nep-ino New Economics Papers
on Innovation
Issue of 2017‒07‒23
twenty-two papers chosen by
Uwe Cantner
University of Jena

  1. Knowledge Exhaustibility and Schumpeterian Growth. By Antonelli, Cristiano
  2. Dissemination of Two Faces of Knowledge: Do Liberal-Democracy and Income-Level Matter? By Samira Hasanzadeh
  3. Innovation activities of firms in Germany - Results of the German CIS 2012 and 2014: Background report on the surveys of the Mannheim Innovation Panel Conducted in the Years 2013 to 2016 By Behrens, Vanessa; Berger, Marius; Hud, Martin; Hünermund, Paul; Iferd, Younes; Peters, Bettina; Rammer, Christian; Schubert, Torben
  4. The Right Kind of Help? Tax Incentives for Staying Small By Dora Benedek; Pragyan Deb; Borja Gracia; Sergejs Saksonovs; Anna Shabunina; Nina T Budina
  5. Unfolding the innovation system for the development of countries: co-evolution of Science, Technology and Production By Emanuele Pugliese; Giulio Cimini; Aurelio Patelli; Andrea Zaccaria; Luciano Pietronero; Andrea Gabrielli
  6. Promoting innovation in transition countries: A trajectory for smart specialisation By Alexander Kleibrink; Philippe Laredo; Stefan Philipp
  7. RIO Country Report 2016: Italy By Leopoldo Nascia; Mario Pianta; Lorenzo Isella
  8. Does the Stock Market Boost Firm Innovation?; Evidence from Chinese Firms By Hui He; Hanya Li; Jinfan Zhang
  9. RIO Country Report 2016: Slovenia By Maja Bucar; Elena Gonzalez Verdesoto
  10. Fission, Forking, and Fine Tuning By Richard N. Langlois
  11. A Tax Plan for Endogenous Innovation By Steve Raymond; Lukas Schmid; Anastasios Karantounias; Mariano Croce
  12. RIO Country Report 2016: Spain By Ana Fernandez Zubieta; Irene Ramos Vielba; Thomas Zacharewicz
  13. Science, technology and innovation for economic competitiveness: the role of smart specialization in less-developed countries. By Krammer, Sorin M.S.
  14. RIO Country Report 2016: France By Stephane Lhuillery; Thomas Zacharewicz
  15. Information security research methodologies: A review By Balasubrahmanyam Suram; M P Sebastian
  16. Innovation policy & labour productivity growth: Education, research & development, government effectiveness and business policy By Al Raee, Mueid; Ritzen, Jo; Crombrugghe, Denis de
  17. Growth and stagnation: The case of the Japanese economy (1981-2009) By Carlos Andres Ballesteros; Carlos Esteban Posada
  18. "Disentangling the Effects of Technological and Organizational Changes in the Rise of the Factory: The Case of the Japanese Fabric Industry, 1905-1914" By Tetsuji Okazaki
  19. Unrelated knowledge combinations: Unexplored potential for regional industrial path development By Grillitsch, Markus; Asheim, Bjorn; Trippl, Michaela
  20. The productivity effect of public R&D in the Netherlands By Soete, Luc; Verspagen, Bart; Ziesemer, Thomas
  21. New technologies create opportunities By Sally Murray
  22. The Growth of U.S. Science and Technology Parks: Does Proximity to a University Matter? By Kelsi, Hobbs; Albert, Link; John, Scott

  1. By: Antonelli, Cristiano (University of Turin)
    Abstract: This paper accommodates the new understanding of the limited exhaustibility of knowledge into the Schumpeterian frame of the creative response to articulate a comprehensive model of Schumpeterian growth. The limited exhaustibility of knowledge and its transient appropriability favor the accumulation of a stock of quasi-public knowledge. The increasing stock of quasi-public knowledge together with appropriate knowledge governance conditions account for the secular decline of knowledge costs and the increase of diachronic and pecuniary knowledge externalities. Because of its limited exhaustibility and the consequent cumulability, knowledge is an endogenous endowment that accounts for growth. Unexpected out-of-equilibrium conditions in product and factor markets stir the response of firms. The availability of knowledge externalities accounts for the rate of innovation as they help making the reaction creative so as to enable the introduction of innovations. The search for technological congruence and the secular decline of the cost of technological knowledge accounts for its knowledge intensive direction as it induces the introduction of biased technological changes that augment the output elasticity of knowledge as an input. The limited exhaustibility of knowledge accounts for the secular trend towards the knowledge economy.
    Date: 2017–06
  2. By: Samira Hasanzadeh
    Abstract: Many researchers have examined the functional relationship between the level of realized total factor productivity (TFP) and innovation, and the positive effect new ideas have on productivity. But, how do diverse ideas drive productivity? And do the home country’s levels of income, civil liberties and political rights influence the spillover effects of innovation? In this research, I answer these questions by using a new dataset on scientific publication. I separate innovations into technical and managerial, and then explore their effects on the economy, using pooled mean group estimations in a dynamic heterogeneous panel setting of 60 countries for the period 1996 to 2014. The findings show that, for high-income countries, domestic innovations in management are a significant source of change in productivity. In contrast, the estimated results do not support the role of the domestic development of management innovation in middle-income countries. However, in the long run, international spillovers of management ideas positively affect the productivity of these latter countries. Regardless of which metric is utilized in the analysis, national spillovers of management ideas increase the productivity of countries with the most-liberal democratic regimes. However, in democratic countries where the regime is only partially liberal, domestic management innovations have a depressing effect on productivity. This last result differs over the long run, as international spillovers of management ideas contribute to higher productivity in less-democratic countries. The results show that, in high-income countries, the elasticity of TFP in respect to management innovation is almost twice as large as it is for technical ideas. The results also indicate that increasing the number of researchers does not enhance the development of management innovation.
    Keywords: Knowledge Dessimination, Managerial Ideas, Technical Ideas, Semi-endogenous Growth Model
    JEL: O30 O40 O50
    Date: 2017–07–19
  3. By: Behrens, Vanessa; Berger, Marius; Hud, Martin; Hünermund, Paul; Iferd, Younes; Peters, Bettina; Rammer, Christian; Schubert, Torben
    Abstract: Innovation is regarded as a key driver of productivity and market growth and thus has a great potential for increasing wealth. Surveying innovation activities of firms is an important contribution to a better understanding of the process of innovation and how policy may intervene to maximise the social returns of private investment into innovation. Over the past three decades, research has developed a detailed methodology to collect and analyse innovation activities at the firm level. The Oslo Manual, published by OECD and Eurostat (2005) is one important outcome of these efforts. In 1993 both organisations have started a joint initiative, known as the Community Innovation Survey (CIS), to collect firm level data on innovation across countries in concord (with each other). The German contribution to this activity is the so-called Mannheim Innovation Panel (MIP), an annual survey implemented with the first CIS wave in 1993. The MIP fully applies the methodological recommendations laid down in the Oslo Manual. It is designed as a panel survey, i.e. the same gross sample of firms is surveyed each year, with a biannual refreshment of the sample. The MIP is commissioned by the German Federal Ministry of Education and Research (BMBF) and conducted by the Centre for European Economic Research (ZEW) in cooperation with the Fraunhofer Institute for Systems and Innovation Research (ISI) and the Institute for Applied Social Science (infas). This publication reports main results of the MIP surveys conducted in the years 2013, 2014, 2015 and 2016. The surveys of the years 2013 and 2015 were the German contribution to the CIS for the reference years 2012 and 2014. The purpose of this report is to present descriptive results on various innovation indicators for the German enterprise sector.
    Date: 2017
  4. By: Dora Benedek; Pragyan Deb; Borja Gracia; Sergejs Saksonovs; Anna Shabunina; Nina T Budina
    Abstract: Some countries support smaller firms through tax incentives in an effort to stimulate job creation and startups, or alleviate specific distortions, such as financial constraints or high regulatory or tax compliance costs. In addition to fiscal costs, tax incentives that discriminate by firm size without specifically targeting R&D investment can create disincentives for firms to invest and grow, negatively affecting firm productivity and growth. This paper analyzes the relationship between size-related corporate income tax incentives and firm productivity and growth, controlling for other policy and firm-level factors, including product market regulation, financial constraints and innovation. Using firm level data from four European economies over 2001–13, we find evidence that size-related tax incentives that do not specifically target R&D investment can weigh on firm productivity and growth. These results suggest that when designing size-based tax incentives, it is important to address their potential disincentive effects, including by making them temporary and targeting young and innovative firms, and R&D investment explicitly.
    Keywords: Productivity;size-based taxation, growth, structural reforms
    Date: 2017–06–13
  5. By: Emanuele Pugliese; Giulio Cimini; Aurelio Patelli; Andrea Zaccaria; Luciano Pietronero; Andrea Gabrielli
    Abstract: We show that the space in which scientific, technological and economic developments interplay with each other can be mathematically shaped using pioneering multilayer network and complexity techniques. We build the tri-layered network of human activities (scientific production, patenting, and industrial production) and study the interactions among them, also taking into account the possible time delays. Within this construction we can identify which capabilities and prerequisites are needed to be competitive in a given activity, and even measure how much time is needed to transform, for instance, the technological know-how into economic wealth and scientific innovation, being able to make predictions with a very long time horizon. Quite unexpectedly, we find empirical evidence that the naive knowledge flow from science, to patents, to products is not supported by data, being instead technology the best predictor for industrial and scientific production for the next decades.
    Date: 2017–07
  6. By: Alexander Kleibrink (European Commission – JRC); Philippe Laredo (Université Paris Est Marne la Vallée (IFRIS) and University of Manchester (MIOIR)); Stefan Philipp (Centre for Social Innovation (ZSI))
    Abstract: Innovation policies seek to prepare an economy for the future by steering it on a transformation path to make it more competitive in increasingly global and interconnected markets. While most advanced economies have a tradition of strategymaking for territorially-based innovation and economic development, transition countries moving from centralised unaccountable planning to decentralised democratic policymaking have no working, market-based practices to build on. Governments in such contexts often resort to mimicking the economic priorities and instruments of advanced countries. We suggest a trajectory for transition countries to avoid the widespread pitfall of poorly defined innovation policies by upgrading and changing their industrial polices in line with the ideas embedded in the concept of innovation strategies for smart specialisation (RIS3): (1) Build a trusted 'competence centre' to provide a comprehensive analysis of your economic fabric and coordinate the process. (2) Begin with one strong economic domain in which engaged stakeholders work together with government bodies to define joint priorities and actions (domain experimentation). (3) Start with one region to experiment different approaches at subnational level (territorial experimentation). (4) Sequence your process in a way you can harvest the low-hanging fruits in the short-term (non-R&D measures), focus on the core of your activities with high potential in the medium term, and leave R&D-heavy breakthrough programmes for the longer term.
    Keywords: innovation policy; transition countries; smart specialisation
    Date: 2017–06
  7. By: Leopoldo Nascia; Mario Pianta; Lorenzo Isella (European Commission - JRC)
    Abstract: The 2016 series of the RIO Country Report analyses and assesses the development and performance of the national research and innovation system of the EU-28 Member States and related policies with the aim of monitoring and evaluating the EU policy implementation as well as facilitating policy learning in the Member States.
    Keywords: research and innovation, Italy, innovation system
    Date: 2017–06
  8. By: Hui He; Hanya Li; Jinfan Zhang
    Abstract: The paper analyses the effect of the stock market on firm innovation through the lens of initial public offering (IPO) using uniquely matched Chinese firm-level data. We find that IPOs lead to an increase in both the quantity and quality of firm innovation activity. In addition, IPOs expand a firm’s scope of innovation beyond its core business. The impact of IPOs on firm innovation varies across financial constraints, corporate governance, and ownership structures. Our results further illustrate that IPOs induce a firm to increase the number of inventors and enable better retention of existing inventors after the IPO. Finally, we show that the enhanced innovation activity resulting from IPOs increases a firm’s Tobin’s Q in the long run.
    Date: 2017–06–30
  9. By: Maja Bucar (Visionary Analytics); Elena Gonzalez Verdesoto (European Commission - JRC)
    Abstract: The 2016 series of RIO Country Reports analyse and assess the policy and the national research and innovation system developments in relation to national policy priorities and the EU policy agenda with special focus on ERA and Innovation Union. The executive summaries of these reports put forward the main challenges of the research and innovation systems.
    Keywords: R&I system, R&I policy, ERA, innovation union, European Semester analysis, Slovenia
    JEL: I20 O30 Z18
    Date: 2017–06
  10. By: Richard N. Langlois (University of Connecticut)
    Abstract: Perhaps because we live in the age of the Internet and social networks, everyone seems agreed that innovation is all about recombination. Although not fully dissenting from this consensus, and perhaps in the end affirming it in an important way, I want to draw attention to some apparently different mechanisms of innovation, both suggested by Adam Smith: subdivision (or differentiation) and fine-tuning. On the surface at least, these – especially the second – do not appear to be processes of recombination. I will attempt to elucidate what I mean by these concepts and try to think about how they fit together with recombination in a full Smithian account of innovation. Whether innovation proceeds from the top down or the bottom up depends crucially on the structure of complementary stages in the process of production. Especially if it takes place in a non-modular way, recombination may require unified decision rights, implying the vertical integration of complementary stages of production, in order to overcome the dynamic transaction costs of change. But the processes of subdivision and differentiation may also require changes in decision rights in order to overcome dynamic transaction costs. I illustrate these points with a case study of three generations of an American family of inventor-entrepreneurs in electricity and electronics.
    Keywords: Innovation, Decision Rights, Dynamic Transaction Costs, Modularity, Institutions
    JEL: B12 B25 D23 L26 L63 L92 M13 N81 N82 O31 O33
    Date: 2017–07
  11. By: Steve Raymond (UNC); Lukas Schmid (Duke University); Anastasios Karantounias (Federal Reserve Bank of Atlanta); Mariano Croce (University of North Carolina at Chapel H)
    Abstract: In times when elevated government debt raises concerns about dimmer global growth prospects, we ask: How can the government provide incentives for innovation in a fiscally sustainable way? We address this question by examining the Ramsey problem of finding optimal tax and subsidy schemes in a model in which growth is endogenously sustained by risky innovation. We characterize the shadow value of growth and entry in the innovation sector. We find that a profit tax is required to replicate the first-best in order to balance the positive spillovers of innovative activity. At the second-best, the profit tax is designed to optimally respond to growth shocks above and beyond what is prescribed by the standard tax-smoothing incentives in economies with exogenous growth. The interplay of risk and innovation opens a new margin for optimal taxation.
    Date: 2017
  12. By: Ana Fernandez Zubieta; Irene Ramos Vielba; Thomas Zacharewicz (European Commission - JRC)
    Abstract: The 2016 series of the RIO Country Report analyses and assesses the development and performance of the national research and innovation system of the EU-28 Member States and related policies with the aim of monitoring and evaluating the EU policy implementation as well as facilitating policy learning in the Member States.
    Keywords: research and innovation, Spain, innovation system
    Date: 2017–06
  13. By: Krammer, Sorin M.S.
    Abstract: Smart specialization (SS) is a policy concept that has gained significant momentum in Europe despite a frail theoretical background and implementation difficulties. These challenges become critical in the case of less-developed economies that often lack regional autonomy, a strong STI base, and local capabilities to identify and sustain such SS strategies. Combining elements from evolutionary economics and the export-led literature, I propose a framework that anchors the role of SS in the national innovation policy of such laggards, as a complementary avenue for improving competitiveness and growth. Moreover, to assist policy makers in lagging regions or countries, I advance a diagnostic tool to identify potential areas for SS, and also address the systemic and the regional-sectoral bottlenecks in these domains. I exemplify the use of this tool in the case of Bulgaria by using a large battery of quantitative and qualitative indicators from publicly available data. This type of investigation may be useful for other less-developed economies to kick-start this process and identify prima facie SS candidates.
    Keywords: Smart Specialization; Innovation Systems; Exports; Patents; Scientific publications;
    JEL: F14 O14 O31 O38 O52
    Date: 2015–12–05
  14. By: Stephane Lhuillery; Thomas Zacharewicz (European Commission - JRC)
    Abstract: The 2016 series of the RIO Country Report analyses and assesses the development and performance of the national research and innovation system of the EU-28 Member States and related policies with the aim of monitoring and evaluating the EU policy implementation as well as facilitating policy learning in the Member States.
    Keywords: research and innovation, France, innovation system
    Date: 2017–06
  15. By: Balasubrahmanyam Suram (Indian Institute of Management Kozhikode); M P Sebastian (Indian Institute of Management Kozhikode)
    Abstract: While new product development is considered critical for profitable growth of firms, there are several risks of cannibalization, if not outright disruption of the new product by those of rival firms much before the former comes up with the next generation product. Even otherwise,smart firms tend to prolong the product lifecycle by means of strategies that achieve product variety in terms of aesthetics or incremental innovations or modular variety or variety of customer value propositions in the form of parallel business models. Though there are studies on flexible product development at both intra-firm and inter-firm levels in a spirit of collaboration between partner firms, there is paucity of literature on flexible product development in the context of co-opetition at an industry level. The current study attempts to synthesize various stand-alone perspectives into an integrated framework which can aid the optimal decision-making of firms w.r.t flexible product development initiatives. This is a developmental paper and many of its suggestions require rigorous testing through studies in a wider array of settings. The paper provides a snapshot of various related corporate practices of strategic flexibility in the form of flexible product development adopted by firms across industries and the respective success/failure stories, the lessons of which when learnt properly can go a long way in the strategic self-renewal of many an organization.
    Keywords: Flexible Product Development, Product Variety, Modular Innovation,Architectural Innovation, Strategic Flexibility, Resource Leverage, Discovery-driven Planning
    Date: 2017–05
  16. By: Al Raee, Mueid (UNU-MERIT, and Maastricht University); Ritzen, Jo (UNU-MERIT, and Maastricht University); Crombrugghe, Denis de (School of Business and Economics, Maastricht University)
    Abstract: This paper examines the relationship between labour productivity growth in non-traditional sectors and "innovation policy" for a cross-section of countries. Innovation policy is characterised by investments in tertiary education and research and development as a percentage of Gross Domestic Product (GDP), the freedom in the business environment, as well as overall government effectiveness. Our results confirm the economic convergence between richer and poorer countries. We could show a significant positive effect of the interaction between government effectiveness and government expenditures in tertiary education as a percent of GDP on labour productivity growth in non-traditional sectors. Also, for developing countries, a positive and significant relationship between the growth variable and effective research and development expenditures was observed. We could not uncover a relationship between other innovation policies and labour productivity growth. Non-traditional sector labour productivity growth in the oil-rich Arabian Gulf countries was observed to be consistently slower than Western countries. Higher oil prices appear to crowd out innovation in oil-rich countries while stimulating innovation in oil-importing countries.
    Keywords: Innovation policy, labour productivity growth, technological change, government effectiveness, developing countries, Arabian Gulf countries.
    JEL: O38 O43 O47
    Date: 2017–04–04
  17. By: Carlos Andres Ballesteros; Carlos Esteban Posada
    Abstract: The pace of Japanese economic growth was substantially higher than that exhibited by the group of developed economies between 1985 and 1995; later has been lower. What explains this "relative decline"? According to the econometric results of an exercise carried out, inspired by the model of Aghion and Howitt (2009), the hypotheses of insufficient investment or savings can be considered implausible to explain such performance, while an alternative hypothesis can be considered likely: The loss of efficiency of the Japanese society, compared with the other developed societies, to transform resources required in R&D into a high and constant rate of technical change.
    Keywords: Economic growth, Slow and Schumpeter models, investment rate, R&D expenditures, capital stock pero efficiency uniits of labor
    JEL: O33 O47 O57
    Date: 2017–05–01
  18. By: Tetsuji Okazaki (Graduate School of Economics, The University of Tokyo)
    Abstract: This paper attempts to contribute to the "factory debate" by disentangling the effects of the technological change and the organizational change in the rise of the factory, using a unique dataset from Japan in the early twentieth century. It is found that the productivity of a factory worker was 2.46 times larger than that of an outworker under the putting-out system, after controlling for the effect of the power loom. The impact of the factory system was almost as large as that of the power loom in the case where all the hand looms were replaced by power looms. This finding indicates how substantial the effect of the organizational change was that gathered dispersed workers under the one roof.
    Date: 2017–07
  19. By: Grillitsch, Markus (KEG, Lund University); Asheim, Bjorn (University of Stavanger); Trippl, Michaela (University of Vienna)
    Abstract: The paper engages in a critical discussion of the related variety – regional branching argument and foregrounds a more differentiated perspective on regional industrial path development. It contributes by i) sharpening the definition of key concepts, namely specialisation and diversity, related and unrelated variety, ii) discussing their relevance in local and non-local spaces, iii) scrutinizing related variety as source for regional branching, and iv) developing a conceptual framework capturing the opportunity space for regional structural change that unveils the relevance of path upgrading, path importation, path branching, path diversification, and new path creation as different forms of new path development.
    Keywords: industrial path development; economic diversification; regional structural change; specialisation and diversity; related and unrelated variety; knowledge base combinations
    JEL: B52 O10 R10 R58
    Date: 2017–07–10
  20. By: Soete, Luc (UNU-MERIT, and Maastricht University); Verspagen, Bart (UNU-MERIT, and Maastricht University); Ziesemer, Thomas (UNU-MERIT, and School of Business and Economics, Maastricht University)
    Abstract: Using a vector-error-correction model (VECM) with endogenous stocks for total factor productivity (TFP), domestic and foreign public and private Research and Development (R&D) as well as the GDP from which current resources are taken, we find that for the Netherlands for the period 1968-2014, extra investment in public R&D has a clear positive effect on total factor productivity growth. Taking into account the costs of these extra investments, we find that the rate of return to such a policy is positive and generally high. Including private R&D in the policy from the beginning is better than increasing public R&D alone and private R&D only following. Transitory and permanent shocks to only domestic public R&D in 1971 show positive effects on private domestic and foreign private and public R&D, total factor productivity and GDP. Under a permanent shock to the growth rate of domestic public R&D by 0.005 (an additional half percentage point on the baseline growth rate), TFP is 27.5% higher than baseline after 70 years, and the GDP is 61% higher because a higher TFP also attracts international capital one-to-one with GDP. Foreign private R&D reacts much more positively then foreign public R&D. Private R&D capital increases by up to 5.5% compared to baseline and returns to baseline in the long run. The internal rate of return is 131 percent obtained already in 1988. If domestic and foreign public R&D are increased by the same permanent shock of 0.005, there are positive effects for thirty five years in domestic private R&D but permanently so for all other variables; TFP would have been higher by 0.56% and GDP by 9.4%, much less than under the first strategy without the symmetric and simultaneous foreign policy. The rate of return is 4-6 percent for horizons 2014, 2024, and 2040 because of higher gains in later periods. If domestic and foreign public and private R&D growth get a shock of 0.0025 (each an additional quarter of a percent on baseline) TFP increases by 13 percent until 2040, GDP by 28 percent and the internal rate of return is 77%.
    Keywords: Research and Development, Innovation, Public R&D, R&D policy, R&D investment, return on investment, rate of return
    JEL: O38 O30 O32 H41
    Date: 2017–05–08
  21. By: Sally Murray
    Abstract: This paper argues that new technologies—for communication, such as mobile phones and the internet, but also for manufacturing, agriculture, energy, and transport—have the potential to bridge many of the productivity gaps between sub-Saharan Africa and more advanced developing and developed countries. Technology can help to overcome distances between producers and consumers, knowledge and skills gaps, and energy shortfalls, and can bring down the costs of living to make wages competitive. However, new technologies will not deliver these gains unaided: supportive policies are required to create an environment where these new technologies can deliver on their potential.
    Date: 2017
  22. By: Kelsi, Hobbs (University of North Carolina at Greensboro, Department of Economics); Albert, Link (University of North Carolina at Greensboro, Department of Economics); John, Scott (Dartmouth College)
    Abstract: In this paper, we present a generalized model of U.S. university science and technology parks, and we identify covariates that might serve as target variables not only to perpetuate the growth of existing parks but also to provide information for those nations, regions, and universities starting new parks. Relevant covariates are the distance between the park and the university and if the park was founded during the information and communications technology (ICT) revolution (post-2000).
    Keywords: science park; technology park; geographic location; ICT
    JEL: O32 O51 R11 R12
    Date: 2017–07–11

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