nep-ino New Economics Papers
on Innovation
Issue of 2014‒08‒02
twelve papers chosen by
Steffen Lippert
University of Auckland

  1. Innovation on the seed market: the role of IPRs and commercialisation rules By Marc Baudry; Adrien Hervouet
  2. Cooperation between Russian research organizations and industrial companies: factors and problems By Simachev, Yuri; Kuzyk, Mikhail; Feygina, Vera
  3. Supplier Innovation in the Presence of Buyer Power By Zhiqi Chen
  4. Towards the societal system of innovation: The case of metropolitan areas in Europe By Turkeli S.; Wintjes R.J.M.
  5. Developing shared product platforms during a merger: The Fiat-Chrysler case By Anna Cabigiosu; Francesco Zirpoli; Markus Becker
  6. International R&D spillovers and unobserved common shocks By Diego-Ivan Ruge-Leiva
  7. Successive leadership changes in the regional jet industry By Vertesy D.
  8. The unequal effect of India's industrial liberalization on firms' decision to innovate: Do business conditions matter? By Bas M.; Paunov C.
  9. Optimal bid disclosure in license auctions with downstream interaction By Fan, Cuihong; Jun, Byoung Heon; Wolfstetter, Elmar G.
  10. Is the Time Allocated to Review Patent Applications Inducing Examiners to Grant Invalid Patents?: Evidence from Micro-Level Application Data By Michael D. Frakes; Melissa F. Wasserman
  11. Innovation in real estate and evolutionary agendas By Kauko, Tom
  12. An introduction to the economics of rare earths By Bartekova E.

  1. By: Marc Baudry; Adrien Hervouet
    Abstract: This article deals with the impact of legislation in the seed sector on incentives for variety creation. The first category of rules consists in intellectual property rights and is intended to address a problem of sequential innovation and R&D investments. The second category concerns commercial rules that are intended to correct a problem of adverse selection. We propose a dynamic model of market equilibrium with vertical product differentiation that enables us to take into account the economic consequences of imposing either Plant Breeders’ Rights (PBRs) or patents as IPRs and either compulsory registration or minimum standards as commercialisation rules. The main result is that the combination of minimum standards and PBRs (patents) provides higher incentives for sequential and initial innovation and may be preferred by a public regulator when sunk investment costs are low (high) and the probability of R&D success is sufficiently high (low).
    Keywords: Intellectual Property Rights, Plant Breeders’ Rights, Catalogue, Product differentiation, Seed market, Biodiversity
    JEL: D43 K11 L13 Q12 Q16
    Date: 2014
  2. By: Simachev, Yuri; Kuzyk, Mikhail; Feygina, Vera
    Abstract: The study is focused on the cooperation of Russian companies with research organizations in implementing R&D projects during technological innovation. Taking into account behavioral changes, authors carry out a micro-level analysis based on empirical data of executive survey of over 600 Russian industrial firms (2011—2012) and about 350 research organizations and universities (2012). The authors emphasize the key factors of firms’ demand for outsourcing R&D reveal the main barriers to the development of university-industry cooperation and their particularities for different cooperation actors. The analysis shows that there is a positive relation between the size of a company and R&D outsourcing. As for the factor of age, the highest cooperation activity of Russian firms is observed among enterprises founded over 20 years ago. As far as concernes cooperation activity of research organizations, large ones are significantly more likely to cooperate with business. A common prerequisite for research organizations' R&D cooperation with business is sufficient academic ranking. Business and science evaluate differently various obstacles to effective cooperation. For firms, the main problems are the inflated costs of national R&Ds, insufficient research organizations’ orientation at company needs, and low quality of developments. As for representatives of research organizations, they mention as barriers primarily the lack of companies' receptivity to innovation and inadequate information about promising developments. Businesses are more optimistic about cooperation with science if they already have a relevant experience of interaction. In the case of research organizations we observe a different pattern: most problems seem more significant to organizations conducting R&D in business interests.
    Keywords: innovations; university-industry cooperation; barriers to research and development; firm behavior
    JEL: L20 O31 O32
    Date: 2014–07
  3. By: Zhiqi Chen (Department of Economics, Carleton University)
    Abstract: A theoretical framework is constructed to derive general conditions under which increased buyer power weakens or strengthens a supplier’s incentive to innovate. These conditions are then applied to two sets of specific models: one on product innovation and the other on process innovation. The analysis shows that the effects of buyer power depend on the type of innovation, the source of buyer power, and the channel through which buyer power manifests itself. It identifies circumstances under which an increase in buyer power has a negative, positive or zero impact on innovation. The welfare consequences of buyer power are also investigated.
    Keywords: Buyer power, innovation, product variety
    JEL: L1 L4
    Date: 2014–05–14
  4. By: Turkeli S.; Wintjes R.J.M. (UNU-MERIT)
    Abstract: Innovation serves many purposes. In this paper we study new varieties of innovation and innovation policy which address societal challenges in the largest cities in Europe. These metropolitan areas consistently show resounding characteristics in terms of multiplicities of innovation, governance and societal challenges. They serve as living labs and lead-markets for solutions to societal challenges. The identified and analysed cases of social innovation initiatives in these metropolitan areas organize for new resourceful interactions between the demand for social innovations and the capacities to generate multi-domain solutions. It is the context dependencies of these cases of social innovation that open up diverse interest-based possibilities. In this daily life-world context a multiplicity of actors select local-interactive processes. The broad range of actors includes government research labs, public sector, creative and other service industries, social entrepreneurs, intrapreneurs, student platforms, and profession-linked open communities. Such interactions represent emerging transformative capabilities for addressing societal challenges, turning local-societal political/administrative; economic/ financial; technological/social solutions into multi-level regional, national, global opportunities, and a wider range of benefits. In metropolitan areas, these multi-domain and multi-level potentials are activated by organizing societal synergies between social participative creativity and economic innovative efficiency for any level. Existing concepts of innovation systems do not capture and explain these unique societal synergies, because they only focus on one specific type of innovation and one specific type of sectoral, technological, socio-technical, social or spatio-organizational national, regional system of innovation. It requires acknowledging that innovation and innovation systems are not only instrumental for economic benefits in a system-technocratic sense, but also for addressing societal challenges in a grassroots-communicative sense. Therefore we construct an overarching yet deepened concept the societal system of innovation, a theoretical-analytical framework based on empirical background. We do not add yet another type of innovation system, but acknowledge the overlaps and linkages between the existing types of innovation systems. The existing types are the special cases of the societal system of innovation with respect to the presence/absence of organizations, where organizational rules and interactional play between them. Over-embedded or lacking interactions among these special-case innovation systems cannot capture evolving contextuality life-world for innovation. This shortcoming provides a complementary policy rationale for being critical in the organization of widened interactions S2S, system-to-system; G2G, grassroots-to-grassroots and deepened contextuality S2G, systems-to-grassroots; and G2S, grassroots-to-systems under the concept, instruments, measurement/assessment of the societal system of innovation.
    Keywords: Technological Change; Research and Development; Intellectual Property Rights: General; Technological Change: Government Policy; Economywide Country Studies: Europe;
    JEL: O30 O38 O52
    Date: 2014
  5. By: Anna Cabigiosu; Francesco Zirpoli; Markus Becker
    Abstract: This paper, building on R&D integration and improvisation literature, explores how firms organize to jointly develop common product platforms if their integration process is still in progress. In order to address our exploratory research question, we draw on a unique set of empirical data gathered during the Fiat-Chrysler R&D integration process and during the development of their first shared product platform. We show that, how due to fierce competition on time in the industry, the two companies did not have time to complete the planned R&D integration. As a consequence, the first shared platform development project represented the real locus of technological, knowledge, and organizational integration between the two firms. In line with the R&D integration literature, this paper identifies a set of planned integration mechanisms: a centralized R&D area, two teams that mirror each other, integrator roles and shared technical norms. This organization was designed to help Fiat and Chrysler exploiting their complementarities. Furthermore, building on the improvisational literature, we show that the planned organization did not suffice: interstices between the two firms exist and planning and improvisation are complementary. Improvisation should be built upon a minimum structure and firms willing to accelerate their integration process can rely upon NPD activities.
    Keywords: R&D integration, improvisation, NPD organization, merger and acquisitions
    JEL: O32
    Date: 2014–07
  6. By: Diego-Ivan Ruge-Leiva
    Abstract: This paper investigates the effects of the domestic and foreign R&D weighted by bilateral imports on productivity accounting for the heterogeneous impact of unobserved micro and macroeconomic common shocks, which are modeled in a multifactor error structure. Using a panel of 50 economies from 1970-2011, I find that when unobserved common shocks are not regarded, as has been done by the literature in this area, estimates of domestic R&D and foreign R&D might be biased and inconsistent. Once unobserved common shocks are accounted for, by allowing for heterogeneous technology coefficients, significant estimates become more sizable, consistent and not seriously biased in most cases. However, these estimates might be capturing not only returns to domestic R&D and trade-related knowledge spillovers, but also unobserved common spillovers and other effects. This indicates that knowledge spillovers and effects of unknown form cannot be easily separated. Therefore, unobserved common shocks should be considered when estimating returns to domestic R&D and international R&D spillovers.
    Keywords: Productivity, Spillovers, Cross-Section Dependence, Unobserved Common Shocks.
    Date: 2014–07
  7. By: Vertesy D. (UNU-MERIT)
    Abstract: This study examines leadership dynamics in the regional jet manufacturing industry from the 1980s onwards. With the help of leading products aircraft or aircraft family, British Aerospace BAe, Fokker, Bombardier and Embraer consecutively took the leadership in terms of new deliveries. In order to understand the co-evolution of demand for aircraft, technology and industrial structure, the paper applies a framework for innovation system dynamics that investigates in detail the preconditions for growth, windows of opportunity and strategic response of firms. In the first major leadership change, BAe and Fokker lost their leadership to Bombardier, which was the first to respond to a combination of windows of opportunity more efficient jet engine technology, cheaper oil prices, market liberalization and the expansion of regional services boosted by the introduction of scope clauses that created a niche for the 50-seat market. Bombardiers radical innovation, the business-jet based CRJ200 became the leading product of the 1990s. A second leadership change occurred in 2005, as new demand and regulatory windows increasing oil prices, more competitive market, fluctuating economy, relaxing scope clauses opened new opportunities for the 70-120 market segment to the detriment of both the 50-seat regional and 150-seat large civil jet markets. The Brazilian Embraer, with its already proven design, manufacturing and marketing capabilities in the regional jet industry was the first to make a strategic move and introduce a new product line, the ERJ-170/190 specifically intended for this market. The fate of failed challengers and past leaders points to the importance of preconditions, timing of windows of opportunity, speedy strategic response by companies and a proper evaluation of future demand. The long lead time between development and entry into serial production necessitates favourable demand windows both during the development and the serial production phases in order to turn a new product into a leading product, thus timing of response was found to be critical not only for gaining leadership, but also for staying in the market and recovering sunk costs.
    Keywords: Multinational Firms; International Business; Business Objectives of the Firm; Firm Organization and Market Structure; Automobiles; Other Transportation Equipment; Industrialization; Manufacturing and Service Industries; Choice of Technology; Management of Technological Innovation and R&D; Technological Change: Government Policy;
    JEL: F23 L21 L22 L62 O14 O32 O38
    Date: 2014
  8. By: Bas M.; Paunov C. (UNU-MERIT)
    Abstract: This paper examines the heterogeneous impact of industrial liberalization policy, the dismantling of the License Raj in India, on firms innovation performance. Our results show that larger and more productive firms in liberalized industries were more likely to take up RD while the smallest and least efficient firms were less likely to do so. We also show that this inequality of effects was strongest in economically less developed Indian states and where financial development and the knowledge base are weaker. This suggests business conditions shape heterogeneous impacts of liberalization policies to the advantage of initially larger and more efficient firms.
    Keywords: Firm Behavior: Empirical Analysis; Industrialization; Manufacturing and Service Industries; Choice of Technology; Industrial Policy; Innovation and Invention: Processes and Incentives;
    JEL: O25 O14 O31 D22
    Date: 2014
  9. By: Fan, Cuihong; Jun, Byoung Heon; Wolfstetter, Elmar G.
    Abstract: The literature on license auctions for process innovations in oligopoly assumed that the auctioneer reveals the winning bid and stressed that this gives firms an incentive to signal strength through their bids, to the benefit of the innovator. In the present paper we examine whether revealing the winning bid is optimal. We consider three disclosure rules: full, partial, and no disclosure of bids, which correspond to standard auctions. We show that more information disclosure increases the total surplus divided between firms and the innovator as well as social surplus. More disclosure also increases bidders’ payoff. However, no disclosure maximizes the innovator’s expected revenue.
    Keywords: Auctions; innovation; licensing; information sharing.
    JEL: D21 D43 D44 D45
    Date: 2014–07
  10. By: Michael D. Frakes; Melissa F. Wasserman
    Abstract: This paper explores how examiner behavior is altered by the time allocated for reviewing a patent application. Insufficient examination time may crowd out examiner search effort, impeding the ability to form time-intensive prior-art-based rejections (especially, obviousness rejections) and thus leaving examiners more inclined to grant otherwise invalid applications. To test this prediction, we trace the behavior of individual examiners over the course of a series of certain promotions that carry with them a substantial reduction in expected examination time. For these purposes, we use novel micro-level application data spanning a ten year period and estimate examiner fixed-effects specifications that allow us to control flexibly for examiner heterogeneity. We find evidence demonstrating that search efforts and time-intensive rejections indeed fall, while granting tendencies rise, upon the promotions of interest. Assuming that patent examiners will tend to make the correct patentability determinations when provided sufficient examination time, our results suggest that the present schedule of time allotments may be inducing patent examiners to grant patents that otherwise fail to meet the patentability requirements.
    JEL: K0 O30 O38
    Date: 2014–07
  11. By: Kauko, Tom
    Abstract: Ideally, the notion of innovation enables paving the avenue of research towards evaluation of sustainability in all research areas dealing with the built environment, also real estate. While innovativeness can be understood as an extension of the current paradigm in urban real estate economics, it can also be understood as an alternative paradigm involving more evolutionary perspectives. What happens in the mother discipline of general economics is a reasonable prediction of what eventually will happen in applied disciplines such as real estate economics. However, given the vast differences between physical and asset-oriented views of real estate, it is realistic to assume inertia among real estate economists trained in neoclassical economics in adapting new concepts such as evolutionary dynamics, in which case some other discipline (economic geography, for instance) must set the cross-disciplinary agenda. This paper reviews various literatures involved in this adaption of the innovation-concept and seeks to make connections across them. It argues for the need for real estate economists to open up horizons for dialogue with other disciplines.
    Date: 2014
  12. By: Bartekova E. (UNU-MERIT)
    Abstract: The aim of this paper is to examine the supply risk of rare earths and its impact on low carbon technologies deployment. Bringing together seemingly disconnected strands of scientific literature, this multidisciplinary approach allows to provide an overarching overview of the economics of rare earths. In terms of supply risk, as opposed to the common belief, it is not Chinas dominant position per se, but its industrial policies which distort the rare earths market. On the demand side, the results of this paper disprove the widespread allegation that availability risk impedes deployment of offshore wind. Contrary to this, a potential supply shortage of rare earths would disrupt the further development of the automotive industry and its electrification. Ultimately, uncertainty about volatile prices and threat of supply shortages induce manufacturers to shift away from technologies containing rare earths, and thus render innovation in these economically nonviable.
    Keywords: Production, Pricing, and Market Structure; Size Distribution of Firms; Mining, Extraction, and Refining: Other Nonrenewable Resources; Innovation and Invention: Processes and Incentives; Nonrenewable Resources and Conservation: Demand and Supply; Nonrenewable Resources and Conservation: Issues in International Trade; Alternative Energy Sources; Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling;
    JEL: L11 L72 O31 Q31 Q37 Q42 Q53
    Date: 2014

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