nep-ino New Economics Papers
on Innovation
Issue of 2014‒08‒16
twelve papers chosen by
Steffen Lippert
University of Auckland

  1. Spatial Aspects of Innovation Activity in the US By Drivas, Kyriakos; Economidou, Claire; Karkalakos, Sotiris
  2. Patent Protection as a Tax on Competition and Innovation By Pedro Bento
  3. Innovative capacity and export perfor mance: Exploring heterogeneity along the export intensity distribution By Chiara Piccardo; Anna Bottasso; Luigi Benfratello
  4. The effects of R&D intensity and tax incentives on firms’ growth - empirical evidence from world's top R&D spending firms between 2003 and 2012 By Tiago Soares; Samuel Pereira; Elísio Brandão
  5. Competition as a Discovery Procedure: Schumpeter Meets Hayek in a Model of Innovation By Pedro Bento
  6. Openness and innovation performance: are small firms different? By Priit Vahter; James H. Love; Stephen Roper
  7. Financial Innovation and Fragility By Kühnhausen, Fabian
  8. Can venture capital foster innovation? A study of the coupling between innovation and finance By Kevin Levillain; Blanche Segrestin; Armand Hatchuel
  9. Designing generic technologies in Energy Research: learning from two CEA technologies for double unknown management By Sophie Hooge; Olga Kokshagina; Pascal Le Masson; Kevin Levillain; Benoît Weil; Vincent Fabreguettes; Nathalie Popiolek
  10. Product Innovation in Response to Environmental Standards and Competitive Advantage: A Hedonic Analysis of Refrigerators in the Japanese Retail Market By Kimitaka Nishitani; Munehiko Itoh
  11. Moving'diversely'towards'the'green'economy.'CO2'abating'techno organisational'trajectories'and'environmental'policy'in'EU'sectors. By Massimiliano Mazzanti; Ugo Rizzo
  12. Bank loan application success by SMEs: the role of ownership structure and innovation By Peter van der Zwan

  1. By: Drivas, Kyriakos; Economidou, Claire; Karkalakos, Sotiris
    Abstract: This paper studies the effects of spatial concentration of innovation activity on local production of patents in the US. In doing so, we augment the standard knowledge production function with a structure that allows for spatial effects, accounting along with bilateral also for multilateral influences across states. Our findings corroborate with past evidence on the important role of state’s own R&D stock and human capital in producing new inventions. In addition, external knowledge, via spatial interactions, is also a purveyor of local innovation production. The effect is stronger when we consider spatial influences from all states, in particular from the most innovative ones, and to a lesser extent from close neighboring states. Finally, spillovers are more likely to occur between states with similar technological specialization, which share common technological knowledge and pour similar technological effort.
    Keywords: patents, innovation, knowledge production, spatial
    JEL: C21 O31 R12
    Date: 2014–08–10
  2. By: Pedro Bento (West Virginia University, College of Business and Economics)
    Abstract: I introduce patents into a general equilibrium model of innovation, where innovators choose between creating a new product market and competing in an existing market. Patent holders demand royalties from sequential innovators, but are constrained by the ability of innovators to work around patents. I show patent protection acts as a net tax on sequential innovators, reducing both competition and productivity growth. Calibrated to match moments from U.S. data, the model predicts that eliminating patent protection in the U.S. would generate a 23% increase in steady-state productivity growth as well as an increase in welfare equivalent to that from a 16% increase in annual consumption. I test several implications of the model using both U.S. and cross-country data. Consistent with the model, the data suggests an increase in the strength of patent protection reduces both productivity growth and the average quality of innovations.
    Keywords: patent protection, competition, innovation, productivity, regulation, growth
    JEL: O1 O4
    Date: 2013–10
  3. By: Chiara Piccardo (Università di Genova); Anna Bottasso (Università di Genova); Luigi Benfratello (Università di Napoli Federico II and CSEF)
    Abstract: This paper sheds additional light on the relationship between firm level innovative capacity and export intensity. By drawing from the recent literature on exporters' heterogeneity, we apply quantile regression techniques to a sample of Italian firms in order to verify whether the effect of innovative capacity – measured by R&D expenditures – varies along the conditional distribution of the export intensity, after controlling for censoring and potential endogeneity of the innovation variable. We confirm that R&D expenditures positively affect export intensity and we find that such effect has a bell shaped pattern along its conditional distribution: firms characterized by export intensity of about 60% can take highest advantage from investing in R&D activity. Overall results prove to be robust to several specification checks and suggest not only that firms innovative capacity helps to explain heterogeneity in export intensity performance, but also that its positive effect differs across the export to sales ratio distribution.
    Keywords: Exports, R&D, quantile regression, endogeneity, distance to the frontier
    JEL: F14 O32 D22 C31 C36
    Date: 2014–08–04
  4. By: Tiago Soares (FEP-UP, School of Economics and Management, University of Porto); Samuel Pereira (FEP-UP, School of Economics and Management, University of Porto); Elísio Brandão (FEP-UP, School of Economics and Management, University of Porto)
    Abstract: R&D expenditures made by companies, and governmental policies oriented for the promotion of these expenditures in the private sector, are nowadays considered variables that have an impact on firms’ growth in the medium term. This study aims at understanding the simultaneous influence of R&D investment and R&D tax incentives on firms’ growth, for different technological and knowledge-intensity industries. For that, a panel data of 1127 firms belonging to 35 different industries from 21 OECD countries, during the period between 2003 and 2012, was used. The results of the econometric estimation confirm, as foreseen in the literature, the positive effect for firms’ net sales growth of their investment in R&D and of tax policies that benefit the firms which perform these types of activities, particularly in high-tech firms. The results also returned a positive effect of R&D intensity in firms’ growth in the period before crisis (2003 - 2007) and a negative and significant crossover effect of R&D tax credits and R&D intensity in firms’ growth for the period before crisis. The two factors remain insignificant in crisis period, suggesting that other factors gained a more powerful explanation of a firm’s growth in that period.
    Keywords: R&D investment, R&D tax credits, firm’s growth
    JEL: H20 H30 H81 O32
    Date: 2014–07
  5. By: Pedro Bento (West Virginia University, College of Business and Economics)
    Abstract: I incorporate an insight of Friedrich Hayek - that competition allows a thousand flowers to bloom, and discovers the best among them - into a model of Schumpeterian innovation. Firms face uncertainty about the optimal direction of innovation, so more innovations implies a higher expected value of the `best' innovation. The model accounts for two seemingly contradictory relationships reported in recent empirical studies - a positive relationship between competition and industry-level productivity growth, and an inverted-U relationship between competition and firm-level innovation. Notwithstanding the positive relationship between competition and growth, I find antitrust policy reduces industry-level growth.
    Keywords: competition, innovation, productivity growth, inverted-u, antitrust, regulation
    JEL: O31 O40 L41 L51
    Date: 2013–08
  6. By: Priit Vahter (University of Tartu, Estonia); James H. Love (Aston Business School); Stephen Roper (Warwick University Business School)
    Abstract: Traditionally, literature on open innovation has concentrated on analysis of larger firms. We explore whether and how the benefits of openness in innovation are different for small firms (less than 50 employees) compared to medium and large ones. Using panel data over a long time period (1994-2008) from Irish manufacturing plants, we find that small plants have on average significantly lower levels of openness, a pattern which has not changed significantly since the early 1990s. However, the effect of ‘breadth’ of openness (i.e. variety of innovation linkages) on innovation performance is stronger for small firms than for larger firms. For small firms (with 10-49 employees) external linkages account for around 40 per cent of innovative sales compared to around 25 per cent in larger firms. Small plants also reach the limits to benefitting from openness at lower levels of breadth of openness than larger firms. Our results suggest that small firms can gain significantly from adopting an open innovation strategy, but for such firms appropriate partner choice is a particularly important issue.
    Keywords: open innovation, SMEs, boundary-spanning linkages, learning effects, Ireland
    JEL: O31 O32 L25
    Date: 2013–11–01
  7. By: Kühnhausen, Fabian
    Abstract: In this paper, I evaluate the impact of innovative activity of financial agents on their fragility in a competitive framework. There exist a vast array of concerns about the interconnection of financial innovations, financial distress of firms and financial crises provided by theoretical arguments. I build on these and assess empirically the causal link between a financial agents' innovativeness and stability. Using a unique data set on financial innovations in the USA between 1990 and 2002, I show that a larger degree of innovation negatively (positively) affects firm stability (fragility) after controlling for the underlying firm characteristics. The results are robust against different modifications of innovation measures and against different fragility parameters indicating profitability, activity risk and risk of insolvency.
    Keywords: Incentives to Innovate; Financial Innovation; Fragility
    JEL: G01 G2 L11 O31
    Date: 2014–06–23
  8. By: Kevin Levillain (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); Armand Hatchuel (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris)
    Abstract: Venture Capital is generally thought to be a key link in the complex chain of financing for young innovative firms. By helping them at critical stages of innovation development, it would help an economy to leverage its public research and sustain its growth. However, recent research reveals that the performance of VC funds, both internal (profitability) and external (growth), does not reach the expectations. In this paper, we aim to show that paradoxically, the theoretical model of VC conveyed by the literature does not take the management of innovation into account, and makes unrealistic assumptions on the composition of project portfolios. Conversely, based on interviews with some VC funds managers, we show that actual funds can invent alternative management models, for example based on the structuration of ecosystems for the start-ups, the development of "external valuation" mechanisms, or the creation of synergies between financed projects.
    Date: 2014–06
  9. By: Sophie Hooge (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris); Olga Kokshagina (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); Kevin Levillain (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); Vincent Fabreguettes (Centre de recherche du Commissariat à l'Energie Atomique - CEA Cadarache (Saint Paul-lez-Durance, France) - Centre de recherche du Commissariat à l'Energie Atomique - CEA Cadarache (Saint Paul-lez-Durance, France)); Nathalie Popiolek (CEA - CEA Saclay - CEA)
    Abstract: The aim of this paper is to shed light on an innovative strategy for the design of generic technologies (GTs). Research on radical innovation management, while recognizing the success of GTs, generally describes their design according to evolutionary strategies featuring multiple and uncertain trials, which would finally result in the discovery of common features between multiple applications. Building on a case study conducted on two technological development programs at the French Alternative Energies and Atomic Energy Commission (CEA), we exhibit an anomaly to this rarely discussed idea: we describe an alternative strategy that consists in intentionally designing common features that bridge the gap between a priori heterogeneous applications and a priori heterogeneous technologies. This anomaly brings three main results: 1) The usual trial-and-learning strategy is not necessarily the only strategy to design a GT; 2) beyond technological breakthrough, the value of GTs also relies on the capacity to reuse and connect existing technologies; 3) the design of GT might require sophisticated organizational patterns to be able to involve multiple technology suppliers and applications' providers.
    Keywords: Design; Generic technologies; double unknown; Energy
    Date: 2014–06–06
  10. By: Kimitaka Nishitani (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan); Munehiko Itoh (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)
    Abstract: The purpose of this study is to analyze whether a manufacturer's product innovation in response to environmental standards produces a competitive advantage, as the Porter hypothesis suggests. If a product with environmentally friendly attributes that are innovated in response to environmental standards is preferred in the market, the product can receive a price premium for its attributes. The main findings from our hedonic price regression for refrigerators, using Japanese retail market data during the period 1998–2012, are as follows. First, the attribute-adjusted refrigerator price has decreased drastically in last 15 years, which implies that the fundamental value of "refrigerating" has been commoditized. Second, price premiums are found for products that have been innovated in response to environmental standards to be chlorofluorocarbon (CFC)-free and use energy more efficiently. Third, the price premiums for these attributes show specific trends during this period. A CFC-free product initially received a high price premium; however, the premium decreased and became 0. On the other hand, although an energy-consumption-efficient product did not receive a high price premium initially, the price premium increased every time manufacturers faced new or revised environmental standards. These findings prove that product innovation in response to environmental standards can create a competitive advantage where product commoditization has occurred, and that the trends in the price premiums for environmentally friendly attributes are not unique for CFC-free and energy-consumption-efficient products.
    Keywords: Porter hypothesis, Environmental innovation, Hedonic price approach, POS data, CFC-free, Energy-consumption efficiency
    Date: 2014–07
  11. By: Massimiliano Mazzanti (Dipartimento di Economia e Management, Università  di Ferrara and SEEDS - Sustainability Environmental Economics and Dynamic Studies.); Ugo Rizzo (Dipartimento di Economia e Management, Università  di Ferrara.)
    Abstract: This paper investigates, from ex ante perspectives, potential techno- organisational dynamics aimed at reducing GHG emissions in the EU by 2030 and 2050. We take a qualitative view by exploiting interviews with representatives from principal manufacturing sectors in the EU. The novel value of this analysis is in its focus on 'sectors', which, following neo-Schumpeterian theory, are key 'players' in the technological domain. From a conceptual point of view, we mainly refer to the integrated concepts of sector and national systems of innovation which have consolidated into innovation-oriented evolutionary theory: The EU is characterized by national sector specialisations that emerge from historical developments and markets effects, but also from industrial, innovation and environmental policy effects. In this way this work complements more consolidated quantitative econometric and modelling based analyses, as it presents sector-specific techno-organisational options to help reach the decarbonisation targets. We assess the feasibility of those targets from technological and economic perspectives: specific emphasis is put on the smooth or 'radical' change-driven transition towards a greener economy. Both market and policy factors are considered. The assessment of experts' qualitative responses, together with main outcomes from the literature, shows that heavy industrial sectors share some similarities but also key distinctions in relation to their past and future responses to market and policy dynamics. Their specificities should be taken into consideration when defining the specific design of the future EU policy package for energy efficiency and CO2 abatement at EU and national levels.
    Keywords: techno-organisational change, climate change, EU 2030 2050 targets, sectors, eco-innovations.
    JEL: L52 O33 Q58
    Date: 2014–05
  12. By: Peter van der Zwan
    Abstract: This paper focuses on SMEs – firms with 250 employees at most – and the proportion of their requested loan that is granted by the bank. Financial data for SMEs in 38 European countries for 2011 are used (SMEs’ Access to Finance survey) to test the relationship between ownership structure and innovation on the one hand and loan application success on the other hand. The set of control variables includes firm age, firm size, past firm growth, expected firm growth, and sector orientation. Focusing on the determinants of access to finance is important because restricted access could hinder firm growth. It turns out that SMEs that are part of a business group and SMEs with a multiple ownership structure have higher probabilities of receiving the requested bank loan than SMEs with a single owner. There is some evidence that female owned business have more success regarding their loan applications than male owned businesses. Furthermore, SMEs that adopt product or process innovations are less likely to receive the requested loan than SMEs that do not display innovative behavior. The robustness of these findings across several model specifications is shown and the implications of the findings are discussed.
    Date: 2014–04–25

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