); Alessandra Mori (Bank of Italy); Diego Scalise (Bank of Italy)
    Abstract: In the last decade R&D expenditure in Italy has been lagging at a bare 1.2-1.3 per cent of GDP. Its private share is low by international standards and Italian firms take out only a small number of patents. External sources of innovation, however, are available to firms. This work aims at examining the determinants of research collaboration between firms and universities using the results of the 15th Bank of Italy Business Outlook Survey on Firms, together with data on the quality and importance of university research. Controlling for endogeneity problems, we show that the distance from top research centres is the most important factor in determining the probability of collaboration. Other results indicate that the presence of different innovation sources increases the probability of collaboration; and that proximity is more important for small- and medium-sized firms, while larger ones collaborate with universities that are better able to sell the results of their research, regardless of their location. Sector effects also emerge from the analysis.
    Keywords: research collaboration, innovation, R&D expenditure, technology transfer
    JEL: L24 O31 O32 R12
    Date: 2012–10
  2. By: Köhler, Christian; Rammer, Christian
    Abstract: Buyer power is widely considered to decrease innovation incentives of suppliers. However, there is little empirical evidence for this statement. Our paper analyses how buyer power influences innovation incentives of upstream firms while taking into account the type of competition in the downstream market, namely price and technology. We explore this relationship empirically for a unique dataset containing 1,129 observations of German firms from manufacturing and service sectors including information on the economic dependency of firms from their buyers. Using a generalised Tobit model, we find a negative effect of buyer power on a supplier's likelihood to start R&D activities. This negative effect is mitigated if the supplier faces powerful buyers operating under strong price competition. There is also weak evidence for a negative effect of buyer power on suppliers' R&D intensity if the powerful buyer operates under strong technology competition. --
    Keywords: Innovation,Buyer Power
    JEL: L11 O31
    Date: 2012
  3. By: Gutierrez, Juan Julio; Correa, Paulo
    Abstract: This paper explores fundamental issues affecting technology commercialization of publicly funded research and development (R&D) in the Russian Federation. Despite substantial R&D investments, Russia has experienced a decline in scientific output and employment. Nevertheless, the innovation system remains strong in several technological fields. This paper develops an analytical framework to discuss conditions for technology commercialization, which hinge on the innovation system research base, governance of research institutions, alignment between specialization and sector prioritization, availability and performance of scientists and engineers, intellectual property (IP) regime for publicly funded discoveries, and early stage finance. The paper identifies areas for policy and regulatory improvement to incentivize research institutes and scientists to undertake research with market potential. These include: stronger results-based management that rewards commercialization efforts and focuses not only on high-technology sectors, but also on sectors where Russia has technological comparative advantages. In addition, researchers'career development could consider performance metrics that include entrepreneurial achievements, as well as support for young scientists and for international collaboration. Moreover, the IP regime for federally funded R&D may consider transferring full ownership of research discoveries to research organizations. Finally, to increase deal-flow of new ventures, enhancing the supply of early-stage financing for new technologies may be considered.
    Keywords: Tertiary Education,E-Business,ICT Policy and Strategies,Scientific Research&Science Parks,Science Education
    Date: 2012–11–01
  4. By: Tjandrawinata, Raymond R.; Simanjuntak, Destrina Grace
    Abstract: This paper analyzes the impact of mergers and acquisitions (M&A) activities in research-based pharmaceutical companies, specifically the impact of R&D expenditure, profitability, and sales revenue on firms’ productivity, R&D intensity, in pharmaceutical industries following M&A activities. The model was estimated using annual data, gathered from seven large research-based pharmaceutical companies pre and post-M&A, during the period 2003 until 2010. The regression analysis method uses a fixed effect method with generalized least square (GLS) analysis. The result further shows that following M&A activities, firms’ one-year lagged R&D expenditure (t-1) and lagged profitability (t-1) to be positive in increasing significantly the firms’ amount of R&D intensity in research-based pharmaceutical industries, while, surprisingly firms’ one-year lagged sales revenue (t-1) have a negative impact in increasing significantly the firms’ amount of R&D intensity in research-based pharmaceutical industries.
    Keywords: Mergers and Acquisitions (M&A); R&D Expenditure; Profitability; Sales Revenue; R&D Intensity
    JEL: D21 D24
    Date: 2012–11
  5. By: Timo Mitze; Falk Strotebeck
    Abstract: We analyse the determinants of network formation in Germany’s biotechnology industry using social network analysis combined with a regression approach for count data. Outcome variable of interest is the degree centrality of German regions, which is specified as a function of the region’s innovative and economic performance as well as biotech-related policy variables. The inclusion of the latter allows us to shed new light on the question to what extent R&D-based cluster policies are able to impact on the formation of the German biotech network. Our results show that policy indicators such as the volume of public funding for collaborative R&D activity are positively correlated with the region’s overall and interregional degree centrality. However, besides this direct funding effect, we do not observe any further (non-pecuniary) advantages such as prestige or image effects. Regarding the role played by locational factors as elements of the sector-specific and broader regional innovation system, we find that the number of biotech patent applications, the share of regional hightech start-ups and the population density among other factors are positively correlated with the region’s position in the German biotechnology network.
    Keywords: Biotechnology; network formation; degree centrality; R&D policy
    JEL: C21 R38
    Date: 2012–10
  6. By: Francesco LISSONI (GREThA, CNRS, UMR 5113); Michele PEZZONI (KITeS, University of Bocconi); Bianca POTI (CERIS-CNR); Sandra ROMAGNOSI (Parco Scientifico Università \"Tor Vergata\")
    Abstract: Using data on patent applications at European Patent Office, we search for trends in academic patenting in Italy, 1996-2007. During this time, Italian university underwent a radical reform process, which granted them autonomy, and were confronted with a change in IP legislation, which introduced the professor privilege. We find that, although the absolute number of academic patents has increased, (i) their weight on total patenting by domestic inventors has not, while (ii) the share of academic patents owned by universities has increased. By means of a set of probit regressions, we show that the probability to observe an academic patent depends largely on the technology considered and characteristics of the local innovation system. After controlling for these determinants, the conditional probability to observe an academic patent has indeed declined over time. Also by means of probit regressions, we find that the rise of university ownership is explained, significantly albeit not exclusively, by the increasing share of public vs. private R&D and by the increased autonomy of Italian universities, which has allowed them to introduce explicit IP regulations concerning their staff\'s inventions. The introduction of the professor privilege has had no impact at all.
    Keywords: academic patenting, university autonomy, professor privilege
    JEL: I23 O31 O34
    Date: 2012
  7. By: Konig, Bettina; Kuntosch, Anett; Bokelmann, Wolfgang; Doernberg, Alexandra; Schwerdtner, Wim; Busse, Maria; Siebert, Rosemarie; Koschatzky, Knut; Stahlecker, Thomas
    Abstract: Innovations of agricultural suppliers, producers and retailers are directly or indirectly shaping sustainability within the agro food web. If sustainable innovations targeted at the key challenges agriculture is facing worldwide, such as food security, climate change, sustainable use of natural resources etc. should be promoted, knowledge about current innovation processes is needed to reveal mechanisms that allow for promoting sustainable agricultural innovations. In this paper we present the development of an analytical framework to study agricultural innovation systems. We divide the agricultural sector into four levels and expand the innovation system approach (Malerba 2002 and 2004, Koschatzky 2009) to study innovation processes. On the example of the role of farmers and extension services in agricultural innovation processes we demonstrate the adequateness of the approach and give detailed insight into the later stages of the innovation process, where barriers occur most in the German agricultural innovation system.
    Keywords: innovation system, precision farming, animal monitoring, energy in horticulture, Agribusiness, Agricultural and Food Policy,
    Date: 2012–09–18
  8. By: Lamprinopoulou, Chrysa; Renwick, Alan W.; Klerkx, Laurens; Hermans, Frans; Islam, Md. Mofakkarul; Roep, Dirk
    Abstract: Innovation and knowledge exchange are receiving increased attention among policy makers as a means to address sustainable economic development challenges (European Commission, 2011). However, a range of factors such as inappropriate structures and institutional or capabilities barriers may negatively influence the spread or direction of processes of innovation and knowledge exchange (Klein-Woolthuis et al., 2005). These problems are often referred to as systemic weaknesses or failures, and highlight the need to focus on the innovation system (IS) as a whole (Smiths and Kuhlmann, 2004; Raven et al., 2010). The purpose of the paper, using a comprehensive innovation systems failure framework, is to assess and he performance of agrifood innovation systems of Scotland and the Netherlands, through analysis of the key innovation actors (organisations, networks or influential individuals), and their key functions (research provider, intermediary etc), and those mechanisms that either facilitate or hinder the operation of the IS (known as inducing and blocking mechanisms, respectively). This framework was drawn up based on literature research and a series of semi-structured interviews and/or workshops with experts involved in the agrifood innovation systems in the two countries. The findings confirm the appropriateness of considering actors, functions, inducing or blocking mechanisms and governance instruments as analytical tools to evaluate the performance of agrifood innovation systems. In both countries, blocking mechanisms in terms of actors’ interactions and competencies as well as market and incentive structure were revealed. The proposed mix of governance mechanisms in each country offers actors a better chance to influence the direction and speed of innovation in agrifood systems.
    Keywords: national innovation system, IS failure matrix, Dutch, Scottish, agrifood, Agribusiness, Agricultural and Food Policy,
    Date: 2012–09–18
  9. By: Massimiliano Bratti (University of Milan); Giulia Felice (Centro Studi Luca d\'Agliano)
    Abstract: Recent empirical studies have reported strong firm-level evidence of `learning by exporting\' in product innovation. In this paper we consider a specific channel which might contribute to explain the innovation premium of exporters, by focussing on the information exchange between firms establishing buyer-supplier relationships related to production to order (PTO). Using new European firm-level data, we first provide some descriptive evidence that suppliers doing PTO for foreign firms are more innovative than suppliers producing only for domestic rms. We rationalize this evidence in a theoretical framework where firms are heterogeneous in the characteristics of their products and where buyers, searching for a specialized input, have to match either with a domestic or with a foreign supplier in order to produce a final good. A successful match requires the intermediate good\'s adaptation/modification (`innovation\') which can be carried out either by the buyer or by the supplier. In a framework where information is imperfect and contracts are incomplete, we single out the conditions for which different internationalization and innovation strategies are implemented, and in particular suppliers are likely to adapt their products for foreign buyers (i.e., `learning by exporting\'). Our results are driven by the interplay between the innovation costs\' structure, the internationalization costs and the density of suppliers in the different countries.
    Keywords: Exporting, firm behavior, product innovation, production to order
    JEL: D21 D22 F10 L23 L25 O31
    Date: 2012–11–13
  10. By: Sauer, Johannes; Latacz-Lohmann, Uwe
    Abstract: This empirical study aims to shed light on the dynamic linkages between innovation and efficiency at individual farm level. We use a comprehensive dataset for dairy farms in Germany for the period 1995 to 2010. Based on a directional distance function framework we estimate the changes in efficiency, technical change and productivity over the period considered. In a second step we then investigate possible factors for technically efficient milk production at farm level before we finally try to identify those farms that are capable of translating investments in innovative technologies into actual efficiency gains over time applying a multinomial logit approach. Our empirical findings reveal that investments in innovative dairy technologies are only reflected in higher profitability if sufficient Know-How for the efficient use of these innovations is available.
    Keywords: Innovation, Efficiency, Dairy Farming, Microeconometrics, Innovation, Effizienz, Milchproduktion, Mikroökonometrie, Livestock Production/Industries, Q12, D24, C23,
    Date: 2012
  11. By: Islam, Md. Mofakkarul; Renwick, Alan W.; Lamprinopoulou-Kranis, Chrysa; Klerkx, Laurens
    Abstract: The application of genetic selection technologies in livestock breeding offers unique opportunities to enhance the productivity, profitability, and competitiveness of the livestock industry in Scotland. However, there is a concern that the uptake of these technologies has been slower in the sheep and beef sectors in comparison to the dairy, pig and poultry sectors. This is rather paradoxical given the fact that Scotland’s research outputs in farm animal genetics are widely perceived to be excellent. A growing body of literature, popularly known as Innovation Systems theories, suggests that technological transformations require a much broader approach that transcends formal research establishments. Accordingly, this paper reports on preliminary work exploring whether and how an agricultural innovation systems perspective could help identify the dynamics of technology uptake in the livestock sectors in Scotland. Although the work has been undertaken in dairy, sheep, and beef sectors, in this paper, we provide the preliminary results obtained from a case study of the sheep sector only. The key objectives of this work were to map the sheep genetics innovation system in Scotland and identify the barriers prevailing within the system with regard to the uptake of genetic selection technologies. Although the sheep innovation system was characterised by the presence of all key domains and actors, it was found to suffer from some crucial weaknesses relating to network integration, technological infrastructure, and policies and institutional frameworks. The implications of these findings are discussed.
    Keywords: Genetic Selection, Sheep, Scotland, EBV, Innovation System, Agribusiness, Agricultural and Food Policy,
    Date: 2012–09–18
  12. By: Dries, Liesbeth; Pascucci, Stefano; Torok, Aron; Toth, Jozsef
    Keywords: Agribusiness, Agricultural and Food Policy,
    Date: 2012–09–18
  13. By: Bas Straathof; Sander van Veldhuizen
    Abstract: Despite the centrality of incentives for innovation in models of economic growth, there is little systematic evidence that the value of technologies varies with market size and institutional arrangements. This paper presents micro-evidence indicating the value of patent rights for a given technology show substantial variation across countries. Read also the <a href="">CPB Policy Brief 2012/05 'The value of a well-designed EU Patent'</a>. A large part of this variation can be attributed to market size and institutional arrangements. We estimate the value of patent rights by exploiting the validation behavior of holders of European Patents granted in 2004. We control for unobserved patent and country characteristics. The mean value of patent rights across countries ranges from 17 thousand euro in Germany to 400 euro in Ireland. The mean value over 16 countries is 9 thousand euro per country. Protection of intellectual property rights and market size seem to explain most of the German advantage. The estimated total value of granted European Patents is 2.6 billion euro in 2004, of which a third are German patent rights.
    JEL: O34 O38 K1
    Date: 2012–11
  14. By: David Encaoua (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Thierry Madiès (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen Basse-Normandie)
    Abstract: Cet article propose une réflexion générale sur le système des brevets. Trois questions sont d'abord examinées: 1. Le brevet favorise-t-il l'innovation? 2. La propriété intellectuelle est-elle comparable aux autres formes de propriété? 3. La protection par le brevet est-elle complémentaire de la concurrence? Deux critiques fondamentales sont ensuite adressées: 1. L'attribution abusive d'un brevet à des nombreuses demandes ne satisfaisant pas les critères de brevetabilité, ce qui pose la question de la qualité des brevets. 2. L'incompatibilité du système unique des brevets à la diversité technologique et l'innovation cumulative, ce qui entraîne un coût excessif d'implémentation.
    Keywords: droit de propriété, qualité du brevet, mécanisme d'incitation, implémentation, innovation,
    Date: 2012–11
  15. By: Hron, Jan; Macak, Tomas
    Abstract: In this paper, we develop core of an expert system for planning of innovation. The practical outcome of the paper is based on rules determination for search of perspective innovation and its distinguish from commercially unperceptive innovation. The second practical outcome of the paper is a research of interactions between factors during optimization of the product. In general, we gain process synergy, which can be a source of competitive advantage during product innovation in the presence of organizational complexity by systematically moving through the process definition, control, and improvement elements. The improvement elements can cause interactions between these elements (or factors/process parameters). First, we have to distinguish between synergistic and antagonistic interactions. For synergistic interaction can be used graphic illustration - lines on the plot do not cross each other. In contrast, for antagonistic interaction, the lines on the plot cross each other. In this case, the change in mean response for factor at low level is noticeable high compared to high level. Searching for positive interactions leading to the creation of synergies in the performances we can do at each stage of management innovations. At first, we realize only part of the possible gain, with unrealized potential remaining. Using process control, over time, we stabilize our process and obtain additional limited gain. Using process improvement, we can realize additional gain (it looks as short vertical line during the time), with some potential gain remaining. When new, feasible options develop, we can redefined our process and continue with our control and improvement efforts. Hence, each process-related issue definition, control, improvement has a distinct role to play. Confusion between roles or the omission of any of the roles creates disharmony and frustration in the production system, which ultimately limits production system effectiveness and efficiency. Sometimes, in the presence of confusion, it is possible that effectiveness and efficiency may decrease. In this situation, we hope to learn from our negative factor interactions (or failures) and subsequently improvement trends in long term with using sophisticated methods and own intuition. This paper objective is to create rules for planning innovation expert system. According to this rules will be possible to distinguish perspective innovation from commercially unperceptive innovation. The second paper objective is to explore interactions between factors during a product optimization. For this purpose will be used the methodology based on minimization of logic functions and design of experiments (analytical tools of DOE).
    Keywords: Innovation, expert system, multi-criteria optimization, effectiveness, efficiency, synergy, process improvement, logic function, redundancy factor, design of experiments, Agribusiness, Agricultural and Food Policy,
    Date: 2012–09–18
  16. By: Clark, J. Stephen; Cechura, Lukas
    Abstract: The study re-examines the induced innovation hypothesis from 1958-2006 in Canadian agriculture for two regions in Canada: Central Canada (Provinces of Ontario and Quebec) and Western Canada (Provinces of Alberta Saskatchewan and Manitoba). There is broadly consistent support for the induced innovations hypothesis for Canadian agriculture, especially for Western Canadian Agriculture. In addition, there is support for the notion the US as well as Canadian research expenditures are important to the explanation of input ratio movements in Canadian Agriculture in the long run. This could indicate the existence of spillover effects that run from US agricultural research to Canadian Agriculture.
    Keywords: Induced Innovation, factor substitution, spillover effects, non-stationarity, cointegration, Agribusiness, Agricultural and Food Policy,
    Date: 2012–09–18
  17. By: Revoredo-Giha, Cesar; Leat, Philip M.K.; Renwick, Alan W.; Lamprinopoulou-Kranis, Chrysa
    Abstract: This paper deals with innovation in supply chains and discusses the effects that its organisation (e.g., bargaining power along the chain) might bring on innovation and ultimately to the sustainability of the chain. The analysis was carried out considering the case of the UK potato sector and by comparing three case studies: the first two consider the situation of a supply chain that sells fresh potatoes to retailers (one in South England and another in Scotland), whilst the third one consists of a supply chain that produces potatoes to be further processed. The results indicate that the supply chain leader plays an important role in both in the organisation of the chain and in the initialisation, management and success of the innovation.
    Keywords: Innovation, agri-food supply chains, potato sector, UK agriculture, Agribusiness, Agricultural and Food Policy,
    Date: 2012–09–18
  18. By: Contò, Francesco; Fiore, Mariantonietta; Antonazzo, Anna Paola; La Sala, Piermichele
    Abstract: The project targets the Axis 1 of the European territorial cooperation INTERREG program Greece-Italy 2007-2013. The project was born with the aim of strengthen the presence of the local agri-food SMEs on the foreign markets, enhancing innovation processes through an economic and coordinated cooperation so to ease the internationalization processes of the two targeted areas. After a literature review, we analyzed the economic context of Apulia Region; then we proceed to the definition of a model for the internationalization of SMEs Agro-food of Puglia through the constitution of scientific and technological incubators that will network to deliver innovative services for the internationalization of the agri-food system. The final aim is to develop innovative services of marketing intelligence (MI) to spread knowledge and information about the international markets and the creation and implementation of databases for the search and classification of informative sources.
    Keywords: Internationalization; Innovation; Marketing Intelligence; Agro-food sector
    JEL: O17 Q17 Q13
    Date: 2012–09
  19. By: Pechrova, Marie; Kolarova, Alena
    Abstract: Innovative approach is essential for a growth, but the understanding of the content of it is not unified. The term innovation itself is broad and can cover wide range of activities. The article deals with the projects promoting innovations in the rural areas of the Czech Republic (CR) financed from the European Agricultural Fund for Rural Development (EAFRD). Strategy Plans LEADER (SPL) submitted by Local Actions Groups (LAGs) which are operating under the LEADER1 scheme are analysed and their approach towards innovation is evaluated. The importance of the innovations in the projects is evaluated on the basis of established preferential criteria for selection of the projects and finances devoted to the measure Fiche2 which includes innovative projects. On the basis of case studies of the projects aimed on education I am coming to the conclusion that various types of projects are understood as innovative, but sometimes the term is misinterpreted. Preferential criteria for selecting projects defined by LAGs should be more precious and concrete. Despite the fact that innovations are one of the obligatory criteria for selecting projects which will be financed, its inclusion is mostly formal. Its relative weight in comparison with other criteria is quite low. Besides, the importance of innovative projects is not sufficiently underlined by finances. I argue that there is not adequate attention paid to the real contribution of the projects to innovations. I recommend the revision of the term innovation and its stronger inclusion into the preferential criteria for selection of the project in order to ensure that selected projects clearly correspond with the innovative approach.
    Keywords: Innovative Projects, Rural Area, Local Action Group, Strategic Plan LEADER, Agribusiness, Agricultural and Food Policy,
    Date: 2012–09–18
  20. By: Giacomo Ponzetto
    Abstract: This paper shows that intellectual property rights yield static efficiency gains, irrespective of their dynamic role in fostering innovation. I develop a property-rights model of firm organization with two dimensions of non-contractible investment: how much cost-minimizing effort to exert, and whether to direct it towards partnership or defection. In equilibrium, the first best can be attained if and only if property rights are as strong for intangible as for tangible assets. When IP rights are weaker, the structure of the firm is distorted and efficiency declines. An entrepreneur must either integrate her suppliers, which induces a fall in their investment; or else risk their defection, which entails a waste of her human capital. My model predicts greater prevalence of vertical integration in response to weaker IP rights. It also predicts a switch from integration to outsourcing over the product cycle. Both empirical predictions are consistent with evidence on the organization of multinational companies. As a normative implication, I …find that IP rights should be strong but narrowly defined, to protect one business opportunity without holding up its potential spin-offs.
    Keywords: intellectual property, organization, hold-up problem, property rights, vertical integration, outsourcing, product cycle, spin-off, licensing
    JEL: D23 D86 K11 L22 L24 O34
    Date: 2012–10

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