nep-ino New Economics Papers
on Innovation
Issue of 2014‒07‒21
fifteen papers chosen by
Steffen Lippert
University of Auckland

  1. Patent statistics: a good indicator for innovation in China? Assessment of impacts of patent subsidy programs on patent quality By Dang, Jangwei; Motohashi, Kazuyuki
  2. Innovation in the Service Sector and the Role of Patents and Trade Secrets By Masayuki Morikawa
  3. India as a destination of multinational’s R&D: Growingimportance and management strategy of local R&D centers By Motohashi, Kazuyuki
  4. Multinational’s global open innovation activities in emerging markets: A case of Japanese firms’collaborations with national research institutes in Thailand By Motohashi, Kazuyuki
  5. On the Mechanism of International Technology Diffusion for Energy Productivity Growth By Jin Wei; ZhongXiang Zhang
  7. The effect of the financial crisis on TFP growth: a general equilibrium approach By Millard, Stephen; Nicolae, Anamaria
  8. Innovation Tournaments with Multiple Contributors By Laurence Ales; Soo-Haeng Cho; Ersin Korpeoglu
  9. Dilemma in Individual Collaboration for Invention: Should We be Similar or Diverse in Knowledge? By Huo, Dong; Motohashi, Kazuyuki
  10. Networks and Manufacturing Firms in Africa: Results from a Randomized Field Experiment By Marcel Fafchamps; Simon Quinn
  11. Constraints, Determinants of SME Innovation, and the Role of Government Support By OUM Sothea; Narjoko Dionisius; Charles HARVIE
  12. Offshoring and Directed Technical Change By Daron Acemoglu; Gino Gancia; Fabrizio Zilibotti
  13. Going beyond tradition: Carbon policy in a high-growth economy: The case of China By Lucas Bretschger; Lin Zhang
  14. Patent Expiration and Competition: A dynamic limit price model By Anastasios Papanastasiou
  15. La propagation des grandes idées? L\'impact de l\'activité de brevet des firmes leader sur les inventeurs locaux. By Carlo MENON

  1. By: Dang, Jangwei; Motohashi, Kazuyuki
    Abstract: This paper investigates whether patent subsidy programs aimed at promoting regional innovations have aroused a large number of low-quality applications in China and created biased patent statistics as an indicator for innovations. We found that patent filing fee subsidies encouraged filing of low-quality patent, resulting in a decreased grant rate. Though reward conditioned on grants increased patent grant rate, it also brought patents with narrow claim breadth. Our empirical results confirmed a general concern that patent subsidies have side effects in encouraging patent applications of low quality or low value. However, the patent subsidy programs does not affect the trend of granted patents, particularly for those applied by firms. Therefore, while the surge of patent applications has upward biases as an innovation indicator, increases in granted patents can be explained by uprising of technological capability at enterprise sector in China.
    Keywords: patent, subsidy, quality, China
    JEL: O34 O38
    Date: 2013–11
  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.
    JEL: O31 O34 L80
    Date: 2014
  3. By: Motohashi, Kazuyuki
    Abstract: While R&D activities of multinational firms in India focus on offshore development, some companies are developing cutting-edge technologies. In addition, product development for the local market has increased with the expansion of the Indian market. India’s importance as an R&D center is predicted to increase, and multinationals in advanced countries must improve the competency creation mission of R&D entities in India. To do so, attracting exceptional talent and running highly autonomous organizations with reduced control from headquarters are critical. However, within a corporate-wide innovation strategy, fostering unity through social controls such as international personnel rotations and training, close communication, and permeation of the corporate culture are essential to having an effective local entity.
    Keywords: multinational R&D; India; division of innovative labor
    JEL: F23 O32
    Date: 2014–02
  4. By: Motohashi, Kazuyuki
    Abstract: This paper analyzes the management of multinational’s R&D in emerging economies, taking the case of Japanese firms’ R&D collaboration with NTSDA, Thai national research institute. A detail interview survey for two cases, Polyplastics, an engineering plastics manufacturer and Shiseido, a cosmetic company, both working together with NSTDA for R&D, reveals that there exist significant variations of motivations, scopes and outcomes of such activities. Home base exploiting type activities (Polyplastics) are easier to manage as a natural extension to home country activities, but it is important to motivate its partner to collaborate, since only exploiting local resources may not be sustainable for long time. While, home base augmenting type activities (Shiseido), a local activity has to be well coordinated in global operation at headquarter. In addition, it is difficult to see a short term benefit from such explorative activities, so that top management support becomes important to sustain such activities for certain amount of time.
    Keywords: : Multinational R&D, Thailand, open innovation, national innovation system
    JEL: F23 O32
    Date: 2014–01
  5. By: Jin Wei (Zhejiang University); ZhongXiang Zhang (School of Economics, Fudan University)
    Abstract: International diffusion of energy-saving technologies has received considerable attention in recent energy and environmental economics studies. As a helpful complement to the existing large-scale "black box" modelling works for energy/climate policy analysis, this paper contributes to a transparent analytical model for an economically intuitive exposition of the fundamental mechanism of international technology diffusion for energy productivity growth. We first develop a Solow-type exogenous model where technical change is specified as improvements in energy use efficiency (efficiency-improving vertical innovation). This model is then extended to a Romer-type endogenous model where technical change is described as an expansion of energy technology variety induced by R&D (variety-expanding horizontal innovation). We show that there is a cross-country convergence in the growth rate of energy productivity in a balanced growth path equilibrium, but the absolute levels of energy productivity diverge due to cross-country differences in indigenous innovation efficiency and knowledge absorptive capacities. An economy with a strong capacity of absorbing foreign knowledge diffusion and undertaking indigenous innovation tends to have a higher level of energy productivity.
    Keywords: technological innovation, energy technology diffusion, Solow growth model, endogenous growth model
    JEL: Q55 Q58 Q43 Q48 O13 O31 O33 O44 F18
    Date: 2014–06
  6. By: Sunil Kanwar (Department of Economics, Delhi School of Economics, Delhi, India)
    Abstract: We revisit the relationship between market value and innovation in the context of manufacturing firms in India, using data for 2001-2010. In a milieu where most firms do not patent, the concern was whether ‘small’ innovations would be valued by the stock market. Interestingly, we find that the market places greater value on the relatively innovative firms, though the magnitude of this premium is much smaller than that for developed economies. Further, the market value-innovativeness relationship varies substantially across industry groups, surprisingly having the smallest magnitude for the science-based industries. This variation could be explained by the profit expectation and profit risk associated with the different industries.
    Date: 2014–05
  7. By: Millard, Stephen (Bank of England); Nicolae, Anamaria (Durham University Business School)
    Abstract: In this paper, we use a simple endogenous growth model to show how a financial crisis might have a permanent effect on the level of total factor productivity (TFP). In the model, a financial shock leads to a rise in the spread between the rate of interest paid by firms and the risk-free rate. Since firms have to borrow to finance their research and development (R&D) spending, such a rise in the spread leads to a fall in R&D spending, which affects innovation and, hence, reduces TFP growth. In turn, this leads to permanent falls in the levels of output and labour productivity.
    Keywords: Endogenous growth; Research and development; Innovation
    JEL: O40
    Date: 2014–06–27
  8. By: Laurence Ales; Soo-Haeng Cho; Ersin Korpeoglu
  9. By: Huo, Dong; Motohashi, Kazuyuki
    Abstract: This study integrates theories relevant to collaborative knowledge creation and provides evidence to discover effects of knowledge diversity on collaborative knowledge creation. The analysis uses a sample comprising 38,500 granted U.S. utility patents involving two collaborating inventors, from application year 1991 to 2005. Interindividual knowledge diversity is thought to affect collaborative knowledge creation in three dimensions: increasing probability of excellent ideas, increasing probability of disagreements, and lowering knowledge assimilation. Furthermore, these impacts are conditional on two proposed moderators: technology scope and affiliation scope. Empirical evidence supports the positive effect of knowledge diversity weakening as the scope of technology broadens. The effect also differs depending upon whether the collaboration occurs between organizations, within one organization, or outside any organization.
    Keywords: invention, collaboration, knowledge diversity, knowledge quality, technology scope, affiliation scope
    JEL: O31 O32
    Date: 2014–02
  10. By: Marcel Fafchamps; Simon Quinn
    Abstract: We run a novel field experiment to link managers of African manufacturing firms. The experiment features exogenous link formation, exogenous seeding of information and exogenous assignment to treatment and placebo. We study the impact of the experiment on firm business practices outside of the lab. We find that the experiment successfully created new variation in social networks. We find some limited evidence of diffusion of management practices, particularly in terms of firm formalisation and innovation. Such diffusion appears to be a combination of diffusion of innovation and simple imitation
    JEL: D22 L26 O33
    Date: 2014
  11. By: OUM Sothea (Economic Research Institute for ASEAN and East Asia (ERIA)); Narjoko Dionisius (Economic Research Institute for ASEAN and East Asia (ERIA)); Charles HARVIE (Centre for Small Business and Regional Research School of Economics, University of Wollongong, Australia)
    Abstract: This paper provides an empirical analysis of potential constraints to SMEs upgrading their capability to innovate, and assesses the effectiveness of government support in overcoming these constraints. The justification for government support is that market failures can hinder SMEs’ access to information, finance, technology, and human resources. This paper focuses on the impact of the perceived effectiveness of government support through business development services in terms of providing: (i) training; (ii) counselling and advice; (iii) technology development and transfer; (iv) information; (v) business linkages; (vi) financing; and (vii) a conducive business environment. The effectiveness of this support is evaluated against the ability of SMEs to innovate.
    Keywords: : SMEs, constraints, innovation, government support, and developing Asia.
    JEL: L20 L25
    Date: 2014–10
  12. By: Daron Acemoglu; Gino Gancia; Fabrizio Zilibotti
    Abstract: We study the short- and long-run implications of offshoring on innovation, technology adoption, wage and income inequality in a Ricardian model with directed technical change. In our model, profit maximization determines both the extent of offshoring and the direction of technological progress. A fall in the cost of offshoring induces technical change with an ambiguous factor bias. When the initial offshoring cost is high, an increase in offshoring opportunities triggers a transition with falling real wages for unskilled workers in the West, skill-biased technical change and rising skill premia worldwide. When the offshoring cost is sufficiently low, instead, further increases in offshoring opportunities induce technical change biased in favor of the unskilled workers and may lower the skill premium. Although offshoring improves the welfare of workers in the East, it may benefit or harm unskilled workers in the West depending on parameters, the level of offshoring and the equilibrium growth rate.
    Keywords: China, directed technical change, offshoring, productivity growth, skill premium
    JEL: F43 O31 O33
    Date: 2014–06
  13. By: Lucas Bretschger (ETH Zurich, Switzerland); Lin Zhang (ETH Zurich, Switzerland)
    Abstract: There is widespread concern that an international agreement on stringent climate policies will not be reached because it would imply too high costs for fast growing economies like China. To quantify these costs we develop a general equilibrium model with fully endogenous growth. The framework includes disaggregated industrial and energy sectors, endogenous innovation, and sector-specific investments. We find that the implementation of Chinese government carbon policies until 2020 causes a welfare reduction of 0.3 percent. For the long run up to 2050 we show that welfare costs of internationally coordinated emission reduction targets lie between 3 and 8 percent. Assuming faster energy technology development, stronger induced innovation, and rising energy prices in the reference case reduces welfare losses significantly. We argue that increased urbanization raises the costs of carbon policies due to altered consumption patterns.
    Keywords: Carbon policy; China; Endogenous growth; Induced innova- tion; Urbanization.
    JEL: Q54 O41 O53 C68
    Date: 2014–07
  14. By: Anastasios Papanastasiou
    Abstract: We develop a dynamic model to explore the optimal pricing strategy of a monopolist that faces potential market entry at a given point in time. By engaging in promotional activities, the dominant firm may increase future demand for the product, while by charging below a limit price it can prevent competition from entering the market. Our analysis suggests that the optimal path for price and advertisement depends on the price elasticity of demand and the duration of monopoly life. Relating our model to the market for pharmaceuticals, we establish conditions that would give rise to a Generics Competition Paradox (GCP) and discuss how these conditions are linked to the existing theories that attempt to explain the GCP.
    Keywords: Monopoly, generic competition, brand-name drugs, limit price, price elasticity of demand
    JEL: D21 D42 I11 L12 C61
    Date: 2014–05
  15. By: Carlo MENON
    Abstract: Le document examine si l’activité de brevetage des entreprises les plus inventives affecte le nombre de brevets délivrés à d\'autres inventeurs locaux dans la même zone métropolitaine aux États-Unis. La théorie économique prédit que les effets positifs des économies d\'agglomération peuvent être contrebalancés par une pression à la hausse sur les salaires, laquelle est plus prononcée à court terme et au sein de chaque classe de technologie. L\'analyse empirique exploite la structure en panel des données pour inclure différents effets fixes, et adopte une approche avec variable instrumentale pour démontrer la causalité. Les résultats montrent que l\'effet est globalement positif, qu’il est plus marqué avec un décalage dans le temps, et qu’il ne se limite pas à la même catégorie de technologie, ce qui suggère que la diffusion de connaissances à la Jacob entre secteurs domine les autre sources d\'économies d\'agglomération intra-sectorielles, y compris les mécanismes de partage et d’appariement. Les implications pour la politique de développement local sont discutées.
    Keywords: diffusion locale de connaissances, brevets, innovation.
    JEL: R10 O31
    Date: 2014

This nep-ino issue is ©2014 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.