nep-ino New Economics Papers
on Innovation
Issue of 2014‒07‒05
eighteen papers chosen by
Steffen Lippert
University of Auckland

  1. Propensity to patent, R&D and market competition : dynamic spillovers of innovation leaders and followers By Szabolcs Blazsek; Álvaro Escribano
  2. Innovation in the Service Sector and the Role of Patents and Trade Secrets By Masayuki Morikawa
  3. Closing the Gap: An Empirical Evidence on Firm’s Innovation, Productivity, and Exports By Tavassoli, Sam; Jienwatcharamongkhol, Viroj
  4. Cournot Competition and “Green” Innovation: An Inverted-U Relationship By L. Lambertini; J. Poyago-Theotoky; A. Tampieri
  5. Restructuring China’s Research Institutes: Impacts on China’s Research Orientation and Productivity By Daniel L.Tortorice; Gary H. Jefferson; Renai Jiang
  6. Patent litigants, patent quality, and software: lessons from the smartphone wars By Ronald A. Cass
  7. Southern Innovation and Foreign Direct Investment By Suzuki, Keishun
  8. An Economic Analysis of Deferred Examination System: Evidence from Policy Reforms in Japan By Yamauchi, Isamu; Nagaoka, Sadao
  9. The Spillover Effects of Publicly Supported Private R&D : Analysis of NEDO Follow-up Survey Data By Matsushima, Kazunari; Aoshima, Yaichi
  10. Conflict Resolution, Public Goods and Patent Thickets By Dietmar Harhoff; Georg von Graevenitz; Stefan Wagner
  11. R&D Investment and Financial Frictions By Oscar M. Valencia
  12. Eco-innovation and Regulatory Push/Pull Effect in the Case of REACH Regulation: Empirical Evidence from Survey Data By Nabila Arfaoui
  13. The Acquisition and Commercialization of Invention in American Manufacturing: Incidence and Impact By Ashish Arora; Wesley M. Cohen; John P. Walsh
  14. Understanding the Role of Collective Imaginary in the Dynamics of Expectations: The Space Industry Case Study By Benjamin Cabanes; Blanche Segrestin; Benoît Weil; Pascal Le Masson
  15. Effectiveness of Intellectual Property Regimes: 2006-2011 By Noemí Pulido Pavón; Luis Palma Martos
  16. The 1883 convention and the impossible unification of industrial property By Gabriel Galvez-Behar
  17. The role of external linkages and gatekeepers for the renewal and expansion of U.S. cities’ knowledge base, 1990-2004 By Stefano Breschi; Camilla Lenzi
  18. Atanasoff’s invention input and early computing state of knowledge By Rouchy, Philippe

  1. By: Szabolcs Blazsek; Álvaro Escribano
    Abstract: Dynamic interactions among stock return, Research and Development (R&D) expenses, patent applications based on R&D investment, and the propensity to patent are studied in this work for a panel of firms from the United States. The panel includes technologically similar firms, neck-to-neck, mostly from the drugs product-market sector. Firms’ propensity to patent is modeled by a dynamic latent-factor patent count data model that separates patented and non patented R&D. Patent innovation leader and follower firms are identified according to their knowledge stock. Significant and positive dynamic spillover effects are obtained among patent application leaders and followers. We observe that neck-to-neck firms in patent innovation activity produce an inverted-U relationship between market competition and innovation. Furthermore, firms’ propensity to patent is positively correlated with market competition and there is a positive feedback in both directions. Increasing the degree of competition in the market enhances innovation and patent applications, in order to help firms to appropriate part of the benefits of their R&D investments. On the other hand, firms by increasing their patent applications defend themselves from competitors, trying to improve their market share. However, due to the diffusion of knowledge through patent applications, knowledge spills over to competitors therefore, the degree of competition and innovation increases in the market.
    Keywords: propensity to patent, competition, technological proximity, patent innovation leaders and followers, latent factor patent count data model, panel vector autoregression, simulated quasi maximum likelihood, efficient importance sampling
    JEL: C15 C31 C32 C33 C41
    Date: 2014–06
  2. By: Masayuki Morikawa
    Abstract: This paper, using Japanese firm-level data, presents findings about innovative activities in the service sector and the role of patents and trade secrets on innovation. According to the analysis, first, service firms have fewer product innovations than do manufacturing firms, but the productivity of innovative service firms is very high. Second, service firms have a low propensity for holding patents, but their holding of trade secrets is comparable to that of the manufacturing firms. Third, patents and trade secrets have positive relationships with product innovations, and the effects are quantitatively similar in magnitude, in both the manufacturing and the service sectors. On the other hand, a positive relationship between trade secrets and process innovations is found only in the manufacturing sector. These results suggest a pivotal role of the law protecting trade secrets on innovation and productivity growth in the service sector.
    Keywords: innovation, service sector, patent, trade secret
    JEL: O31 O34 L80
    Date: 2014–06
  3. By: Tavassoli, Sam (CSIR, Blekinge Inst of Technology); Jienwatcharamongkhol, Viroj (Department of Economics, Lund University, Sweden)
    Abstract: It is well known that exporters are productive firms. But the source of their productivity is left unexplained. This paper aims to endogenize the productivity heterogeneity of exporting firms by incorporating innovation in a structural model framework. In doing so, we close the gap between the innovation-productivity and productivity-export literature. Two waves of Swedish Community Innovation Survey (CIS) are merged. This allows for a setup that takes into account the links from innovation input to innovation output and also from innovation output to productivity and exports. The main findings highlight that exporters are productive firms with innovation output in the past, which in turn was driven by prior R&D and other innovation activity investments.
    Keywords: innovation; productivity; export; firm-level; structural model; community innovation survey
    JEL: C31 L60 O31
    Date: 2014–06–01
  4. By: L. Lambertini; J. Poyago-Theotoky; A. Tampieri
    Abstract: We evaluate the relationship between competition and innovation in an industry where production is polluting and R&D has the aim to reduce emissions. We build up an oligopoly model where n firms compete in quantities and decide their investment in green R&D. When environmental taxation is exogenous, the investment in green R&D always increases with the number of firms in the industry. We analyse next the case where taxation is endougenously determined by a regulator with the aim to maximise social welfare. An inverted-U relationship exists under reasonable conditions, and it is driven by the presence of spillovers.
    JEL: Q55 Q56 O30 L13
    Date: 2014–06
  5. By: Daniel L.Tortorice (International Business School, Brandeis University); Gary H. Jefferson (International Business School, Brandeis University); Renai Jiang (Xi'an Jiaotong University)
    Abstract: This paper evaluates the impact of the Chinese government’s initiative begun in 1999 to restructure the country’s approximately 3,500 research institutes. The paper reviews the evolution of China’s research sector over the period 1995 to 2010, identifying certain issues that are analyzed using a panel of sample research institutes. The econometric analysis is based on a balanced sample of these institutes, both converted and unconverted, spanning 1998, the year prior to the restructuring initiative, to 2005. In order to control for potential endogeneity and selection bias, the paper employs various econometric methods to evaluate the impact of the restructuring program on the performance of these institutes. We find that the restructuring program appears to have achieved its fundamental goals, that is, shifting the relevant resources toward a more commercial mission for the converted S&T enterprises and a more researchoriented mission, involving the use of government grants, for the non-profit research institutes. The results show modest gains in the efficiency of patent production, but given the lengthy gestation period, a longer duration is needed to assess how the patent production of China’s research institutes will adapt to the shift in their missions and reassignment of government resources.
    Keywords: Technological Innovation, R&D, Invention, Research Policy
    JEL: O31 O32 O33
    Date: 2014–05
  6. By: Ronald A. Cass
    Abstract: Commentators, public officials, and scholars have sounded alarms over the smartphone patent wars — hundreds of cases asserting infringement of patents by makers of smartphones and tablet computers—often suggesting broad, categorical “fixes” to problems this litigation reveals. In general, these recommendations sweep too broadly, throwing out good claims as well as bad and needed remedies as well as questionable ones. However, calls for attention along two margins promise improvements. One factor, the identity of the enterprise asserting patent rights, already is being used by courts in considering appropriate patent infringement remedies but its use needs to be refined. The other factor, patent quality—especially in software patents, where the existence of parallel schemes of intellectual property protection exacerbates quality problems—is even more critical to the way the system operates. Addressing the patent quality issue (which is distinct from patent clarity or patent notice) can do more than other reforms to reduce costs without reducing innovation incentives.
    Date: 2014–06
  7. By: Suzuki, Keishun
    Abstract: Many empirical studies have yielded mixed results about the impact of foreign direct investment (FDI) on domestic innovation in developing countries. This paper investigates the effect of FDI-promoting policy on innovation in the South in a general equilibrium model that incorporates both the knowledge spillover effect and the market stealing effect via FDI. Specifically, we conduct the analyses of both the short-run effect and the long-run effect. While FDI-promoting policy temporarily discourages Southern innovation in transitional dynamics through the market stealing effect, the accumulation of Southern knowledge via FDI helps domestic firms begin innovation again in the long-run. In the long-run, FDI-promoting policy may generate an inverted-U effect on innovation depending on whether the knowledge spillover is strong. This paper also examines the effect of FDI-restriction policy on Southern innovation, and the model shows that FDI protectionism has only a shortterm effect and may decrease the innovation rate in the long-run.
    Keywords: Southern Innovation, Foreign Direct Investment, Market Stealing Effect, Transitional Dynamics
    JEL: F21 O11 O31
    Date: 2014–06–10
  8. By: Yamauchi, Isamu; Nagaoka, Sadao
    Abstract: We investigate how a deferred patent examination system promotes ex-ante screening of patent applications, which reduces both the number of granted patents and the use of economic resources for examinations, without reducing the return from R&D. Based on a real option theory, we develop a model of examination request behaviors. Exploiting the responses of Japanese firms to recent policy reform, we find that the shortening of the allowable period for an examination request significantly increases both eventual and early requests, controlling for the blocking use of a pending patent application. This effect is stronger in technology areas with higher uncertainty. These results support the importance of uncertainty for an applicant and of ex-ante screening.
    Keywords: patent, examination, option value, fee structure, R&D
    JEL: C41 L21 O34
    Date: 2014–06
  9. By: Matsushima, Kazunari; Aoshima, Yaichi
    Abstract: Innovation creating economic values has become a vital issue due to severe global competition. Given such a circumstance, government funding has flowed not only into pure research, but into applied research and product development linked directly with commercialization as well. Such a tendency has been accelerated since “Bayh-Dole Act” was enacted, which made it easier for firms to appropriate R&D outcomes. Increased appropriablity that promotes commercialization, however, may prevent technological outcome produced by a government-funded R&D project from being widely utilized in a society. The project aimed at immediate commercialization may tend to create context-specific knowledge that can be applied only to the particular product category rather than generalized technological knowledge that can be widely available for other products or technological fields. Such a project may also have strong incentives to keep such technologies in-house. Therefore, the policy side confronts dilemma that the more government attempts to encourage private R&D activity with public support that are linked directly with market competition, the more the indirect spillover effects are sacrificed because of increased appropriability. To resolve this dilemma, we must identify the factors that influence the spillover effects of private R&D projects receiving public support. In this paper, we first classified a spillover effect in accordance with three dimensions, spillover contents, scope of the spillover, and spillover recipient field. Furthermore, spillover contents can be divided into “technological spillover,” “cognitive spillover” and “social-relations spillover.” And then, we empirically investigate the factors that influence spillover effects by analyzing data obtained from 301 private R&D projects supported by NEDO (New Energy and Industrial Technology Development Organization), Japan’s public management organization promoting private R&D. Our findings show that while the project starting at the exploratory phase had positive effects on technological spillover both within and outside the firm, and that spillover outside the firm is restricted when the project is of great strategic importance for a firm. We also found that information exchanges with other internal divisions had positive effects on not only technical spillover but on cognitive spillover and social-relations spillover. Results imply that it is necessary for supporting institutions to confirm that projects are not isolated internally and that there is a system in place to receive assistance and cooperation from other divisions.
    Date: 2014–06
  10. By: Dietmar Harhoff; Georg von Graevenitz; Stefan Wagner
    Abstract: Post-grant validity challenges at patent offices rely on the private initiative of third parties to correct mistakes made by patent offices. We hypothesize that incentives to bring post-grant validity challenges are reduced when many firms benefit from revocation of a patent and when firms are caught up in patent thickets. Using data on opposition against patents at the European Patent Office we show that opposition decreases in fields in which many others profit from patent revocations. Moreover, in fields with a large number of mutually blocking patents the incidence of opposition is sharply reduced, particularly among large firms and firms that are caught up directly in patent thickets. These findings indicate that post-grant patent review may not constitute an effective correction device for erroneous patent grants in technologies affected by either patent thickets or highly dispersed patent ownership.
    Date: 2014–06
  11. By: Oscar M. Valencia
    Abstract: R&D intensity for small firms is high and persistent over time. At the same time, small firms are often financially constrained. This paper proposes a theoretical model that explains the coexistence of these two stylized facts. It is shown that self-financed R&D investment can distort the effort allocated to different projects in a firm. In a dynamic environment, it is optimal for the firm to invest in R&D projects despite the borrowing constraints. In addition, this paper shows that beyond a certain threshold, effort substitution between R&D and production appears. When transfers from investor to entrepreneur are large enough, R&D intensity decreases with respect to financial resources. Conditional on survival, the more innovative and financially constrained firms are, faster they grow and exhibit higher volatility.
    Keywords: Moral Hazard, Endogenous Borrowing Constraints, Technological Change.
    JEL: O41 D86
    Date: 2014–06–26
  12. By: Nabila Arfaoui (University of Nice Sophia Antipolis, France; GREDEG CNRS)
    Abstract: Numerous theoretical and empirical studies show a positive correlation between eco-innovation and environmental regulation. However, very few analyses explain how environmental policies drive eco-innovation. This paper tries to fill this gap by studying eco-innovation-friendly mechanisms in the way the European REACH (Registration, Evaluation, Authorization and restriction of Chemicals) regulation has been designed. The aim of REACH, which entered into force in 2007 is "to ensure a high level of protection of human health and the environment while improving competitiveness and innovation", which makes it an appropriate subject for analysis of the relation between regulation and eco-innovation. The study uses data from a unique original survey, which identifies innovation-friendly mechanisms in relation with the push/pull effect of regulation on environmental innovations. Our results show that extended responsibility of producers has a positive impact to "pull demand" toward environmental innovation. Moreover the obligation to exchange information along the supply chain and the process of authorization play an important role to “push” environmental innovation.
    Keywords: Eco-innovation, REACH, Regulatory Push/Pull effect, Econometric modeling
    JEL: Q55 Q58 C51
    Date: 2014–06
  13. By: Ashish Arora; Wesley M. Cohen; John P. Walsh
    Abstract: Recent accounts suggest the development and commercialization of invention has become more “open.” Greater division of labor between inventors and innovators can enhance social welfare through gains from trade and greater economies of specialization. Moreover, this extensive reliance upon outside sources for invention also suggests that understanding the factors that condition the extramural supply of inventions to innovators is crucial to understanding the determinants of the rate and direction of innovative activity. This paper reports on a recent survey of over 6000 American manufacturing and service sector firms on the extent to which innovators rely upon external sources of invention. Our results indicate that, between 2007 and 2009, 18% of manufacturing firms had innovated – meaning had introduced a product that was new to the market. Of these, 49% report that their most important new product had originated from an outside source, notably customers, suppliers and technology specialists. We also estimate the contribution of each source to innovation in the US economy. Although customers are the most frequent outside source, inventions acquired from customers tend to be economically less significant than those from technology specialists. As a group, external sources of invention make a significant contribution to the overall rate of innovation in the economy. Indeed, results from a multinomial logit model suggest that, were the outside availability of innovation to be removed, the percentage of innovating firms in the U.S. manufacturing sector would drop from 18% to 10%.
    JEL: L1 O3 O30 O31 O32 O34
    Date: 2014–06
  14. By: Benjamin Cabanes (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris); Blanche Segrestin (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris); Benoît Weil (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris); Pascal Le Masson (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris)
    Abstract: The main objective of this study attempts to contribute to a growing body of research in the understanding of innovation and technological development. When addressing radical changes in technology and innovation, ideas derived from expectations and promises have become key issues in transforming a vision into reality. Thus, our paper aims to investigate the dynamics of expectations and its relationship to the collective imaginary when applied to the space industry. The space industry is one of the most exemplary cases to study the dynamics of social expectations (i.e. space observation, space exploration, the conquest of space, and etc.) and it has clearly been considered as a strong stimulus for design efforts. In order to illustrate the processes involved with fulfilling the design of new visions and innovative promises, we use the most recent models of design reasoning (C-K theory) to support our hypothesis.
    Keywords: Technology Development; Innovation Development; Dynamic of Expectations; Collective Imaginary; Social Imaginary; C-K design theory; Space Industry
    Date: 2014–06–15
  15. By: Noemí Pulido Pavón (University of Seville, Spain); Luis Palma Martos (University of Seville, Spain)
    Abstract: The analysis and implications of copyright provide the foundation for copyright economics, where an array of different streams of thought coexist feeding a number of controversies that at the same time both hinder and enrich the research agenda. One of the keenest debates concerns the relation between copyright and competition policy. The goal of the current work is to explore to what extent competition policy determines the level of protection afforded to copyright. The paper also analyses the effect of other variables such as education, innovation, culture and national wealth. Panel data techniques are applied for a sample of eight countries over the period 2006 to 2011. Findings show that copyright protection is more intense in countries which have more effective competition policy laws, and which perform better in education, innovation and wealth. The link with regard to spending on culture does not prove significant, opening up a range of hypotheses for formulating cultural policy goals and instruments. In terms of countries, those in the Mediterranean area display the weakest regimes for protecting intellectual property.
    Keywords: Intellectual Property Rights, Copyright Economics, Competition Policy, Panel Data Techniques.
    JEL: D4 L5 Z1
    Date: 2014–06
  16. By: Gabriel Galvez-Behar (IRHiS - Institut de Recherches Historiques du Septentrion - CNRS : UMR8529 - Université Lille III - Sciences humaines et sociales)
    Abstract: Symbol of a global policy, the TRIPS agreement is often considered as a way to impose a Western intellectual property regime and, thus, as a form of neocolonialism. Some critical analysis of the Western intellectual property invite us to historicize its development and refuse therefore to consider the TRIPS agreement as the inevitable outcome of a teleological process. Characterized by an early international regulation - with the creation of the 1883 Paris Convention on patents and trademarks, and with the 1886 Berne Convention on copyright - the history of intellectual property gives rise, it is true, to such a finalist perspective. For some, insofar as they were concluded when the Western countries shared Africa and the world, these treaties symbolize the first step of an imperial vision of intellectual property. The parallel is tempting : the late 19th century conventions would be to imperialism what the TRIPS agreement is to neo-colonialism. However, concerning the industrial property, this analogy is problematic and threatens to revive the teleological perspective which is denounced. To what extent, in fact, did the 1883 convention constitute a form of imperialism ? How were the territories under the domination of Western countries embedded in the development of industrial property in the 19th century and the early 20th century ? Our paper has no other purpose than to offer some considerations about the patent right relating with these questions. First, we will consider the issue of international but also sub-national diversity : culture can not be only considered from a national point of view and even in industrialized countries traditional knowledge, for example, was excluded from the field of patentability. Then we will focus on the emergence of the Paris convention, which constituted, at the same time, a French attempt to homogenize the international patent practices and a way to close the patent controversy. At last, our paper will deal with the integration of colonies in the Paris Union, which occurred in the Interwar period and especially with the Hague Conference (1925), which will be analyzed more specifically.
    Keywords: brevets d'invention; propriété industrielle; histoire; innovation; Union de Paris
    Date: 2014–05–15
  17. By: Stefano Breschi; Camilla Lenzi
    Abstract: This paper examines the role of external linkages and gatekeepers for the renewal and expansion of cities’ knowledge base, by presenting new evidence about co-invention networks in U.S. metropolitan areas based on European Patent Office (EPO) data for the period 1990-2004. We argue that the relative importance of direct external linkages and external relations mediated by gatekeepers varies according to specific local conditions. In particular, our findings suggest that external relations are on average a chief conduit to inject non-redundant knowledge at the local level and contribute to broadening and rejuvenating the local knowledge base. However, cities are quite heterogeneous in how they benefit from external relations. Whereas direct external connections outperform, on average, external links mediated by gatekeepers, the latter are especially important in cities with a localized and specialized knowledge base, as they enable the trans-coding and absorption at the local level of externally sourced knowledge.
    Keywords: networks, gatekeepers, knowledge base
    JEL: O31 R11
    Date: 2014–06
  18. By: Rouchy, Philippe (CSIR, Blekinge Inst of Technology)
    Abstract: This article investigates the dynamic relationship between a single pursue of an invention and the general US supply of similar activities in early computing during the 1930-1946 period. The objective is to illustrate how an early scientific state of knowledge affects the efficiency with which an theoretical effort is transformed into an invention. In computing, a main challenge in the pre-industrial phase of invention concerns the lack of or scattered demand for such ground-breaking inventions. I present historiographical evidences of the early stage of US computing providing an improved understanding of the dynamics of the supply of invention. It involves solving the alignment between a single inventor’s incentives to research with the suppliers of technology. This step conditions the constitution of a stock of technical knowledge, and its serendipitous but purposeful organisation.
    Keywords: invention input; computing; technological change
    JEL: B25 L63 N12 O14
    Date: 2014–06–23

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