nep-ino New Economics Papers
on Innovation
Issue of 2014‒11‒12
twenty papers chosen by
Steffen Lippert
University of Auckland

  1. A patentability requirement and industries targeted by R&D By Keiichi Kishi
  2. Research among Copycats: R&D, Spillovers, and Feedback Strategies By Grega Smrkolj; Florian Wagener
  3. Exploring and yet failing less: Learning from exploration, exploitation and human capital in R&D By Pablo D’Este; Alberto Marzucchi; Francesco Rentocchini
  4. Patents, Innovation and Economic Geography By Francesco LISSONI; Ernest MIGUELEZ
  5. Cooperative vs. non-cooperative R&D incentives under incomplete information By Kabiraj, Tarun; Chattopadhyay, Srobonti
  6. Incomplete information and R&D organization By Chattopadhyay, Srobonti; Kabiraj, Tarun
  7. Trapped by the high-tech myth: The need and chances for a new policy rationale By Havas, Attila
  8. Persistence of cooperation on innovation: Econometric evidence from panel micro data By Srholec , Martin
  9. International Patenting Strategies of Chinese Residents: an analysis of foreign-oriented patent families By Mila Kashcheeva; Sacha Wunsch-Vincent; Hao Zhou
  11. The Viet Nam National Innovation System: A Diagnostic Review By Nguyen, Anh; Nguyen, Mai; Doan, Hung
  12. Empirical Analysis of the Assessment of Innovation Effects in U.S. Merger Cases By Wolfgang Kerber; Benjamin Kern; Ralf Dewenter
  13. Regional industrial path development in different regional innovation systems: A conceptual analysis By Isaksen , Arne; Trippl , Michaela
  14. The Effects of Smoothing of the Renewal Fees on Patent Option Value(in Japanese) By Setsuo Yamada
  15. Degrees of freedom in road construction By Nyström, Johan; Lind , Hans; Nilsson , Jan-Eric
  16. The case of Oresund (Denmark-Sweden) – Regions and Innovation: Collaborating Across Borders By Claire Nauwelaers; Karen Maguire; Giulia Ajmone Marsan
  17. How Do Geographical and Organisational Proximity Influence the Relational Pattern of MNCs’ Global Innovation Networks: An In-depth Case Study By Liu, Ju
  18. Intergenerational mobility, composition of human capital and distance to frontier By Basu, Suajta
  19. Effects of innovation on employment in low-income countries: A mixed-method systematic review By Ugur, Mehmet; Mitra, Arup
  20. Competition Policy and Intellectual Property: Insights from Developed Country Experience By Scherer, F. M.; Watal, Jayashree

  1. By: Keiichi Kishi (Graduate School of Economics, Osaka University)
    Abstract: We introduce into a Schumpeterian growth model an inventive step, which is a minimum innovation size required for patents, and thus a patentability requirement. We show that in order to satisfy an inventive step requirement, each R&D firm targets only industries in which the incumbentfs technology is sufficiently obsolete. This is because the technological gap between innovator and incumbent is larger in industries that use older technologies. Although strengthening an inventive step requirement reduces the number of industries targeted by R&D, it also increases the amount of R&D investment directed at the targeted industries. Consequently, introducing an inventive step has either a nonmonotonic or a negative effect on the aggregate flow of innovations, which has some empirical support. Furthermore, by deriving the endogenous long-run distribution of innovation size, we show that strengthening an inventive step reduces innovation size on average, which also has empirical support. This implies that even if the patent office only grants patents for superior innovations, compared with prior art references, this causes innovators to produce inferior-quality innovations on average.
    Keywords: Technological progress, Innovations, Intellectual property rights
    JEL: O31 O34 O41
    Date: 2014–10
  2. By: Grega Smrkolj (Newcastle University, United Kingdom); Florian Wagener (University of Amsterdam, the Netherlands)
    Abstract: We study a stochastic dynamic game of process innovation in which firms can initiate and terminate R&D efforts and production at different times. We discern the impact of knowledge spillovers on the investments in existing markets, as well as on the likely structure of newly forming markets, for all possible asymmetries between firms. We show that the relation between spillovers, R&D efforts, and surpluses is non-monotonic and dependent on both the relative and absolute efficiency of firms. Larger spillovers increase the likelihood that a new technology is brought to production, but they do not necessarily make the industry more competitive.
    Keywords: Differential game, Feedback Nash equilibrium, Numerical partial differential equations, R&D, Spillovers
    JEL: C61 C63 C73 D43 D92 L13 O31
    Date: 2014–08–22
  3. By: Pablo D’Este (INGENIO [CSIC-UPV], Universidad Politécnica de Valencia, Spain); Alberto Marzucchi (Dept. of International Economics, Institutions and Development (DISEIS), Catholic University of Milan, Italy; INGENIO [CSIC-UPV], Universidad Politécnica de Valencia, Spain); Francesco Rentocchini (Southampton Business School, University of Southampton, United Kingdom)
    Keywords: innovation failure, exploration, exploitation, human capital, learning
    JEL: O32 D83 D22 J24
    Date: 2014–10
  4. By: Francesco LISSONI; Ernest MIGUELEZ
    Abstract: In this paper we review 20 years of quantitative research in the geography of innovation, to whose advancement patent data have contributed in a decisive way. We know now that the importance attributed by the earliest studies to knowledge externalities as an agglomeration force was excessive. Localized knowledge flows exist, and explain agglomeration, but they are largely mediated by the labor market and markets for technologies. Besides, we know now that physical distance may affect knowledge diffusion, but so do social distance between inventors as well as inter- and intra-national borders. We also witness an ongoing widening of the research focus, from local/regional to international, with migration issues concerning inventors coming to the forefront.
    Keywords: economic geography, patents, intellectual property, innovation, inventors, spillovers, migration
    JEL: F22 J61 O31 R11 R12
    Date: 2014
  5. By: Kabiraj, Tarun; Chattopadhyay, Srobonti
    Abstract: This paper studies incentives for cooperative research vis-à-vis non-cooperative research in an incomplete information framework. We show that with quantity competition under asymmetric information, the expected payoff from non-cooperative research goes down compared to the case of symmetric information; hence RJV incentives of the firms are larger under asymmetric information. In either case, however, the larger is the size of the cost-reducing innovation the lower is the incentive for cooperative research. Finally in our model, incomplete information does not affect the consumers’ welfare, but the firms become worse off.
    Keywords: Cooperative R&D, non-cooperative R&D, RJV, incomplete information, consumers’ welfare.
    JEL: D43 L13 O31
    Date: 2014–09–30
  6. By: Chattopadhyay, Srobonti; Kabiraj, Tarun
    Abstract: The paper studies incentives for cooperative research vis-à-vis non-cooperative research under incomplete information when the R&D outcome is stochastic and continuously distributed with a given mean and a constant variance. We show that the non-cooperative R&D incentive increases with the variance of the R&D outcome. And this result does not depend on the nature of the product market competition.
    Keywords: Cooperative R&D, non-cooperative R&D, incomplete information, variance of the research outcome
    JEL: D43 L13 O31
    Date: 2014–09–10
  7. By: Havas, Attila
    Abstract: Against the backdrop of a strong plea for evidence-based policy, this paper juxtaposes how innovation is analyzed in mainstream economics and evolutionary economics of innovation, as well as their concomitant policy rationales. By discussing the indicators selected for the Innovation Union Scoreboard and another major EU report, it argues that the science-push model of innovation is still highly influential in the EU STI policy circles, despite a rich set of research insights stressing the importance of non-R&D types of knowledge in innovation processes. In conclusion, the chapter highlights the potential drawbacks of the persistent high-tech myth, considers possible reasons for its perseverance and discusses policy implications of the systemic view of innovation. Those include: i) STI policies should promote knowledge-intensive activities in all sectors, including low- and medium-technology industries and services; ii) it is a highly demanding set of tasks to identify systemic failures, devise appropriate policies to tackle those, and organize the required stakeholder dialogues; iii) several policies affect innovation processes and performance, perhaps even more strongly than STI policies, and hence policy goals and tools need to be orchestrated across several policy domains; iv) analysts and policy-makers need to be careful when interpreting their country’s ranking on ‘scoreboards’; v) the choice of an economics paradigm to guide policy evaluation is likely to be decisive.
    Keywords: Linear and networked models of innovation; Science-push; Market failure; Evolutionary economics of innovation; Systemic failures; STI policy; Opportunity costs
    JEL: B25 O31 O38
    Date: 2014–02
  8. By: Srholec , Martin (CERGE-EI, Prague and CIRCLE, Lund University)
    Abstract: Arrangements to cooperate on innovation facilitate access to external sources of knowledge. Using panel data derived from five waves of Community Innovation Survey in the Czech Republic, we examine whether firms engage in these arrangements persistently or rather revert to other behaviour. Econometric estimates of dynamic random effects and multivariate probit models provide strong support to the thesis of persistence, particularly of linkages with the university sector and suppliers. The results are robust to the initial conditions problem and serial correlation in idiosyncratic errors. Government programs initiating cooperation on innovation therefore have the potential to induce durable changes in the innovative behaviour of firms.
    Keywords: Innovation; cooperation; persistence; panel data; Community Innovation Survey; Czech Republic
    JEL: C23 C25 L20 O31 O32
    Date: 2014–09–28
  9. By: Mila Kashcheeva (Research Fellow, BB&T Center for Education and Economic Policy Studies, and Center for China Studies, Clemson University, USA.); Sacha Wunsch-Vincent (Economics and Statistics Division, WIPO); Hao Zhou (Economics and Statistics Division, WIPO)
    Abstract: In terms of the number of its patent applications, in 2012 China has emerged as the country with the largest IP office in the world. The performance of the Chinese IP system is thus increasingly in the spotlight. While significant economic studies have been devoted to the rise of domestic patenting in China, hardly any study has focused on Chinese patent filings in foreign countries. This paper analyzes Chinese patenting abroad by using WIPO’s foreign-oriented patent family dataset and a respective enterprise questionnaire. It finds that by the turn of the century China emerged as major actor in terms of international patenting. While this is changing rapidly, the share of Chinese patents which get filed abroad is still a fraction of total patents filed at home and most patents still also only target one foreign IP office. Chinese foreign-oriented patent families are concentrated in a few technology fields, notably those related to the ICT sector, “Digital communication”, followed by “Computer technology”, “Nanotechnology”, and similar fields. A few Chinese firms are responsible for a large share of total Chinese patents filed abroad. The paper however also highlights that some of these trends are changing rapidly towards more intensive and broad-based filing abroad. Initial results from a selective firm survey also show a shift from the desire to protect technologies abroad to more strategic motives: (i) the desire to build patent portfolios avoiding litigation, (ii) facilitating collaboration with other firms, but also to (iii) license and sell IP abroad, and to (iv) further the firm’s reputation as true innovator.
    Keywords: China, innovation, intellectual property, patents, patent families, information technology
    JEL: F20 F23 L86 O3 O31 O34
    Date: 2014–09
  10. By: Vesna Vlaisavljevic (Department of Business Administration, Universidad Pablo de Olavide); Carmen Cabello Medina (Department of Business Administration, Universidad Pablo de Olavide); Ana Pérez-Luño (Department of Business Administration, Universidad Pablo de Olavide)
    Abstract: Alliances are increasingly considered a key issue for innovation, especially in knowledge-intensive firms. While this is true, the mere membership to alliances does not explain innovation performance, and thus the alliance’s characteristics that determine high performance must be examined. Our research address the question of how the diversity of partners in a certain alliance for innovation affects innovation performance, and how this influence can be moderated by certain characteristics, such as the social capital and type of knowledge shared among partners. The empirical analysis of a sample of 90 biotech companies shows that diversity, on its own, does not explain alliance performance. Instead, social capital and codified knowledge, as moderating variables, may help reap the benefits of diversity. This effect is not unlimited, so beyond a certain level of diversity, the moderating variables become less effective.
    Keywords: North-South, growth model, innovation assimilation
    Date: 2014–10
  11. By: Nguyen, Anh; Nguyen, Mai; Doan, Hung
    Abstract: National Innovation Systems (NIS) plays a crucial role in countries’ efforts to catch up with technological advances which are critical for the long-term sustainable economic growth and development of countries. This paper provides a diagnostic review of the NIS in Viet Nam such that appropriate policies could be devised and im - plemented. This paper provides an analysis of the institutions, policies and linkages that characterize Viet Nam’s national innovation system. It focuses on the strengths and weaknesses of the nation’s system of innovation that Viet Nam has put in place in order to promote technological innovation for economic growth and development. The first part provides an overview of Viet Nam’s 20 years of economic reform as the context within which innovation takes place. The remainder offers a deeper insight into Viet Nam’s NIS, starting with the legal framework and institutions, including laws on science and technology, legislative government bodies and other supporting agencies. The current funding of R&D activities in general and in different sectors is given along with government’s attempts to encourage investment or financial support for R&D. The key actors in Viet Nam’s NIS are identified and investigated. The conclusion is a summary of rooms for improvement in Viet Nam’s NIS
    Keywords: Vietnam, Innovation System
    JEL: O3 O31
    Date: 2013–05
  12. By: Wolfgang Kerber (University of Marburg); Benjamin Kern (University of Marburg); Ralf Dewenter (HSU Hamburg)
    Abstract: In this empirical study all mergers that have been challenged by the U.S. antitrust agencies FTC and DOJ between 1995 and 2008 were analyzed in regard to the question to what extent and how the agencies assessed the innovation effects of mergers. Theoretical background is the still open question how negative effects of mergers on innovation should be taken into account in merger policy. Although we can show in our study that in one third of all challenged mergers also innovation concerns were raised, the results also point to a still existing large degree of uneasiness and inconsistencies of the agencies in regard to the assessment of innovation effects. A particularly interesting result is that - despite the wide-spread rejection of the "innovation market approach" in the antitrust debate - the agencies used more an innovationspecific assessment approach that includes also innovation in the market definition than the pure traditional product market concept. Additionally, we also found significant differences between the assessment approaches of the FTC and the DOJ.
    Keywords: innovation, merger policy, US antitrust, innovation market
    JEL: K21 L12 L41 O31
    Date: 2014
  13. By: Isaksen , Arne (Department of Working Life and Innovation, University of Agder); Trippl , Michaela (CIRCLE, Lund University)
    Abstract: The notion of path dependent regional industrial development has recently received increasing attention in economic geography, innovation studies and related fields. A core idea is that pre-existing industrial and institutional structures constitute the regional environment in which current activities occur and new activities arise. This may lead to a high degree of inertia of industrial structures and reflects the persistence of region-specific institutions, social forms and cultural traditions. The aim of this paper is to take a more nuanced view on regional economic development and to explore conceptually how various types of regions can renew themselves by moving beyond existing paths. Scholarly contributions to regional industrial path development have often emphasised firm-specific routines, norms and tacit knowledge that first of all underpin path extension, i.e., incremental product and process innovations in existing industries and along established technological paths. The paper extends this approach by looking at alternative paths that point to different forms of transformation of regional economies. A distinction between path renewal (branching of existing industries into different but related ones) and path creation (emergence of new industries) is drawn. The paper also extends the mainly micro-level and firm-based views of evolutionary economic geography with an institutional perspective, offered by the regional innovation system (RIS) concept. This enables us to capture the influence of the wider regional environment on the innovation capability of firms. We distinguish between different types of RISs: i) organisationally thick & diversified RISs, ii) organisationally thick & specialised RISs, and iii) organisationally thin RISs. The paper analyses in a conceptual way the relation between these RIS types and forms of regional industrial path development. We demonstrate that various types of regions, with their specific RISs, tend to transform themselves in different ways, i.e., they can be expected to embark on different development paths. We also discuss adequate policy approaches for the various types of regions.
    Keywords: Regional industrial path development; regional innovation systems; innovation policy
    JEL: O18 O38 R11
    Date: 2014–09–28
  14. By: Setsuo Yamada
    Abstract: This paper aims to construct a patent option model suitable for the Japanese patent system, and then to explore empirically the economic effects caused by the significant revision of the Japanese patent maintenance fees in 1998. The revision of patent law in 1998 fundamentally changed the fee schedule so that payments peaked in ten to twelve year after patent registration, followed by a level off, which resulted in major fee reductions. This was a very bold change in the patent fee structure compared to historical structures of patent fee maintenance in Japan and other major countries. The leveling-off of patent maintenance fees was aimed to reduce cost burden on patent owners and to give incentives to their R&D activities. In addition, it served to contain the special patent account's rising surplus. The simulation results based on the patent option model show that the introduction of the leveling-off maintenance fees enables the patent to hold the patent term longer, while minimizing the influence on the patent option value. However, it is confirmed to have a relatively substantial effect on reducing patent fee revenues.
    Date: 2013–01
  15. By: Nyström, Johan (VTI); Lind , Hans (KTH); Nilsson , Jan-Eric (VTI)
    Abstract: One policy that is believed to increase the rate of innovation and the level of productivity is to move from Design-bid-build contracts (DBB) to Design-Build contracts (DB). A common view is that the latter provides the contractor more degrees of freedom to enable innovation. This hypothesis consists of two steps, first that DB actually has more degrees of freedom and secondly that more degrees of freedom leads to more innovation. This paper focuses on the first step and is based on a review of five road construction projects – two labelled DBB and three DB. It is demonstrated that there is a gap between the textbook definition of the two types of contracts and the actual design of the examples. The degrees of freedom for the contractor are restricted in both DB and DBB contracting and no significant difference in this dimension could be established. Based on this lack of difference in the five projects, the expectation of innovation for the labelled contracts cannot be settled. Some possible rational reasons for the client to restrict the degrees of freedom are also suggested.
    Keywords: Innovation; Contracting; Design Bid Build (DBB); Design and Build (DB)
    JEL: D86 H57 L74
    Date: 2014–10–24
  16. By: Claire Nauwelaers; Karen Maguire; Giulia Ajmone Marsan
    Abstract: The Oresund is the most well-known example of European cross-border collaboration, building on the metropolitan area around Copenhagen and, across the sound, southern Sweden with the cities of Malmö, Lund and Helsingborg. Cross-border integration intensified following the opening of a fixed-link bridge/tunnel in 2000. Commuting, student flows and cross-border residency have been on the rise in this knowledge-intensive area. Cross-border cluster efforts have had varying degrees of longevity, with Medicon Valley being the most internationally known brand. After hitting a plateau in terms of integration, the area is seeking renewed inspiration for cross-border efforts. This case study is part of the project Regions and Innovation: Collaborating Across Borders. A summary of this working paper appears in a report of the same name.
    JEL: L52 L53 O14 O18 O38 R11 R58
    Date: 2013–12–11
  17. By: Liu, Ju (CIRCLE, Lund University)
    Abstract: This paper explores the influencing mechanism of geographical and organisational proximity/distance on the intra-firm relations and external linkages in multinational companies’ (MNCs) global innovation networks (GINs). It adopts an in-depth case study method and employs social network analysis to study the relational pattern of the case GINs and to understand how the relations are organised and why they are organised in a certain pattern. It is found that the intra-firm relations of both case MNCs’ GINs are similarly organised in a global way. The external linkages in the two case GINs are organised in different ways (global vs local) which depend on the dominant knowledge is science-based or engineering-based. Two influencing mechanisms, namely complementary effect and conditional reinforcing effect, are found and discussed. Evidences in practice are identified.
    Keywords: Global innovation network; MNC; Geographical proximity; Organisational proximity; Social network analysis
    JEL: D85 F23 L62 L63
    Date: 2014–09–10
  18. By: Basu, Suajta
    Abstract: An economy can improve its technology level through two channels -- imitating from the world technology frontier and innovating on its own technology level -- innovation being more skilled-intensive than imitation. I develop a growth model based on the endogenous ability-driven skill acquisition decision of an individual in an imperfect credit market. It is shown that there exists a constant level of skilled and unskilled human capital in the imitation-only and innovation-only regimes. In the imitation-innovation regime stock of skilled human capital rises whereas that of unskilled human capital falls in the imitation-innovation regime. Also, both skilled and unskilled human capital shift from imitation to the innovation activity as an economy progresses. Moreover, growth rate falls in the imitation-only regime. But in the diversified regime growth rate rises even if it falls initially and there exists constant level of growth rate in the innovation-only regime. In the long run all the economies will converge to the world technology frontier and grow at a same rate. In the imitation-only and innovation-only regimes, there exists constant level of upward and downward mobility. However, in the diversified regime both upward and downward mobility falls as an economy progresses to the frontier. Along with that, I show that wage rate and average income of both skilled and unskilled human capital falls in the imitation-only regime and the same rises in the innovation-only regime. However, wage rate and average income of skilled human capital rises and unskilled human capital falls in the diversified regime. Also, there exists constant level of between group income inequality in the imitation-only and innovation-only regimes. However, wage and income inequality between skilled and unskilled human capital rises as an economy bridges its gap from the world technology frontier. There exists constant level of income inequality within skilled and unskilled human capital due to parental income differences and due to difference in cognitive ability, in the imitation-only and innovation-only regime. On the other hand, income inequality within skilled and unskilled human capital rises due to parental income differences and due to difference in cognitive ability, in the imitation-innovation regime.
    Keywords: Intergenerational Mobility, Inequality, Economic Growth, Imitation-Innovation, Convergence
    JEL: I24 I25 O1 O15 O43
    Date: 2014–10–06
  19. By: Ugur, Mehmet; Mitra, Arup
    Abstract: We conduct a meta-analysis of the effect-size estimates from 9 empirical studies and a narrative synthesis of the qualitative evidence from 53 qualitative studies on the relationship between innovation and employment in low-income countries (LICs). The meta-analysis reveals a positive but small effect, with evident bias in favour of skilled-labour employment. Both meta-analysis and narrative synthesis findings indicate that innovation’s effects on employment in LICs tend to be larger when: (i) the evidence is related to manufacturing as opposed to agriculture; (ii) the analysis is at the firm level as opposed to sector level; and (iii) the evidence relates to South Asian countries as opposed to other world regions. Further findings from the narrative synthesis of the qualitative evidence indicate that the positive effect of innovation on employment is likely to be augmented by strong forward and backward linkages; but the adverse effects are likely to be exacerbated by capital-intensity of imports and weaknesses in governance and labour-market institutions.
    Keywords: innovation, employment, low-income countries, systematic reviews, meta-analysis
    JEL: C1 C13 J23 O3 O33
    Date: 2014–06–17
  20. By: Scherer, F. M. (Harvard University); Watal, Jayashree (World Trade Organization)
    Abstract: This paper, written for a World Trade Organization compendium, investigates the possibilities open to developing nations for controlling the abuse of intellectual property rights, and in particular patents, under Articles 31 and 40 of the Uruguay Round TRIPS (trade-related aspects of intellectual property) treaty. Article 40 authorizes nations to use their competition policy laws to combat abuses of intellectual property rights, among other things, by invoking the compulsory licensing provisions of Article 31. This paper reviews historically the experience of competition policy authorities in dealing with patent and other intellectual property abuses in the United States, the European Community, Japan, Canada, South Africa, and other jurisdictions and reviews the known consequences of compulsory licensing orders inter alia for companies' continuing efforts to advance technology. Currently controversial fields such as pharmaceuticals and information technology are accorded special attention.
    Date: 2014–02

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.