nep-ino New Economics Papers
on Innovation
Issue of 2013‒03‒16
thirty-one papers chosen by
Steffen Lippert
University of Otago, Dunedin

  1. Effects of R&D spending on Innovation by Irish and Foreign-owned Businesses By Doran, Justin; Jordan, Declan; O'Leary, Eoin
  2. Privatization of Knowledge: Did the U.S. Get It Right? By Cozzi, Guido; Galli, Silvia
  3. Sequential R&D and Blocking Patents in the Dynamics of Growth By Cozzi, Guido; Galli, Silvia
  4. Patent Rights, Product Market Reforms, and Innovation By Philippe Aghion; Peter Howitt; Susanne Prantl
  5. Understanding Innovation in Production Networks in East Asia By Wignaraja, Ganeshan
  6. Heterogeneity of innovative, collaborative, and productive firm-level processes. By Amoroso, S.
  7. Beyond the Arrow effect: income distribution and multi-quality firms in a Schumpeterian framework By Hélène LATZER
  8. International R&D Spillovers: Technology Transfer vs. R&D Synergies By Alistair Dieppe; Jan Mutl
  9. Financial constraints and the failure of innovation projects By Agustí Segarra; José García-Quevedo; Mercedes Teruel
  10. Defensive Strategies in the Quality Ladders. By Ledezma, Ivan
  11. Entrepreneurial Commercialization Choices and the Interaction between IPR and Competition Policy By Gans , Joshua; Persson, Lars
  12. The dynamic linkages among exports, R&D and productivity By Juan A. Máñez; María E. Rochina-Barrachina; Juan A. Sanchis-Llopis
  13. Do Patents Shield Disclosure or Assure Exclusivity When Transacting Technology? By Gaétan de Rassenfosse; Alfons Palangkaraya; Elizabeth Webster
  14. How innovative is Georgian economy? By Aslamazishvili, Nana
  15. Which form of venture capital is most supportive of innovation? Evidence from European biotechnology companies By Bertoni, Fabio; Tykvová, Tereza
  16. Ownership and cyclicality of firms’ R&D investment By Pilar Beneito; María E. Rochina-Barrachina; Amparo Sanchis
  17. Are ICT, Workplace Organization and Human Capital Relevant for Innovation? A Comparative Study Based on Swiss and Greek Micro Data By Spyros Arvanitis; Euripidis N. Loukis; Vasiliki Diamantopoulou
  18. Evaluating the efficacy of European regional funds for R&D By Davide Fantino; Giusy Cannone
  19. Theory and Empirics of Stage-Dependent Intellectual Property Rights By Chu, Angus C.; Cozzi, Guido; Galli, Silvia
  20. Innovation and Inclusive Development: A Discussion of the Main Policy Issues By Caroline Paunov
  21. R&D and Economic Growth in a Cash-in-Advance Economy By Chu, Angus C.; Cozzi, Guido
  22. Growth Options and Firm Valuation By Holger Kraft; Eduardo S. Schwartz; Farina Weiss
  23. Are large innovative firms more efficient? By Sánchez, Rosario/R; Diaz, M. Angeles
  24. Innovation and productivity: evidence for 4 Latin American countries manufacturing industry By M. Constanza Demmel; Juan A. Máñez; María E. Rochina-Barrachina; Juan A. Sanchis-Llopis
  25. Productivité et mobilité des inventeurs prolifiques : une approche comparative des systèmes d'innovation de quatre grands pays asiatiques (Chine, Corée, Japon, Taiwan) By Christian Le Bas; William Latham; Dmitry Volodin
  26. Diffusion of innovation within an agent-based model: Spinsons, independence and advertising By Piotr Przybyla; Katarzyna Sznajd-Weron; Rafal Weron
  27. Firms' innovation capability-building paths and the nature of changes in learning mechanisms: Multiple case-study evidence from an emerging economy By Figueiredo, Paulo N.; Cohen, Marcela; Gomes, Saulo
  28. Carbon Efficiency, Technology, and the Role of Innovation Patterns: Evidence from German Plant-Level Microdata By Sebastian Petrick
  29. Designing an Optimal 'Tech Fix' Path to Global Climate Stability: R&D in a Multi-Phase Climate Policy Framework By Paul A. David; Adriaan van Zon
  30. Billionaire Entrepreneurs: A Systematic Analysis By Henrekson, Magnus; Sanandaji, Tino
  31. Institutions and Venture Capital By Lerner, Josh; Tåg, Joacim

  1. By: Doran, Justin; Jordan, Declan; O'Leary, Eoin
    Abstract: This paper estimates the private returns to four different kinds of R&D spending on the probability of Irish and foreign-owned businesses engaging in product, process and organizational innovation. By providing econometric analysis of nearly 2000 businesses in the Community Innovation Survey: 2004 to 2006, it makes an important contribution to our understanding of the effects of Irish innovation policy, which has incentivized businesses to spend on R&D in Ireland. The main findings are that Irish owned businesses are significantly more likely than foreign-owned to introduce new products as a result of creative R&D work undertaken. Foreign-owned businesses, which spend nearly 6 times more per worker on R&D than Irish-owned, enjoy very high returns mostly from the purchase or licence of patents. This reflects a fundamental difference in the innovation activities of these businesses, which is critical for policymakers’ understanding of the Irish innovation system.
    Keywords: Innovation Policy; Innovation Output; Research & Development
    JEL: O31 R19
    Date: 2013
  2. By: Cozzi, Guido; Galli, Silvia
    Abstract: To foster innovation and growth should basic research be publicly or privately funded? This paper studies the impact of the gradual shift in the U.S. patent system towards the patentability and commercialization of the basic R&D undertaken by universities. We see this movement as making universities becoming responsive to "market" forces. Prior to 1980, universities undertook research using an exogenous stock of researchers motivated by "curiosity." After 1980, universities patent their research and behave as private firms. This move, in a context of two-stage inventions (basic and applied research) has an a priori ambiguous effect on innovation and welfare. We build a Schumpeterian model and match it to the data to assess this important turning point.
    Keywords: R&D and Growth, Sequential Innovation, Basic Research, Patent Laws
    JEL: O31 O34 O41
    Date: 2013–03
  3. By: Cozzi, Guido; Galli, Silvia
    Abstract: The incentives to conduct basic or applied research play a central role for economic growth. How does increasing early innovation appropriability affect basic research, applied research, innovation and growth? In a common law system an explicitly dynamic macroeconomic analysis is appropriate. This paper analyzes the macroeconomic effects of patent protection by incorporating a twostage cumulative innovation structure into a quality-ladder growth model with skill acquisition. We focus on two issues: (a) the over-protection vs. the under-protection of intellectual property rights in basic research; (b) the evolution of jurisprudence shaping the bargaining power of the upstream innovators. We show that the dynamic general equilibrium interactions may seriously mislead the empirical assessment of the growth effects of IPR policy: stronger protection of upstream innovation always looks bad in the short- and possibly medium-run. We also provide a simple "rule of thumb" indicator of the basic researcher bargaining power.
    Keywords: Endogenous Growth, Basic and Applied Research, Endogenous Technological Change, Common Law.
    JEL: O31 O33 O34
    Date: 2013–03
  4. By: Philippe Aghion; Peter Howitt; Susanne Prantl
    Abstract: Can patent protection and product market competition complement each other in enhancing incentives to innovate? In this paper, we address this question by investigating how innovation responses to a substantial policy initiative increasing product market competition interact with the strength of patent rights. We provide empirical evidence of innovation responding positively to the product market reform in industries of countries where patent rights are strong, not where these are weak. The positive response to the reform is more pronounced in industries in which innovators rely more on patenting than in other industries, and in which the scope for deterring entry through patenting is not too large. Our empirical findings are in line with step-by-step innovation models predicting that product market competition enhances innovation and, more importantly, that patent protection can complement competition in inducing innovation.
    JEL: L1 L5 O3 O4
    Date: 2013–02
  5. By: Wignaraja, Ganeshan (Asian Development Bank Institute)
    Abstract: This paper explores the “black box” of innovation in the electronics production network in East Asia through a mapping exercise of technological capabilities and an econometric analysis of exporting in the People’s Republic of China (PRC), Thailand, and the Philippines. Technology-based approaches to trade offer a plausible explanation for firm-level exporting behavior and complement the literature on production networks. The econometric results confirm the importance of foreign ownership and innovation in increasing the probability of exporting in electronics. Higher levels of skills, managers’ education, and capital also matter in the PRC as well as accumulated experience in Thailand. Furthermore, a technology index composed of technical functions performed by firms (to represent technological capabilities) emerges as a more robust indicator of innovation than the research and development (R&D) to sales ratio. Accordingly, technological effort in electronics in these countries mostly focuses on assimilating and using imported technologies rather than formal R&D by specialized engineers.
    Keywords: production networks; foreign direct investment; innovation; technological capabilities; r&d; exports; east asia; prc; thailand; philippines
    JEL: F23 L63 O31 O32 O57
    Date: 2013–03–03
  6. By: Amoroso, S. (Tilburg University)
    Abstract: This thesis addresses a set of interrelated topics that contribute to both structural and empirical fields of the economics of innovation. First, we consider the role of imperfect competition in product and labor markets in shaping the productivity of a firm. Second, we model and evaluate the expected correlations present among firms' R&D cooperative choices due to both firm- and sector-level heterogeneity. In the last study, we develop and estimate a structural dynamic monopoly model to quantify the linkages between R&D spending, cooperation, and innovation investment choices, and endogenous productivity.
    Date: 2013
  7. By: Hélène LATZER (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: This paper introduces multi-quality firms within a Schumpeterian framework. Featuring non-homothetic preferences and income disparities in an otherwise standard quality-ladder model, I indeed show that the resulting differences in the willingness to pay for quality among consumers generate both positive investments in R&D by industry leaders and positive market shares for more than one quality, hence allowing for the emergence of multi-product firms within a vertical innovation framework. This positive investment in R&D by incumbents is obtained with complete equal treatment in the R&D field between the incumbent patentholder and the challengers: in our framework, the incentive for a leader to invest in R&D stems from the possibility for an incumbent having innovated twice in a row to efficiently discriminate between rich and poor consumers displaying differences in their willingness to pay for quality. I hence exemplify a so far overlooked demand-driven rationale for innovation by incumbents. I am then also able to analyze the impact of inequality both on long-term growth and on the allocation of R&D activities between challengers and incumbents. I find that redistributive policies generally lead to an increase in the long-run growth rate, and to variations in the share of the overall R&D expenditures being undertaken by incumbents.
    Keywords: Growth, Innovation, Income inequality, Multi-Product firms
    JEL: O3 O4 F4
    Date: 2013–02–19
  8. By: Alistair Dieppe (European Central Bank); Jan Mutl (European Business School)
    Abstract: We estimate a model of international technological spillovers that allows for both international and inter-sectoral technology transfer, as well as international and intersectoral synergies in research and development (R&D). Furthermore we allow for a dynamic interaction in explaining total factor productivity (TFP). Relative to the existing literature, our model enables us make a judgment on the relative importance of the channels of international technology transmission. We find that direct technology transfer is positive while there are negative R&D spillovers. However, since R&D is found to positively affect TFP in own sector, the model implies that after accounting for both R&D and TFP spillovers, there is a total positive impact of R&D on TFP in the same sector while the overall impact of R&D on TFP in other sectors and countries is negative. Our results indicate that, by not distinguishing among different channels of transmission, some models previously estimated in the literature may suffer from omitted variable bias. JEL Classification: C21, C23, D24, O30
    Keywords: TFP, Total Factor Productivity, R&D, Research and Development, International Spillovers, Technology Transfer
    Date: 2013–01
  9. By: Agustí Segarra (Research Group of Industry and Territory, Department of Economics and CREIP, Universitat Rovira i Virgili, Av. Universitat, 1; 43204 – Reus (Spain)); José García-Quevedo (Department of Public Economics and Barcelona Institute of Economics (IEB), University of Barcelona, Av. Diagonal 690; 08034 – Barcelona (Spain)); Mercedes Teruel (Research Group of Industry and Territory, Department of Economics and CREIP, Universitat Rovira i Virgili, Av. Universitat, 1; 43204 – Reus (Spain))
    Abstract: Theoretical and empirical approaches have stressed the existence of financial constraints in innovative activities of firms. This paper analyses the role of financial obstacles on the likelihood of abandoning an innovation project. Although a large number of innovation projects are abandoned before their completion, the empirical evidence has focused on the determinants of innovation while failed projects have received little attention. Our analysis differentiates between internal and external barriers on the probability of abandoning a project and we examine whether the effects are different depending on the stage of the innovation process. In the empirical analysis carried out for a panel data of potential innovative Spanish firms for the period 2004-2010, we use a bivariate probit model to take into account the simultaneity of financial constraints and the decision to abandon an innovation project. Our results show that financial constraints most affect the probability of abandoning an innovation project during the concept stage and that low-technological manufacturing and non-KIS service sectors are more sensitive to financial constraints.
    Keywords: barriers to innovation, failure of innovation projects, financial constraints
    JEL: O31 D21
    Date: 2013–03
  10. By: Ledezma, Ivan
    Abstract: Dans cet article nous étudions le comportement potentiellement défensif des innovateurs et son effet sur l’effort agrégé d’innovation. Un modèle à échelles de qualité est proposé afin d’analyser l’émergence d’avantages technologiques qui, in fine, déterminent qui innove (le leader ou ses concurrents). Dans ce contexte, la réglementation de marché peut avoir un effet positif ou négatif sur l’intensité en R&D. Elle peut être négativement associée à l’effort d’innovation dans des environnements hautement dérèglementés. Par contre, en économies qui dépassent un certain seuil de réglementation, susceptible de limiter effectivement la construction de barrières stratégiques, la réglementation induit des incitations à innover. Ces prédictions sont cohérentes avec des tests empiriques menés sur un échantillon d’industries appartenant à 14 pays de l’OCDE durant la période 1987-2003.
    Abstract: This paper analyses the potentially defensive behaviour of patent race winners and its effect on aggregate R&D effort. It proposes a quality-ladders model that endogenously determines leaders technology advantages and who innovates. Product market regulation can have either a positive or a negative effect on R&D intensity. The negative effect is likely to be observed in highly deregulated economies. The positive influence arises in more regulated environments and it is stronger for larger innovative jumps. These steady-state equilibrium outcomes are consistent with puzzling and contrasting patterns stemming from data on manufacturing industries for 14 OECD countries during the period 1987-2003.
    Keywords: réglementation; modèle à échelles de qualité; leaders innovants; R&D; product market regulation; quality ladders; Innovative Leaders;
    JEL: O33 O31 L13
    Date: 2013–01
  11. By: Gans , Joshua (Rotman School of Management); Persson, Lars (Institutet för näringslivsforskning)
    Abstract: This paper examines the interaction between intellectual property protection and competition policy on the choice of entrepreneurs with respect to commercialization as well as the rate of innovation. We find that stronger intellectual property protection makes it more likely that entrepreneurs will commercialize by cooperating with incumbents rather than competing with them. Consequently, we demonstrate that competition policy has a clearer role in promoting a higher rate of innovation in that event. Hence, we identify one reason why the strength of the two policies may be complements from the perspective of increasing the rate of entrepreneurial innovation.
    Keywords: Entrepreneurs; innovation; commercialization; intellectual property law; competition law
    JEL: O31
    Date: 2013–08–09
  12. By: Juan A. Máñez (University of Valencia and ERICES); María E. Rochina-Barrachina (University of Valencia and ERICES); Juan A. Sanchis-Llopis (University of Valencia and ERICES)
    Abstract: This paper estimates a dynamic model of a firm’s decision to export and invest in R&D, in which we allow past export and R&D experience to endogenously affect productivity. In our empirical strategy we proceed in two steps: in the first step, using as starting point the traditional control approach method to estimate total factor productivity, we consider a more general process driving the law of motion of productivity in which we recognise the potential role that export and R&D experience might have in shaping future firms’ productivity, and test whether this assumption holds; in the second step, we estimate a bivariate dynamic model of the firm’s decision to invest in R&D and export, in which we analyse the linkages among investing in R&D, exporting and productivity. Using a representative sample of Spanish manufacturing firms for the period 1990- 2009 we find that both export and R&D positively affect future productivity, which will drive more firms to self-select in those activities.
    Keywords: export experience, R&D experience, endogenous Markov, Total Factor Productivity, learning-by-exporting, returns to innovation, GMM, dynamic bivariate probit
    Date: 2013–03
  13. By: Gaétan de Rassenfosse (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; Intellectual Property Research Institute of Australia, The University of Melbourne); Alfons Palangkaraya (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; Intellectual Property Research Institute of Australia, The University of Melbourne); Elizabeth Webster (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; Intellectual Property Research Institute of Australia, The University of Melbourne)
    Abstract: Patents may assist trade in technology either by protecting buyers against the expropriation of the idea by third parties (the appropriation effect) or by enabling sellers to more frankly disclose the idea during the negotiation phase (the disclosure effect). We test for the presence of both these effects using quasi-experimental matching analysis on a novel dataset of 860 technology transaction negotiations. We identify the appropriation effect by comparing the probability of successful negotiations involving a granted patent with those involving a pending patent. Similarly, we identify the disclosure effect by comparing the probability of successful negotiations involving a pending patent with those involving no patent. We find evidence for the appropriation but not the disclosure effect: technology transaction negotiations involving a granted patent instead of a pending patent are 10 per cent more likely to be successfully completed (compared with an average completion rate of approximately 80 per cent).
    Keywords: Markets for technology, R&D, invention, patent, intellectual property, appropriability
    JEL: O31 O34
    Date: 2013–02
  14. By: Aslamazishvili, Nana
    Abstract: In the present-day reality, research and innovation undoubtedly deserve promotion and encouragement, without which the advance and development of any national economy is unimaginable. This paper surveys the studies on Global Competitiveness and Innovations issues carried out by the international organizations. The objective of the article is to stimulate the discussion among the policymakers in Georgia on the best strategies and policies to help country to overcome the obstacles to improving competitiveness.
    Keywords: global competitiveness, global competitiveness index, innovations, innovative technologies, lower-middle income countries, R&D, SMEs, statistics
    JEL: E66 G21 G28 H50 O31 O32 O34
    Date: 2013–01
  15. By: Bertoni, Fabio; Tykvová, Tereza
    Abstract: We argue that different forms of venture capital contribute differently to the innovation process and, consequently, differ in their impact on portfolio companies' innovation output. Our results suggest that the innovation output of companies financed by independent VCs increases significantly faster than that of both non-VC-backed companies and of companies financed by governmental VCs. However, governmental VCs may be beneficial for innovation by complementing the skills and resources provided by an independent VC in a heterogeneous syndicate. --
    Date: 2013
  16. By: Pilar Beneito (Universidad de Valencia and ERICES); María E. Rochina-Barrachina (Universidad de Valencia and ERICES); Amparo Sanchis (Universidad de Valencia and ERICES)
    Abstract: In this paper we analyse the effect of ownership on the response of firms?’ R&D expenditures to the business cycles in the economy, using a panel dataset of Spanish manufacturing firms for the period 1990-2006. Following Aghion et al. (2012), we allow the impact of the business cycle on firms?' R&D expenditures to depend upon credit constraints, but we extend their analysis by considering the moderating effect of different firms?’ ownership types. We find that firms?’ R&D spending is countercyclical but that credit constraints may reverse this countercyclicality, in line with previous results in the literature. However, our findings indicate that these results are moderated by firms?’ ownership. In particular, in the case of firms that are family owned and firms that are group affiliated the responsiveness of R&D to the business cycle is considerably less dependent on being credit constrained, especially during recessions.
    Keywords: R&D investment, business cycle, credit constraints, ownership
    Date: 2013–03
  17. By: Spyros Arvanitis (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Euripidis N. Loukis (University of the Aegean, Department of Information and Communication Systems Engineering, Greece); Vasiliki Diamantopoulou (University of the Aegean, Department of Information and Communication Systems Engineering, Greece)
    Abstract: This paper investigates the relationship between indicators for the intensity of use of ICT (examining three different types of ICT widely used in firms: internal, e-sales, e-procurement IS), several forms of workplace organization, and human capital on one hand, and several measures of innovation performance at firm level on the other hand, in an innovation equation framework, in which was also controlled for standard innovation determinants such as demand, competition and firm size. The empirical part is based on data of Swiss and Greek firms. This paper contributes to literature in three ways: first, it analyzes three important factors, i.e. information technology, workplace organization and human capital, which are considered to be drivers of innovation performance particularly in the last fifteen to twenty years, in the same setting, it uses several innovation indicators that cover both the input and the output side of the innovation process and, third, it does the analysis in a comparative setting for two countries, Greece and Switzerland, with quite different levels of technological and economic development.
    Keywords: ICT, workplace organization, product innovation, process innovation
    JEL: O31
    Date: 2013–03
  18. By: Davide Fantino (Bank of Italy); Giusy Cannone (Polytechnic University of Turin)
    Abstract: This paper provides some empirical evidence of the impact of two policy measures designed to support innovation in small and medium firms in an Italian region, both financed using the European Structural Funds but managed at regional level. The first measure was a concessional loan to promote the introduction of innovative plant, machinery and equipment, while the second was a free grant to stimulate research activity by firms. The programmes were effective in stimulating targeted investments (respectively tangible and intangible), but the benefits were short-lived, although to different degrees. The impact was stronger for the smallest firms and, in the case of the second measure, for firms with a low credit rating.
    Keywords: R&D, public policy, evaluation
    JEL: O32 O38
    Date: 2013–02
  19. By: Chu, Angus C.; Cozzi, Guido; Galli, Silvia
    Abstract: Inspired by the Chinese experience, we develop a Schumpeterian growth model of distance to frontier in which economic growth in the developing country is driven by domestic innovation as well as imitation and transfer of foreign technologies through foreign direct investment. We show that optimal intellectual property rights (IPR) protection is stagedependent. At an early stage of development, the country implements weak IPR protection to facilitate imitation. At a later stage of development, the country implements strong IPR protection to encourage domestic innovation. Therefore, the growth-maximizing and welfare-maximizing levels of patent strength increase as the country evolves towards the world technology frontier, and this dynamic pattern is consistent with the actual evolution of patent strength in China. Furthermore, we use a dynamic panel regression model to provide empirical evidence that supports the key implication of our theoretical model.
    Keywords: Economic growth, stage-dependent intellectual property rights
    JEL: O31 O34 O40
    Date: 2013–03
  20. By: Caroline Paunov
    Abstract: Inclusive development is a key policy priority since growth processes have not always helped lowerincome groups. Innovation is a major driver of growth and its relationship with inequalities in income and opportunities raises some important policy questions: Do innovation and the resulting technological change necessarily lead to increased inequalities? Do policies aimed at supporting innovation foster inequalities? To what extent can innovation be mobilised to improve the life conditions of the lower income groups? These questions are the basis of this report, which, prepared for the OECD-DST Conference on Innovation for Inclusive Development, reviews the existing evidence in response.<P>L'innovation et le développement inclusif : une discussion des principales questions politiques<BR>Le développement inclusif est une priorité politique importante car la croissance économique ne bénéficie pas toujours aux groupes à faible revenu. L'innovation est un moteur de la croissance, et sa relation avec les inégalités de revenus et d'opportunités soulève des questions majeures : l'innovation et le changement technologique qui en résulte conduisent-ils nécessairement à l'accroissement des inégalités ? Les politiques visant à soutenir l'innovation conduisent-elles à une augmentation des inégalités ? Dans quelle mesure l'innovation peut-elle être mobilisée pour améliorer les conditions de vie des groupes à faible revenu ? Ces questions sont au départ du présent rapport, préparé pour la Conférence de l'OCDE et du DST sur l'innovation et le développement inclusif, qui passe en revue les informations et connaissances existantes sur le sujet.
    Keywords: inclusive, frugal and grassroots innovations, inequalities in income and opportunities, within-country innovation and productivity dispersion, ICTs for inclusive development, developing and emerging economies, innovation, inclusives, frugales et « grassroots », inégalités de revenus et d’opportunités, dispersions d’innovation et de productivité à l’intérieur des pays, TICs pour le développement inclusif, les économies en développement et émergentes
    JEL: D20 I30 L30 O10 O30
    Date: 2013–01–29
  21. By: Chu, Angus C.; Cozzi, Guido
    Abstract: R&D investment has well-known liquidity problems, with potentially important consequences. In this paper, we analyze the effects of monetary policy on economic growth and social welfare in a Schumpeterian model with cash-in-advance (CIA) constraints on consumption, R&D investment, and manufacturing. Our results are as follows. Under the CIA constraints on consumption and R&D (manufacturing), an increase in the nominal interest rate would decrease (increase) R&D and economic growth. So long as the effect of cash requirements in R&D is relatively more important than in manufacturing, the nominal interest rate would have an overall negative effect on R&D and economic growth as documented in recent empirical studies. We also analyze the optimality of Friedman rule and find that Friedman rule can be suboptimal due to a unique feature of the Schumpeterian model. Specifically, we find that the suboptimality or optimality of Friedman rule is closely related to a seemingly unrelated issue that is the overinvestment versus underinvestment of R&D in the market economy, and this result is robust to alternative versions of the Schumpeterian model.
    Keywords: Economic growth, R&D, quality ladders, cash-in-advance, monetary policy, Friedman rule
    JEL: O30 O40 E41
    Date: 2013–03
  22. By: Holger Kraft; Eduardo S. Schwartz; Farina Weiss
    Abstract: This paper studies the relation between firm value and a firm's growth options. We find strong empirical evidence that (average) Tobin's Q increases with firm-level volatility. However, the significance mainly comes from R&D firms, which have more growth options than non-R&D firms. By decomposing firm-level volatility into its systematic and unsystematic part, we also document that only idiosyncratic volatility (ivol) has a significant effect on valuation. Second, we analyze the relation of stock returns to realized contemporaneous idiosyncratic volatility and R&D expenses. Single sorting according to the size of idiosyncratic volatility, we only find a significant ivol anomaly for non-R&D portfolios, whereas in a four-factor model the portfolio alphas of R&D portfolios are all positive. Double sorting on idiosyncratic volatility and R&D expenses also reveals these differences between R&D and non-R&D firms. To simultaneously control for several explanatory variables, we also run panel regressions of portfolio alphas which confirm the relative importance of idiosyncratic volatility that is amplified by R&D expenses.
    JEL: G12
    Date: 2013–02
  23. By: Sánchez, Rosario/R; Diaz, M. Angeles
    Abstract: One of the characteristics of the Spanish economy is the high percentage of small and medium-sized firms. Size is one of the factors that condition the managerial organization of the firms and their efficiency and productivity. Moreover size has been found a highly significant variable in explaining differences in firm’s innovative activities and the returns of R&D expenditures, and it is a well-established connection between productivity and innovative activities. This paper analyses the relationship between innovative activities and size and their effect over firms’ technical efficiency and then over their productivity. We also take into account other variables that could affect the relationship between productivity and innovative activities: industrial sector, market structure, or firms’ financial conditions. The analysis could help to design political economic measures to encourage small firms’ innovation and then contribute to improve their competitiveness. We use a micro panel data set of Spanish manufacturing firms, during the period 2004–2009, to simultaneously estimate a stochastic frontier production function and the inefficiency determinants. The data source is published in the Spanish Industrial Survey on Business Strategies (Encuesta sobre Estrategias Empresariales, ESEE), collected by the Fundación SEPI. Our preliminary results show that innovative firms are more efficient than non-innovative firms; and that small and medium-sized firms’ tent to be more efficient than large firms are.
    Keywords: small firms, technical efficiency, innovative activities.
    JEL: C23 J21 L60
    Date: 2013–02–25
  24. By: M. Constanza Demmel (Universitat de València and ERI-CES); Juan A. Máñez (Universitat de València and ERI-CES); María E. Rochina-Barrachina (Universitat de València and ERI-CES); Juan A. Sanchis-Llopis (Universitat de València and ERI-CES)
    Abstract: The literature on firm level productivity in developed countries recognizes the important role played by firm innovation activities on the evolution of firm productivity. However, the literature on this topic for developing and emerging economies is scarcer and far from conclusive. The aim of this paper is to study the innovation-productivity link at the firm level for four Latin American countries (Argentina, Mexico, Colombia and Peru) for the manufacturing sector. The paper distinguishes between different innovations types such as process and product innovations. The data used have been drawn from the World Bank panel Enterprise Surveys, which provides data for these countries for the years 2006 and 2010. Our estimation strategy follows two-steps: first, we estimate TFP measures following De Loecker (2010) approach and Wooldridge (2009) estimation procedure (this allows us to compare results both considering an exogenous or endogenous Markov process for the dynamics of productivity); and, second, we use the estimated TFPs as dependent variables in several models with innovation activities as covariates, in order to disentangle the effects of those variables on the TFP. From our results we confirm that the most productive firms self-select into innovation activities under the endogenous Markov, driven by product innovations, only for Argentina and Mexico. Further, we obtain that there are returns to innovation in terms of productivity for all innovation types, under an exogenous or endogenous Markov process but, again, only for Argentina and Mexico.
    Keywords: innovation types, Total Factor Productivity (TFP), GMM, endogenous Markov
    Date: 2013–03
  25. By: Christian Le Bas (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); William Latham (Department of Economics, University of Delaware - University of Delaware); Dmitry Volodin (Department of Economics, University of Delaware - University of Delaware)
    Abstract: Dans ce texte nous décrivons et comparons les systèmes d'innovation de quatre grands pays asiatiques (Chine, Corée, Japon, Taiwan) à partir de quelques caractéristiques des inventeurs les plus productifs de ces pays. On mobilise le modèle évolutionniste de production de connaissance par recombinaisons pour expliquer la productivité, la mobilité et la valeur des inventions de ces inventeurs prolifiques. Les données de brevets de la base du NBER permettent d'estimer une série de relations. Nos principaux résultats sont : validité pour tous les pays de la loi expliquant la valeur des inventions par la productivité de l'inventeur, la mobilité inter firmes ne joue aucun rôle sur la productivité des inventeurs au Japon et en Corée, elle a un impact positif sur leur productivité en Chine et à Taiwan, la mobilité internationale des inventeurs prolifiques joue un rôle dans la détermination de la valeur des inventions à Taiwan.
    Keywords: système d'innovation; inventeur; mobilité; valeur des brevets
    Date: 2013–02–18
  26. By: Piotr Przybyla; Katarzyna Sznajd-Weron; Rafal Weron
    Abstract: We modify a two-dimensional variant of a two-state non-linear voter model and apply it to understand how new ideas, products or behaviors spread throughout the society in time. In particular, we want to find answers to two important questions in the field of diffusion of innovation: Why does the diffusion of innovation take sometimes so long? and Why does it fail so often? Because these kind of questions cannot be answered within classical aggregate diffusion models, like the Bass model, we use an agent-based modeling approach.
    Keywords: Agent-based model; Diffusion of innovation; Word of mouth marketing; Conformity; Advertising; Spinson
    JEL: C63 D70 M37
    Date: 2013
  27. By: Figueiredo, Paulo N. (Brazilian School of Public and Business Administration, Getulio Vargas Foundation); Cohen, Marcela (Brazilian School of Public and Business Administration, Getulio Vargas Foundation); Gomes, Saulo (Brazilian School of Public and Business Administration, Getulio Vargas Foundation)
    Abstract: Although much has been written about organizational-level learning, there is a dearth of empirical studies that explore the role of changes in the nature of firm-centred learning mechanisms in affecting inter-firm differences and similarities in the accumulation of innovation capabilities, especially among firms from emerging economies, known as latecomers. By examining the relationships between these issues based on fieldwork evidence from 13 natural resource-processing firms in Brazil (1950-2000s), this study found that: (1) firms that combined the use of external and internal learning mechanisms with increased intensity and quality achieved higher innovation capability levels than firms that used these learning mechanisms with limited frequency and unchanged quality over time; (2) the relative importance of both external and internal learning mechanisms changed as firms' capabilities approached world-leading levels; (3) some combinations of external and internal learning mechanisms were associated with the attainment of particular innovation capability levels. Therefore, if latecomer firms expend limited efforts in using and deliberately changing the intensity and, mainly, the quality of both external and internal learning mechanisms over time, they will deepen their innovation capabilities slowly and will remain innovation 'followers' rather than becoming world-leading innovators. Using a novel approach that explores the relationship between latecomer firms' innovation capability-building and the extent of changes in the underlying learning mechanisms, this paper furthers our understanding of the nature and dynamics of learning and its role as a primary source of firms' international innovation performance. It also challenges recent approaches that seem to over emphasize open learning processes and post-Chandlerian forms of learning as the leading sources of firms' innovation capabilities.
    Keywords: Innovation capability building, learning mechanisms, latecomer firms, natural resources, multiple case-study, Brazil
    JEL: O12 O32 O33 M10 Q20
    Date: 2013
  28. By: Sebastian Petrick
    Abstract: We describe the determinants of energy intensity, carbon intensity, and CO2 emissions in the German manufacturing sector between 1995 and 2007, applying the LMDI index decomposition technique not to aggregate but to micro data. We trace back changes in total CO2 emissions from manufacturing to changes in activity level, structural change between sectors, structural change within sectors, energy intensity at the firm level, fuel mix, and emission factors. We use a firm data set on energy use from the AFiD-Panel on German manufacturing plants that allows us to analyze energy use at the firm level with unprecedented accuracy. Our results show that heterogeneity among firms within one sector is a driver of energy intensity, carbon intensity, and CO2 emissions. By stressing the importance of competition between firms for energy efficiency improvements, we highlight a factor that has so far been widely ignored. Firm heterogeneity has so far rarely included in index decomposition analyses. Contrary to wide-spread beliefs, energy intensity improvements at the firm level do not play a significant role in reducing emissions. Based on findings from the decomposition analysis, we use sector-level results on the relative importance of improvements in firm-level energy intensity and intra-sectoral structural change to distinguish two different innovation channels: innovation by technology and by entrants. We show that incumbent firms in a number of sectors, including some of the most energy intensive ones, do not significantly improve their energy efficiency. Innovation takes place via new entrants instead, rendering standard policies targeted at firm-level energy efficiency ineffective
    Keywords: Index decomposition, industrial energy, energy intensity, carbon intensity, structural change
    JEL: Q40 Q41
    Date: 2013–02
  29. By: Paul A. David (Stanford Economics Department); Adriaan van Zon (SBE Maastricht University & UNU-MERIT (Maastricht, NL))
    Abstract: The research reported here gives priority to understanding the inter-temporal resource allocation requirements of a program of technological changes that could halt global warming by completing the transition to a “green” (zero net CO2- emission) production regime within the possibly brief finite interval that remains before Earth’s climate is driven beyond a catastrophic tipping point. This paper formulates a multi-phase, just-in-time transition model incorporating carbon-based and carbon-free technical options requiring physical embodiment in durable production facilities, and having performance attributes that are amenable to enhancement by directed R&D expenditures. Transition paths that indicate the best ordering and durations of the phases in which intangible and tangible capital formation is taking place, and capital stocks of different types are being utilized in production, or scrapped when replaced types embodying socially more efficient technologies, are obtained from optimizing solutions for each of a trio of related models that couple the global macro-economy’s dynamics with the dynamics of the climate system. They describe the flows of consumption, CO2 emissions and the changing atmospheric concentration of green-house gas (which drives global warming), along with the investment dynamics required for the timely transformation of the production regime. These paths are found as the welfare-optimizing solutions of three different “stacked Hamiltonians”, each corresponding to one of our trio of integrated endogenous growth models that have been calibrated comparably to emulate the basic global setting for the “transition planning” framework of dynamic integrated requirements analysis modeling (DIRAM). As the paper’s introductory section explains, this framework is proposed in preference to the (IAM) approach that environmental and energy economists have made familiar in integrated assessment models of climate policies that would rely on fiscal and regulatory instruments -- but eschew any analysis of the essential technological transformations that would be required for those policies to have the intended effect. Simulation exercises with our models explore the optimized transition paths’ sensitivity to parameter variations, including alternative exogenous specifications of the location of a pair of successive climate “tipping points”: the first of these initiates higher expected rates of damage to productive capacity by extreme weather events driven by the rising temperature of the Earth’s surface; whereas the second, far more serious “climate catastrophe” tipping point occurs at a still higher temperature (corresponding to a higher atmospheric concentration of CO2). In effect, that sets the point before which the transition to a carbon-free global production regime must have been completed in order to secure the possibility of future sustainable development and continued global economic growth.
    Keywords: global warming, tipping point, catastrophic climate instability, extreme weatherrelated damages, R&D based technical change, embodied technical change, optimal sequencing, multi-phase optimal control, sustainable endogenous growth
    JEL: Q54 Q55 O31 O32 O33 O41 O44
    Date: 2013–03
  30. By: Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Sanandaji, Tino (Research Institute of Industrial Economics (IFN))
    Abstract: The overwhelming majority of self-employed individuals are not entrepreneurial in the Schumpeterian sense. In order to unmistakably identify Schumpeterian entrepreneurs we focus on self-made billionaires (in USD) on Forbes Magazine’s list who became wealthy by founding new firms. In this way we identify 996 billionaire entrepreneurs in over fifty countries in the 1996–2010 period. To our knowledge this is the first systematic cross-country study of billionaire entrepreneurs, an economically important group. We demonstrate that the common practice of relying on self-employment and related measures to proxy for entrepreneurship often gives rise to misleading inferences. Interestingly the rate of billionaire entrepreneurs per capita correlates negatively with self-employment rates. Countries with higher income, higher trust, lower taxes, more venture capital investment and lower regulatory burdens have higher entrepreneurship rates but less self-employment.
    Keywords: Entrepreneurship; Innovation; Institutions; Regulation; Self-employment
    JEL: L50 M13 O31 P14
    Date: 2013–03–06
  31. By: Lerner, Josh (Harvard Business School); Tåg, Joacim (Research Institute of Industrial Economics)
    Abstract: We survey the literature on venture capital and institutions and present a case study comparing the development of the venture capital market in the US to Sweden. Our literature survey underscores that the legal environment, financial market development, the tax system, labor market regulations, and public spending on research and development correlates with venture capital activities across countries. Our case study suggests these institutional differences led to the later development of an active venture capital market in Sweden compared to the US. In particular, a later development of financial markets and a heavier tax burden for entrepreneurs have played a key role.
    Keywords: Financial market development; Institutions; IPOs; Labor markets; Legal environment; R&D; Taxation; Stock markets; Venture Capital. [Running Title: Spinoffs in Sweden]
    JEL: E02 G24 G28 N20 O16 O43 O57
    Date: 2013–08–08

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