nep-ino New Economics Papers
on Innovation
Issue of 2012‒12‒22
fifteen papers chosen by
Steffen Lippert
University of Otago, Dunedin

  1. Tax incentives and direct support for R&D: What do firms use and why? By Isabel Busom Piquer; Beatriz Corchuelo; Ester Martinez Ros
  2. Is Innovative Firm Behavior Correlated with Age and Gender Composition of the Workforce? Evidence from a New Type of Data for German Enterprises By Pfeifer, Christian; Wagner, Joachim
  3. Collusion through joint R&D: An empirical assessment By Duso, Tomaso; Röller, Lars-Hendrik; Seldeslachts, Jo
  4. Unleashing Business Innovation in Canada By Alexandra Bibbee
  5. Environmental Innovation in Germany By Ivan Haščič
  6. An Analysis of the Employment Effects of the Washington High Technology Business and Occupation (B&O) Tax Credit By Timothy J. Bartik; Kevin Hollenbeck
  7. Impact of Production Linkages on Industrial Upgrading in ASEAN, the People’s Republic of China, and India: Organizational Evidence of a Global Supply Chain By Machikita, Tomohiro; Ueki, Yasushi
  8. Technological catching up, quality of exports and competitiveness: a sectoral perspective By Eleonora Cavallaro; Piero Esposito; Alessia Matano; Marcella Mulino
  9. Productivity and structural heterogeneity in the Brazilian manufacturing sector: trends and determinants By Eva Yamila Catela; Mario Cimoli; Gabriel Porcile
  10. An improved theoretical ground for the linear feedback model and a new indicator By Yoshitsugu Kitazawa
  11. Optimal Multi-Phase Transition Paths toward A Stabilized Global Climate: Integrated Dynamic Requirements Analysis for the ‘Tech Fix’ By Paul A. David; Adriaan van Zon
  12. Financial Constraints, Innovation Performance, and Sectoral Disaggregation By Georgios Efthyvoulou; Priit Vahter
  13. The State of University Policy for Progress in Europe By Hoareau, Cécile; Ritzen, Jo; Marconi, Gabriele
  14. Entrepreneurship and Post-Entry Performance: the Microeconomic Evidence By Marco Vivarelli
  15. ICT spillovers, absorptive capacity and productivity performance By Ana Rincon; Michela VECCHI; Francesco VENTURINI

  1. By: Isabel Busom Piquer (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona); Beatriz Corchuelo (Deparment of Economy, University of Extremadura); Ester Martinez Ros (Departamento de Economía de la Empresa, Universidad Carlos III de Madrid and UNU-MERIT)
    Abstract: This paper studies whether firms’ use of R&D subsidies and R&D tax incentives is correlated to two sources of underinvestment in R&D, financing constraints and appropriability. We find that financially constrained SMEs are less likely to use R&D tax credits and more likely to obtain subsidies. SMEs using legal methods to protect their intellectual property are more likely to use tax incentives. Results are ambiguous for large firms. For both having previous experience in R&D increases the likelihood of using tax incentives, while it reduces the likelihood of using exclusively subsidies, suggesting that the latter induce entry into R&D. Results imply that direct funding and tax credits do not have the same ability to address each source of R&D underinvestment, and that on average subsidies may be better suited than tax credits at least for SMEs. From a policy perspective these tools may be complements rather than substitutes.
    Keywords: R&D, tax incentives, subsidies, policy mix
    JEL: H25 L60 O31
    Date: 2012–12
  2. By: Pfeifer, Christian (Leuphana University Lüneburg); Wagner, Joachim (Leuphana University Lüneburg)
    Abstract: This empirical research note documents the relationship between composition of a firm's workforce (with a special focus on age and gender) and its performance with respect to innovative activities (outlays and employment in research and development (R&D)) for a large representative sample of enterprises from manufacturing industries in Germany using unique newly available data. We find that firms with a higher share of older workers have significantly lower proportions of R&D outlays in total revenues and of R&D employment in total employment, whereas firms with a higher share of female employment seem to be more active in R&D.
    Keywords: ageing, firm performance, gender, Germany, innovation, R&D
    JEL: D22 D24 J21 J24 L25
    Date: 2012–11
  3. By: Duso, Tomaso; Röller, Lars-Hendrik; Seldeslachts, Jo
    Abstract: This paper tests whether upstream R&D cooperation leads to downstream collusion. We consider an oligopolistic setting where firms enter in research joint ventures (RJVs) to lower production costs or coordinate on collusion in the product market. We show that a sufficient condition for identifying collusive behavior is a decline in the market share of RJV-participating firms, which is also necessary and sufficient for a decrease in consumer welfare. Using information from the U.S. National Cooperation Research Act, we estimate a market share equation correcting for the endogeneity of RJV participation and R&D expenditures. We find robust evidence that large networks between direct competitors - created through firms being members in several RJVs at the same time - are conducive to collusive outcomes in the product market which reduce consumer welfare. By contrast, RJVs among non-competitors are efficiency enhancing. --
    Keywords: Research Joint Ventures,Innovation,Collusion,NCRA
    JEL: K21 L24 L44 D22 O32
    Date: 2012
  4. By: Alexandra Bibbee
    Abstract: This paper discusses how to improve Canada’s business innovation in order to boost labour productivity and output growth. Many general framework conditions are highly favourable to business risk-taking and innovation, including macro stability, openness, strong human capital, low corporate tax rates, low barriers to firm entry and flexible labour markets. However, they can be improved further by reduced external and interprovincial barriers in network and professional service sectors, more efficient capital markets, fewer capital tax distortions and improved patent protection. A second focus should be on ensuring that incentives arising from government subsidies are targeted on actual market failures. The very high level of support to business R&D via the federal Scientific Research and Experimental Development (SR&ED) tax credit and provincial top-ups may affect the incentives of small firms to grow and should be redesigned. A plethora of small, fragmented granting programmes, mainly geared to SMEs, should be streamlined for better government-business collaboration. The large public share in venture capital should be wound down, as it may crowd out more productive private finance. A final focus should be on boosting manager and worker skills that are intrinsic to all forms of innovation, by filling gaps in training, mentoring and education. This Working Paper relates to the 2012 OECD Economic Review of Canada (<P>Libérer l'innovation des entreprises au Canada<BR>Cette étude se penche sur la manière de renforcer l’innovation dans les entreprises canadiennes afin de stimuler la productivité de la main-d’oeuvre et la croissance de la production. De nombreuses conditions-cadres canadiennes sont très propices à la prise de risques et à l’innovation dans les entreprises : stabilité macroéconomique, ouverture sur l’extérieur, solidité du capital humain, faible imposition des bénéfices des sociétés, rareté des obstacles à l’entrée des entreprises sur le marché, flexibilité des marchés du travail. Ces conditions-cadres peuvent toutefois s’améliorer encore grâce à une diminution des barrières extérieures et interprovinciales dans les secteurs des réseaux et des services professionnels, à une plus grande efficience des marchés financiers, à de moindres distorsions de l’imposition du capital et à une meilleure protection des brevets. Un deuxième axe pourrait consister à s’assurer que les incitations découlant des subventions de la puissance publique ciblent bien les carences effectives du marché. Il se peut que le très fort soutien à la R-D des entreprises représenté par le crédit d’impôt fédéral pour la RS&DE (recherche scientifique et développement expérimental) et par ses compléments provinciaux entame le désir de croissance des petites entreprises ; peut-être donc faudrait-il redessiner ces aides. La kyrielle de petits programmes fragmentaires de subventionnement visant principalement les PME devrait être rationalisée pour améliorer la coopération entre le milieu universitaire et le monde de l’entreprise. Il faudrait réduire la trop grande place des fonds publics dans le capital-risque, car il se peut qu’elle évince des financements privés plus productifs. Un dernier axe devrait, par des actions cherchant à combler les lacunes de formation, de tutorat et d’enseignement, privilégier la stimulation des compétences de l’encadrement et du personnel qui s’appliquent à toutes les formes d’innovation. Ce Document de travail se rapporte à l’Étude économique de l’OCDE du Canada 2012 (
    Keywords: productivity, venture capital, competition, innovation, vouchers, subsidies, research and development, business taxes, intellectual property rights, multifactor productivity, entrepreneurship, patents, technology transfer, intangibles, angel investing, R&D tax credits, academic research grants, productivité, capital-risque, innovation, concurrence, subvention, productivité multifactorielle, entrepreneuriat, brevets, transfert de technologie, impôt sur les sociétés, recherche et développement, biens immatériels, tutorat-investissement, crédits d’impôt pour la R-D, subventions pour la recherche universitaire, bons, droits de propriété intellectuelle
    JEL: H25 I23 O31 O32 O34 O38
    Date: 2012–10–29
  5. By: Ivan Haščič
    Abstract: This paper reviews the recent experience of Germany in encouraging innovation to reduce negative environmental impacts of economic activity. The essence of the German approach to policy-induced environmental innovation is discussed in the context of changing policy objectives, and illustrated with selected examples from waste management, renewable energy and transportation. The paper covers environmental and general innovation policies and the cross-cutting issue of policy co-ordination. Particular attention is paid to analysis of policies to promote renewable energy, including feed-in tariffs, and policies to promote advanced transportation.<BR>Ce document analyse le bilan de l’action menée dans un passé récent en Allemagne pour encourager une innovation tournée vers la réduction des effets négatifs de l’activité économique sur l’environnement. La nature profonde de l’approche de l’Allemagne, qui mise sur le développement d’innovations environnementales sous l’impulsion des politiques publiques, est examinée dans le contexte de l’évolution des objectifs de l’action publique, et illustrée par plusieurs exemples portant sur la gestion des déchets, les énergies renouvelables et les transports. Ce document aborde les politiques en faveur de l’innovation environnementale et de l’innovation en général, de même que la question transversale de la coordination des politiques. Une attention particulière est portée à l’analyse des mesures visant à promouvoir les énergies renouvelables – dont les tarifs de rachat – et des mesures visant à promouvoir les technologies avancées de transport.
    Keywords: environmental policy, innovation, technology, eco-innovation, policy coordination, politique environnementale, innovation, technologie, éco-innovation, coordination des politiques
    JEL: H23 O31 O33 O38 O52 Q42 Q48 Q53 Q54 Q55 Q58 R48
    Date: 2012–12–12
  6. By: Timothy J. Bartik (W.E. Upjohn Institute for Employment Research); Kevin Hollenbeck (W.E. Upjohn Institute for Employment Research)
    Abstract: This paper estimates the effects of an R&D tax credit in the state of Washington on job creation. The research uses micro-data on the job creation and tax credits received by individual firms in the state of Washington from 2004 to 2009. We correct for the endogeneity of R&D tax credits received by individual firms by using instrumental variables based in part on national industry factor shares for R&D. We estimate that this tax credit created jobs, but at a high cost. The cost per job-year created is estimated to be between $40,000 and $50,000. The credit was so high cost in part because the credit was non-refundable. As a result, about one-quarter of the firms receiving credits were maxed out on credit eligibility, so that the credit provided no marginal incentive for additional R&D spending or job creation.
    Keywords: R&D tax credits, business incentives, state economic development policies, job creation
    JEL: R38 H71 J23
    Date: 2012–06
  7. By: Machikita, Tomohiro (Asian Development Bank Institute); Ueki, Yasushi (Asian Development Bank Institute)
    Abstract: This paper presents a simple model of industrial upgrading as a result of backward and forward information linkages between upstream and downstream relations. It also serves as an empirical investigation of the impact of mutual knowledge exchange on the knowledge production function using data on firms' self-reported customers and suppliers. Evidence from interconnected firms in Indonesia, Thailand, Philippines, and Viet Nam suggests that there are strong spillover effects between downstream and upstream firms in terms of international standard certification. The degree of product and process innovation is quite diverse across manufacturing firms within a local supply chain and within a global supply chain.
    Keywords: innovation; international production organization; backward forward linkages
    JEL: O31 O32 R12
    Date: 2012–12–05
  8. By: Eleonora Cavallaro; Piero Esposito; Alessia Matano; Marcella Mulino
    Abstract: In the paper we focus on emerging market economies’ pattern of trade, with a view to explaining the different features of competitiveness for high skill- and low skill-intensive firms. We consider a theoretical dynamical setup where high-skill firms engage in innovation activity and gain market shares in high-income â€quality dominated†markets thanks to technological catching up, whereas low-skill firms face price competition for their exports. On the basis of the theoretical model, we run econometric estimations for trade between CEECs and EU economies over the period 2000-2007. In the econometric analysis we first test the assumption that UVR is an adequate indicator of quality in trade, showing that in high skill-intensive firms it is systematically correlated to domestic and foreign technological variables; we then use the fitted UVR in the estimation of the role of preference for quality in the evolution of CEECs’ market shares. The estimations support the results of the theoretical model as to the role of non-price competitiveness stemming from quality-supply as well as quality-demand factors.
    Keywords: Vertical innovation, Knowledge spillovers, Product quality, International competitiveness.
    JEL: F12 F14 F15 O32
    Date: 2012–11
  9. By: Eva Yamila Catela; Mario Cimoli; Gabriel Porcile
    Abstract: This paper discusses the evolution of firmsù productivity and structural heterogeneity (SH) in the Brazilian manufacturing industry in the 2000s. SH is defined (following the Latin American structuralist tradition) as a situation in which a large share of total firms is in the lowest productivity groups of the production structure, and there are very large differences in labour productivity between groups and firms. The paper combines and makes compatible several databases on manufacturing production, innovation and micro-social data for Brazil, in order to measure productivity and SH, to analyze its evolution between 2000 and 2008, and to discuss its determinants. Econometric analyses (k-means cluster methodology to identify productivity groups, and ordered probit models to analyse the determinants of SH) show that increasing returns in innovation and learning prevailed in the 2000s, while policies failed to encourage the catching up process by laggard firms. As a result, SH did not fall in the Brazilian manufacturing sector.
    Keywords: Structural heterogeneity; technological change; productivity growth; technological asymmetries
    Date: 2012–11–29
  10. By: Yoshitsugu Kitazawa (Faculty of Economics, Kyushu Sangyo University)
    Abstract: This paper describes a lucid theoretical ground for the linear feedback model proposed by Blundell et al. (2002) and further proposes the indicator on the initial knowledge storage in the framework of the linear feedback model. The values of the indicator are calculated with the estimation results conducted by Blundell et al. (2002). Further, the GMM estimations of the linear feedback model are conducted by using the stationarity moment conditions customized to needs of count panel data, in order to calculate the values of the indicator.
    Keywords: linear feedback model, knowledge production, initial knowledge storage, patents-R&D relationship, GMM
    JEL: C23 C25 O30
    Date: 2012–12
  11. By: Paul A. David (Stanford University); Adriaan van Zon (Maastricht University)
    Abstract: This paper analyzes the requirements for a social welfare-optimized transition path toward a carbon-free economy, focusing particularly on the role of R&D and other technological measures to achieve timely supply-side transformations in the global production regime that will avert catastrophic climate instability. We construct a heuristic integrated model of macroeconomic growth constrained by geophysical system with climate feedbacks, including extreme weather damages from global warming driven by greenhouse gas emissions, and ‘tipping point’ for catastrophic runaway warming. A variety of options for technology development and implementation, and the dynamic relationships among them will be examined: interactions among the, each having a distinctive primary functionality CO2 emissions control. The specifications recognize (i) the endogeneity and embodiment of technical innovations, and (ii) the irreversibility and long gestation periods of required intangible (R&D) and tangible capital formation. Efficient exercise of these options is shown to involve sequencing different investment and production activities in separate temporal “phases” that together form a transition path to a carbon free economy. To study the requirements of a timely (catastropheaverting) transition, we formulate a sequence of optimal control sub-problems linked together by transversality conditions, the solution of which determines the optimum allocation of resources and sequencing of the several phases implied by the options under consideration. Ours is “planning-model” approach, which departs from conventional IAM exercises by eschewing assumptions about the behaviors of economic and political actors in response to market incentives and specific public policy measures. Solutions for each of several multi-phase models yields the optimal phase durations and rates of investment and production that characterize the transition path. Sensitivity experiments with parameters of economic and geophysical sub-systems provide insights into the robustness of the requirements analysis under variations in the technical and geophysical system parameters.
    Keywords: global warming, tipping points, catastrophic climate instability, technology fix options, R&D investments, capital-embodied innovations, optimal sequencing, IAM and DIRAM policy design approaches, multi-phase optimal control, sustainable endogenous growth
    JEL: Q54 Q55 O31 O32 O33
    Date: 2012–12
  12. By: Georgios Efthyvoulou (Department of Economics, The University of Sheffield); Priit Vahter (Faculty of Economics and Business Administration, University of Tartu, Estonia)
    Abstract: How do the effects of financial constraints on innovation performance vary by sector and firm characteristics? This paper uses innovation survey data from eleven European countries to examine the heterogeneity of these effects. So far, there has been a lack of cross-country micro-level studies exploring the effects of financial constraints on innovation performance in Western Europe and only little research about the variability of such effects between the broad sectors of production and services. Our results suggest that the impact of direct measures of financial barriers differs in production and services sectors, and also by the firm’s export orientation. In particular, financial constraints appear to have more pronounced negative effects in the production sector than in the services sector. Among different types of firms, the response to financial constraints seems to be stronger for non-exporters.
    Keywords: financial constraints; innovation
    JEL: L1 L2 O1 O3
    Date: 2012
  13. By: Hoareau, Cécile (Maastricht University); Ritzen, Jo (IZA and Maastricht University); Marconi, Gabriele (Maastricht University)
    Abstract: Higher education contributes to economic innovation. This study measures and compares the extent to which national governments’ policies foster this contribution across Europe. The study stresses the relevance of policies which are ‘empowering’ for higher education institutions, or in other words provide them with appropriate resources and regulatory environments. The assessment relies on quantitative scores, based on the contribution of policies regarding funding and autonomy to higher education performance in education, research and economic innovation, using non-arbitrary weights and eighteen policy indicators across 32 European countries. A large number of countries belong to a ‘middle group’ in our overall assessment, indicating a relative cohesion in Europe. Yet, substantial variations exist in terms of higher education policy in Europe, each European country having room for policy improvement.
    Keywords: higher education, research, innovation, Europe, public policy, institutions
    JEL: I23 I28 J24 L38 O31 O38 O43 O52
    Date: 2012–12
  14. By: Marco Vivarelli (DISCE, Università Cattolica)
    Abstract: The aim of this study is to provide a microeconomic investigation of the concept of entrepreneurship; in particular, it discusses the following issues: 1) the alternative ways of looking at entrepreneurship, distinguishing “creative destruction” from simple “turbulence”; 2) the different microeconomic determinants of new firm formation, distinguishing “progressive” from “regressive” drivers; 3) the relationship between ex-ante characteristics (of the founder) and postentry performance (of the new firm); and 4) the possible scope for an economic policy aimed at maximizing the impact of entrepreneurship on economic growth. Where possible and appropriate, the paper devotes particular attention to the specific features characterizing entrepreneurship in developing countries.
    Keywords: Entrepreneurship; new firm; innovation, development.
    JEL: L26 O12
    Date: 2012–10
  15. By: Ana Rincon; Michela VECCHI; Francesco VENTURINI
    Abstract: We analyse the impact of ICT spillovers on productivity in the uptake of the new technology using company data for the U.S. We account for inter- and intra-industry spillovers and assess the role played by firm’s absorptive capacity. Our results show that intra-industry ICT spillovers have a contemporaneous negative effect that turns positive 5 years after the initial investment. By contrast, inter-industry spillovers are important both in the short and in the long run. In the short run, companies’ innovative effort is complementary to ICT spillovers, but such complementarity disappears with the more pervasive adoption and diffusion of the technology.
    JEL: D22 D24 D62 O33
    Date: 2012–08–01

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