nep-ino New Economics Papers
on Innovation
Issue of 2013‒02‒03
sixteen papers chosen by
Steffen Lippert
University of Otago, Dunedin

  1. (International) R&D Collaboration and SMEs: The effectiveness of targeted public R&D support schemes By LOPES BENTO Cindy; HOTTENROTT Hanna
  2. Impact of external knowledge acquisition strategies on innovation – A comparative study based on Dutch and Swiss panel data By Spyros Arvanitis; Martin Wörter; Pierre Mohnen; Boris Lokshin
  3. Absorptive capacity, innovation cooperation and human-capital. Evidence from 3 European countries By Chiara Franco; Alberto Marzucchi; Sandro Montresor
  4. L’innovation managériale de l'invention à la diffusion. Analyse du processus d’établissement d’une innovation managériale à partir du cas de la méthode 5 steps. By Canet, Emilie
  5. The free-rider problem and the optimal duration of research joint ventures: theory and evidence from the Eureka program By Kaz Miyagiwa; Aminata Sissoko
  6. R&D and Non-Linear Productivity Growth of Heterogeneous Firms By d'Artis Kancs; Boriss Siliverstovs
  7. Open global innovation networks as enablers of frugal innovation: propositions based on evidence from India By Tiwari, Rajnish; Herstatt, Cornelius
  8. Market value of the firms and R&D investment: Theoretical overview and empirical estimation for the panel of countries By Josheski, Dushko; Magdinceva-Sopova , Marija
  9. Compulsory licensing, price controls, and access to patented foreign products By Eric Bond; Kamal Saggi
  10. The financial performance of green prospector firms: a contingent approach By Javier Aguilera-Caracuel; Javier Aguilera-Caracuel; Natalia Ortiz-de-Mandojana
  11. Empirical Evidence on Relationships between Ex Ante Innovation Pursuit and Post-M&A Performance in the Vietnamese M&A Industry, 2005-2012 By Quan Hoang Vuong; Nancy K. Napier; Donaldine E. Samson; Hong Kong Nguyen
  12. To own or not to own: How ownership affects user innovation - An empirical study in the German rowing community By Tietze, Frank; Pieper, Thorsten; Herstatt, Cornelius
  13. Effect of R&D Tax Credit on the cost-metrics of cloud computing By Marc Daumas
  14. Protecting Research and Technology from Espionage By D. THORLEUCHTER; D. VAN DEN POEL
  15. Parenting with Style: Altruism and Paternalism in Intergenerational Preference Transmission By Doepke, Matthias; Zilibotti, Fabrizio
  16. Market power in the global economy: the exhaustion and protection of intellectual property By Kamal Saggi

    Abstract: This study analyses the effectiveness of targeted public support for R&D investment. In particular, we test whether the specific policy design aiming at incentivizing (international)collaboration and R&D in small and medium-sized firms achieves the desired objectives on input as well as output additionality. Our results show that the targeted R&D subsidies accelerate R&D spending in the private sector, and especially so in the targeted groups. Further, we differentiate between privately financed R&D and subsidy-induced R&D investment to evaluate their respective effects on innovation performance. The results confirm that the induced R&D is productive as it translates into marketable product innovations. While both types of R&D investments trigger significant output effects, we find that the effect of subsidy-induced R&D investment is higher for firms that collaborate internationally as well as for SMEs.
    Keywords: Innovation Policy; Subsidies; R&D; Trestment effect; SMEs; International Collaboration; Innovation Performance
    JEL: C14 C30 G23 O31 O38
    Date: 2012–10
  2. By: Spyros Arvanitis (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Martin Wörter (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Pierre Mohnen (Maastricht University); Boris Lokshin (Maastricht University)
    Abstract: There is growing evidence that firms increasingly adopt open innovation practices. In this paper we investigate the impact of two such external knowledge acquisition strategies, ‘buy’ and ‘cooperate’, on firm’s product innovation performance. Taking a direct (productivity) approach, we test for complementarity effects in the simultaneous use of the two strategies, and in the intensity of their use. Our results based on large panels of Dutch and Swiss innovating firms, suggest that while both ‘buy’ and ‘cooperate’ have a positive effect on innovation, there is little statistical evidence that using them simultaneously leads to higher innovation performance. Results from the Dutch sample provide some indication, that there are positive economies of scope in doing external and cooperative R&D simultaneously conditional on doing internal R&D.
    Keywords: Open innovation, R&D collaboration, make, buy strategies
    JEL: O31 O32
    Date: 2013–01
  3. By: Chiara Franco (Catholic University of Milan); Alberto Marzucchi (Catholic University of Milan); Sandro Montresor (JRC-IPTS)
    Abstract: The paper aims at extending the analysis of the firm’s absorptive capacity (AC) by taking stock of its manifold nature. Innovation cooperation is recognised as one of its antecedents, along with R&D, but with different possible outcomes, depending on the kind of partner. Human capital is claimed to be as important as other organisational mechanisms for the AC impact on innovation. The empirical application, carried out on about 10,500 firms located in 3 EU countries (i.e. Germany, Italy and Spain), confirms the role of these factors. Interacting with research organisations, for example, increases the firm’s AC providing it occurs within the national boundaries. The transformation of AC into actual innovation is favoured by the human capital of the firm, while it is actually hampered by socialisation mechanisms of an organisational nature.
    Keywords: Absorptive capacity – Innovation cooperation – Human capital
    JEL: O33 O32 J24
    Date: 2012–11
  4. By: Canet, Emilie
    Abstract: Au sein de la littérature sur l’innovation, certains auteurs se sont intéressés à une forme particulière : l’innovation managériale. Nous nous centrons sur une période critique de la vie des innovations managériales entre invention et diffusion. Il s’agit de comprendre les processus en œuvre entre le moment où l’innovation est inventée au sein d’une organisation et celui où elle est considérée comme validée et établie dans un périmètre académique et professionnel plus large. En nous appuyant sur une étude de cas et une démarche d’observation participante, nous proposons une analyse exploratoire de cette période qui permet de mettre en évidence ses caractéristiques sur différents aspects : l’évolution de l’innovation tant dans son contenu que sur sa rhétorique, la dynamique d’évolution et le régime de conception.
    Abstract: Management innovation is a specific genre within the literature on innovation. We will focus on a critical phase on managerial innovations lifecycle, sprawling between invention and diffusion. We aim at understanding the processes at work between the moment an innovation is invented within an organization and the moment it is considered established and validated by numerous organizations. Relying on a case study and a participative observation approach, we will put forward an exploratory analysis of this phase allowing to highlight its characteristics in various lights: evolution of content and rhetoric, evolution dynamics and design system.
    Keywords: diffusion of innovations; discourse; design; establishment; management innovation; diffusion des innovations; discours; conception; consultants; établissement; innovation managériale;
    JEL: O33 O31 O32
    Date: 2012–12
  5. By: Kaz Miyagiwa (Department of Economics, Florida International University); Aminata Sissoko (Universite catholique de Louvain)
    Abstract: A research joint venture (RJV) faces a serious free-rider problem because its participants¡¯ contributions are mostly unobservable. We first present a model that shows that a RJV solves this problem by pre-committing to its termination date. Our analysis shows that there is an optimal termination date or duration, which increases with the value of the innovation per member and decreases with the R&D flow cost per member. Utilizing data from the European Eureka program, we then examine the factors determining the durations of Eureka RJVs. The empirical results support our hypotheses from the theoretical model.
    Keywords: research joint venture (RJV), free-rider problem, duration, innovation, Eureka projects
    JEL: L1 L2
    Date: 2013–01
  6. By: d'Artis Kancs (JRC-IPTS); Boriss Siliverstovs (ETH Zurich - KOF Swiss Economic Institute)
    Abstract: The present paper studies the relationship between R&D investment and firm productivity growth by explicitly accounting for non-linearities in the R&D-productivity relationship and inter-sectoral firm heterogeneity. In order to address these issues, we employ a two step estimation approach, and match two firm-level panel data sets for the OECD countries, which allows us to relax both the linearity and homogeneity assumptions of the canonical Griliches (1979) knowledge capital model. Our results suggest that: (i) R&D investment increases firm productivity with an average elasticity of 0.15; (ii) the impact of R&D investment on firm productivity is differential at different levels of R&D intensity – the productivity elasticity ranges from -0.02 for low levels of R&D intensity to 0.33 for high levels of R&D intensity; (iii) the relationship between R&D expenditures and productivity growth is non-linear, and only after a certain critical mass of R&D is reached, the productivity growth is significantly positive; (iv) there are important intersectoral differences with respect to R&D investment and firm productivity – high-tech sectors’ firms not only invest more in R&D, but also achieve more in terms of productivity gains connected with research activities.
    Keywords: R&D investment, firm productivity, generalised propensity score
    JEL: C14 C21 D24 F23 O32
    Date: 2012–12
  7. By: Tiwari, Rajnish; Herstatt, Cornelius
    Abstract: Recent years have seen the emergence of low-cost innovations targeted at economically weaker sections of the society, seeking to align business with social welfare. In many instances, results on the ground have been, however, rather sobering as firms have generally (probably justifiably) worried that 'good quality, low price' products may cannibalize into their regular business. At the same time those very customers that were intended to benefit from the new approach have tended to shy away fearing low quality and social stigma of using cheap products. Using multiple case studies of successful affordability-driven innovations ('frugal innovations') from India we investigate how firms can effectively reduce market and technology uncertainty of product innovations targeted at price-sensitive customers. The key criteria to success seem to lie in reducing the overall cost of ownership and enhancing customer perception of quality and image. The case studies reveal that affordability-driven innovations are especially successful when firms seek recourse to open global innovation networks (OGINs) for collaborative development in all phases of the innovation value chain. --
    Keywords: frugal innovations,bottom of the pyramid,lead markets,open innovation,global innovation,India,open global innovation networks,innovation systems
    Date: 2012
  8. By: Josheski, Dushko; Magdinceva-Sopova , Marija
    Abstract: The aim of this paper is to investigate the issue of R&D investment and the market value of the firm. This idea dating back from Arrow paper, later developed by Paul Romer but in the area of economic growth. Zvi Griliches (1979), first introduced the production function, which later would be used in a vast literature from this area (Market value of the firms and R&D investment). In the theoretical section of this paper we are describing Tobin’s original model, and Abel’s (1984) model, this models relates Tobin’s quotient with intangible assets of the company. In the empirical part we develop cross-section time series model (Feasible Generalized Least Squares Model), for a panel of countries in Europe including UK and Turkey, in total of 11 panels. Later we test that model by estimating the marginal effects of R&D investment with Tobin’s q on a small economy such as R. Macedonia. The results exert positive and statistically significant relationship between market value of the firms and R&D investment.
    Keywords: Tobin’s q; R&D; knowledge absorption
    JEL: D46 E22 D92
    Date: 2013–01–31
  9. By: Eric Bond (Department of Economics, Vanderbilt University); Kamal Saggi (Department of Economics, Vanderbilt University)
    Abstract: Motivated by existing multilateral rules regarding intellectual property, we develop a North-South model to highlight the dual roles price controls and compulsory licensing play in determining Southern access to a patented Northern product. The Northern patent-holder chooses whether and how to work its patent in the South (either via entry or voluntarily licensing) while the South determines the price control and whether to issue a compulsory license. The threat of compulsory licensing benefits the South and also increases global welfare when the North-South technology gap is significant. The price control and compulsory licensing are complementary instruments from the Southern perspective.
    Keywords: Patented Goods, Compulsory Licensing, Price Controls, Quality, Welfare
    JEL: F0
    Date: 2012–12–07
  10. By: Javier Aguilera-Caracuel; Javier Aguilera-Caracuel (Department of Business Organization and Marketing, Universidad Pablo de Olavide); Natalia Ortiz-de-Mandojana (Department of Management, Universidad de las Islas Baleares.)
    Abstract: Innovation is central to improving economic productivity, human well-being and environmental conservation. Firm-level green innovation includes technological improvements that save energy, prevent pollution, or make it possible to recycle waste. Such innovation also includes green product design and corporate environmental management. This type of innovation contributes to business sustainability as it potentially has a positive effect on the firms’ financial, social and environmental outcomes. However, the specific effect of green innovation on firms’ outcomes can be highly influenced by the context in which firms develops their activities. Using a contingent approach and employing a sample of 88 green prospector firms from 14 different countries, we observe that the intensity of green innovation is positively related to firm profitability. We also show that stringent environmental regulations keep firms from taking the financial advantage of the benefits of green innovation. However, the environmental normative conditions in a country do not have any significant impact on the way firms take advantage of green innovation to increase their level of financial performance. Finally, we also discuss implications for academia, managers and policy-makers.
    Keywords: Green innovation, environmental regulations, environmental normative dimension, contingent approach, prospector firms.
    Date: 2013–01
  11. By: Quan Hoang Vuong; Nancy K. Napier; Donaldine E. Samson; Hong Kong Nguyen
    Abstract: This research aims to communicate new results of empirical investigations to learn about the relationship between determination of controlling an acquired firm’s capital, assets and brand versus its capability of innovation and ex post performance of the rising Vietnamese M&A industry in the 2005-2012 period. The analysis employs a categorical data sample, consisting of 212 M&A cases reported by various information sources, and performs a number of logistic regressions with significant results as follows. Firstly, the overall relationship between pre-M&A pursuit’s determination on acquiring resources and performance of the post-M&A performance is found significant. There exist profound effects of a ‘size matters’ strategy in M&A ex post performance. When there is an overwhelming ‘resources acquiring’ strategy, the innovation factor’s explanatory power becomes negligible. Secondly, for negative performance of post-M&A operations, the emphasis on both capital base and asset size, and the brand value at the time of the M&A pursuit is the major explanation in the post-M&A period. So does the absence of innovation as a goal in the pre-M&A period. These two insights together are useful in careful M&A planning. Lastly, expensive pre-M&A expenditures tend to adversely affect the post-M&A performance. As a general conclusion, this study shows that innovation can be an important factor to pursue in M&A transitions, together with the need to emphasize and find capable and willing human capital, rather than a capital base (equity or debt) and existing values of the acquired brands.
    Keywords: Mergers and Acquisitions; Innovation; Firm Performance; Economic Transition; Human Capital; Financial Markets; Vietnam
    JEL: L25 O10 O30 P31 P34
    Date: 2013–01–28
  12. By: Tietze, Frank; Pieper, Thorsten; Herstatt, Cornelius
    Abstract: Prior research on user innovation has concentrated on markets in which products (e.g., mountain bikes, kitesurfing equipment, tools, etc.) are typically purchased by those users who modify them. However, in numerous markets, this is not the case, for example, those in which equipment is rented. Moreover, firms increasingly servitize, selling functionality instead of products. Thus, product ownership is being transferred to users less and less. Instead of purchasing products, users increasingly rent or lease equipment. Consequently, our research investigates the impact of product ownership on user innovation behavior. We question whether absent ownership is an innovation barrier, negatively impacting users' propensity to innovate. This should be particularly relevant to firms that collaborate with users, scouting for their ideas. This study was conducted in the German rowing community. In contrast with previously studied sports markets, equipment ownership in rowing often remains with sport clubs and not with individual users. Following a pre-study, we distributed a survey to the members of 410 clubs enlisted in the German Rowing Federation's roster. Our approach yielded 743 responses. We present results from multivariate ordinal and logistic regressions for two dependent variables (idea generation and realized ideas), differentiating between three ownership types (private, non-private with dedicated use, and non-private with shared use). Our results reveal that private ownership has significant positive effects on user innovation behavior. Users, who own their equipment develop significantly more innovative ideas and have a significantly higher probability to realize ideas than users who use equipment that is owned by a third party. We find that private ownership positively moderates use experience's impact on the development and realization of ideas. The results imply that manufacturers should be aware of the effect that ownership could have, particularly when offering services or in situations where ownership rights are not transferred to users (e.g., leasing models). We discuss measures to remedy the negative impact of absent ownership, such as equipment sponsorships complemented by specific use contracts, experiment labs, and insurances. --
    Date: 2013
  13. By: Marc Daumas (PROMES - Laboratoire Procédés, Matériaux et Energie Solaire - CNRS : UPR8521, ASR - Architecture, Systèmes et Réseaux (2010-2012) - CNRS : GDR725)
    Abstract: Cloud computing probably carries disruptive innovations that will change our future in many ways. We explore in this article how R&D Tax Credit changes the cost metrics of cloud computing with short- and long-term effects of its future developments and acceptance as a new key technology. Some of the situations described here may be in effect or arise in some other countries but in-depth analysis of legal texts and practices is necessary to identify them. The comparisons in this article are limited to bare costs. I do not propose adjustments or my opinion to policy makers in order to remain on a scientific level. Yet we go as far as possible as long as we remain in the intents of present laws and regulations.
    Date: 2013–01–10
    Abstract: In recent years, governmental and industrial espionage becomes an increased problem for governments and corporations. Especially information about current technology development and research activities are interesting targets for espionage. Thus, we introduce a new and automated methodology that investigates the information leakage risk of projects in research and technology (R&T) processed by an organization concerning governmental or industrial espionage. Latent semantic indexing is applied together with machine based learning and prediction modeling. This identifies semantic textual patterns representing technologies and their corresponding application fields that are of high relevance for the organization’s strategy. These patterns are used to estimate organization’s costs of an information leakage for each project. Further, a web mining approach is processed to identify worldwide knowledge distribution within the relevant technologies and corresponding application fields. This information is used to estimate the probability that an information leakage occur. A risk assessment methodology calculates the information leakage risk for each project. In a case study, the information leakage risk of defense based R&T projects is investigated. This is because defense based R&T is of particularly interest by espionage agents. Overall, it can be shown that the proposed methodology is successful in calculation the espionage information leakage risk of projects. This supports an organization by processing espionage risk management.
    Keywords: Latent semantic indexing, SVD, Espionage, Risk assessment
    Date: 2012–12
  15. By: Doepke, Matthias (Northwestern University); Zilibotti, Fabrizio (University of Zurich)
    Abstract: We construct a theory of intergenerational preference transmission that rationalizes the choice between alternative parenting styles (related to Baumrind 1967). Parents maximize an objective function that combines Beckerian and paternalistic altruism towards children. They can affect their children's choices via two channels: either by influencing their preferences or by imposing direct restrictions on their choice sets. Different parenting styles (authoritarian, authoritative, and permissive) emerge as equilibrium outcomes, and are affected both by parental preferences and by the socioeconomic environment. We consider two applications: patience and risk aversion. We argue that parenting styles may be important for explaining why different groups or societies develop different attitudes towards human capital formation, entrepreneurship, and innovation.
    Keywords: intergenerational preference transmission, altruism, paternalism, entrepreneurship, innovation
    JEL: D10 J10 O10 O40
    Date: 2012–12
  16. By: Kamal Saggi (Department of Economics, Vanderbilt University)
    Abstract: We develop a North-South model in which a firm that enjoys monopoly status in the North (by virtue of a patent or a trademark) has the incentive to price discriminate internationally because Northern consumers value its product more than Southern ones. While North's policy regarding the territorial exhaustion of intellectual property rights (IPR) determines whether the firm can exercise market power across regions, Southern policy regarding the protection of IPR determines the firm's monopoly power within the South. In equilibrium, each region's policy takes into account the firm's pricing strategy, its incentive to export, and the other region's policy stance. Major results are: (i) the North is more likely to choose international exhaustion if the South protects IPR whereas the South is more willing to offer such protection if the North implements national exhaustion; (ii) the firm values IPR protection less than the freedom to price discriminate internationally if and only if its quality advantage over Southern imitators exceeds a certain threshold; and (iii) requiring the South to protect IPR increases global welfare iff such protection is necessary for inducing the firm to export to the South.
    Keywords: Exhaustion of IPRs, Imitation, Market power, TRIPS, Welfare
    JEL: D6
    Date: 2012–12–06

This nep-ino issue is ©2013 by Steffen Lippert. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.