nep-ino New Economics Papers
on Innovation
Issue of 2017‒09‒03
twenty-one papers chosen by
Uwe Cantner
University of Jena

  1. Measuring the Spillovers of Venture Capital By Schnitzer, Monika; Watzinger, Martin
  2. Identifying technological sub-trajectories in photovoltaic patents By Martin Kalthaus
  3. Essays on Empirical Industrial Organization : Entry and Innovation By Fernandez Machado, Roxana
  4. Capital investments and financing structure: Are R&D companies different? By Kadri Männasoo; Heili Hein
  5. Beyond EU-US Trade Dynamics: TTIP Effects Related to Foreign Direct Investment and Innovation By Jungmittag, Andre; Welfens, Paul J. J.
  6. The Fluidity of Inventor Networks By Michael Fritsch; Moritz Zoellner
  7. The Role of Entrepreneurial Human Capital as a Driver of Endogenous Economic Growth By Isaac Ehrlich; Dunli Li; Zhiqiang Liu
  8. Learning from abroad: Export versus foreign ownership By Kadri Männasoo; Heili Hein
  9. Invention Machines: How Control Instruments and Information Technologies Drove Global Technologigal Progress over a Century of Invention By Koutroumpis, Pantelis; Leiponen, Aija; Thomas, Llewellyn D W
  10. Firms' Costs, Profits, Entries, and Innovation under Optimal Privatization Policy By Haraguchi, Junichi; Matsumura, Toshihiro
  11. Role of governance in clean energy innovation policies in East and North-East Asia By Dorothea Lazaro from the ESCAP Subregional Office for East and North-East Asia.
  12. Are R&D companies credit-constrained? Credit frictions during and post-crisis By Kadri Männasoo; Heili Hein
  13. R&D policy regimes in France: New evidence from a spatio-temporal analysis By Benjamin Montmartin; Marcos Herrera; Nadine Massard
  14. Are Ideas Getting Harder to Find? By Michael Webb; John Van Reenen; Charles Jones; Nicholas Bloom
  15. The Structure and Performance of U.S. Research Joint Ventures: Inferences and Implications from the Advanced Technology Program By James D. Adams; Albert N. Link
  16. The Contribution of Educated Workers to Firms' Efficiency Gains The Key Role of the Proximity to Frontier By Vincent Vandenberghe
  17. Sitting at a desk at work makes creative employees tired By Viive Pille; Viiu Tuulik; Aaro Hazak
  18. Non-creative tasks: a turn off for creative R&D employees By Aaro Hazak
  19. More flexibility, better results? Issues in R&D work efficiency By Marko Virkebau; Aaro Hazak; Kadri Männasoo
  20. Who has a better chance of getting higher salaries among creative R&D employees? By Heili Hein; Aaro Hazak; Kadri Männasoo
  21. Are business obstacles different for R&D companies? By Heili Hein; Kadri Männasoo

  1. By: Schnitzer, Monika; Watzinger, Martin
    Abstract: We provide the first measurement of knowledge spillovers from venture capital-financed companies onto the patenting activities of other companies. On average, these spillovers are nine times larger than those generated by the R&D investment of established companies. Spillover effects are larger in complex product industries than in discrete product industries. Start-ups with experienced inventors holding a patent at the time of receiving the first round of investment produce the largest spillovers, indicating that venture capital fosters the commercialization of technologies. Methodologically, we contribute by developing a novel definition of the spillover pool, combining citation-based and technological proximity-based approaches.
    Keywords: innovation; Spillovers; venture capital
    JEL: G24 O3 O31 O32
    Date: 2017–08
  2. By: Martin Kalthaus (FSU Jena)
    Abstract: This paper proposes a search strategy for photovoltaic patents which allows to distinguish the photovoltaic system into sub-trajectories. Identifying and analyzing sub-trajectories is of particular importance for understanding micro patterns of technological change. The proposed search strategy is modular and replicable. It performs similar to leading benchmark search strategies but allows to distinguish three cell sub-trajectories and two system components. Descriptive analysis reveals that inventive activity differs between sub-trajectories. The market dominating silicon wafer cell sub-trajectory shows hardly any patented inventive activity. Country comparison reveals that Asian countries focus on the emerging cell sub-trajectory. The USA focus on the established thin-film sub-trajectory and inventive activity in Germany focuses on module components. While the proposed search strategy allows for a fine-grained analysis of inventive activity in photovoltaics, the empirical assessment of sub- trajectories in general can increase understanding of technological change and can be used to implement policy interventions at a microtechnological level.
    Keywords: Innovation, Sub-trajectory, Patent search, Photovoltaics
    JEL: O31 O34 Q42
    Date: 2017–08–30
  3. By: Fernandez Machado, Roxana (Tilburg University, School of Economics and Management)
    Abstract: The dissertation contains three essays on empirical industrial organization devoted to studying firms' strategic interaction in different settings. The first essay develops an entry model to address an important matter in the area of urban economics: the development of cities. In particular, it focuses on the food and beverage service industry in the Netherlands and investigates to what extent the presence of urban amenities produces positive spillovers on other amenities in the market. For the case of take-out places and bars, the findings show evidence of unidirectional spillover effects upon entry. The two policy experiments conducted show that taking into account this asymmetry is relevant for both new entrant firms and policy makers. The second essay analyzes the competitive dynamics of firms in the presence of first- mover advantages. Using data of the U.S. digital mobile markets, the study quantifies the advantage early movers have relative to later entrants. In particular, it measures the impact of competitors' entry on the profits of incumbents and entrants. The findings show an asymmetric competitive effect in favor of incumbents. Finally, the third essay focuses on innovation and firms’ patent portfolio choices. Patent portfolios have become an important tool for firms to compete and secure their position in the market. The essay focuses on the U.S. semiconductor industry and shows how firms of different sizes choose their technologies in relation to other firms. The main findings suggest that small- and medium-size firms replicate large firms' choices while ignoring the giants in the market. While giants' portfolios are positively related to their previous investments, they are overall independent of other types' choices
    Date: 2017
  4. By: Kadri Männasoo; Heili Hein
    Abstract: Research and development (R&D) activities place elevated demands on high-technology equipment and infrastructure, and this requires sizable investments. However, returns on R&D investments are time-lagged, highly uncertain and subject to appropriability problems, causing private R&D investment to fall below the socially desirable level. Market imperfections such as financing constraints are also reasons why R&D may be insufficient. This short, descriptive analysis compares the funding structure of the capital investments of R&D and non-R&D companies over rounds IV (2007-2009) and V (2012-2014) of the Business Environment and Enterprise Performance Survey. We find that R&D companies invest more relative to sales, and that they are more reliant on credit from banks and other financial intermediaries. Although the share of internal funding increased for all companies after the crisis, the strong selection of companies into R&D and innovation activities has made R&D companies less vulnerable to credit contraction with fewer marked changes in their financing structure than has been seen by non-R&D companies.
    Date: 2017–08–31
  5. By: Jungmittag, Andre (FH Frankfurt); Welfens, Paul J. J. (University of Wuppertal)
    Abstract: The international economic debate on the Transatlantic Trade and Investment Partnership (TTIP) has focused mainly on trade induced real income gains while the FDI related and innovation induced benefits have been largely neglected, although the EU and the US are leading FDI host countries and FDI source countries. Moreover, from a theoretical perspective a knowledge production function has to be considered in order to analyze FDI and innovation dynamics – and this can then be linked to output and economic growth, respectively. It is argued that such a Schumpeterian approach for an open economy is needed to understand deep integration dynamics while the standard CGE model used by Francois et al (2013) leads to an underestimation of deep integration projects such as TTIP. The panel data estimation of knowledge production functions for 20 EU countries between 2002-2012 shows clear empirical evidence that a rise of the number of researchers and of the FDI stock-GDP ratio (or related variables) will raise patent applications. Additionally, a higher per capita income – that could reflect trade related real income gains in the context of TTIP – also contributes to new knowledge and a fortiori to higher GDP. Time series data analysis for Germany indicates additionally that FDI induced higher innovation dynamics will raise output – combining trade benefits and FDI/innovation related real income gains plus transatlantic macroeconomic interdependency effects a real income gain of nearly 2% should be expected for Germany (and the EU): considerably higher than what the official TTIP report for the European Commission has suggested. The results also suggest positive employment effects.
    Keywords: knowledge production function, innovation, FDI, TTIP, empirical analysis, EU
    JEL: F14 F43 O30 O47 O52
    Date: 2017–08
  6. By: Michael Fritsch (FSU Jena); Moritz Zoellner (Friedrich Schiller University Jena, School of Economics and Business Administration)
    Abstract: We investigate the stability of cooperative relationships between inventors and consequences for the characteristics and patent productivity of the respective regional innovation systems (RIS). The empirical analysis is for nine German regions over a period of 15 years. We find a rather high level of 'fluidity', i.e., entry and exit of actors, as well as instability of their relationships over time. The aggregate characteristics of the regional networks are, however, quite robust even with high levels of micro-level fluidity. There are both significantly positive and negative relationships between micro-level fluidity and the performance of the respective RIS.
    Keywords: Innovation networks, R&D cooperation, division of innovative labor, patents
    JEL: O3 R1 D2 D8
    Date: 2017–08–29
  7. By: Isaac Ehrlich; Dunli Li; Zhiqiang Liu
    Abstract: We model investment in entrepreneurial human capital (EHC) - the representative enterprise’s share of production capacity allocated to investment in innovative industrial and commercial knowledge – as a distinct channel through which firm-specific human capital drives endogenous growth. Our model suggests that institutional factors supporting free markets for goods and ideas, and higher educational attainments of entrepreneurs and workers, enhance endogenous economic growth by augmenting the efficiency of investment in EHC rather than exclusively by themselves. We test these implications using data from Global Entrepreneurship Monitor’s Adult Population Survey of 63 countries over 2002-2010 and find robust support for these hypotheses.
    JEL: L26 O31 O43
    Date: 2017–08
  8. By: Kadri Männasoo; Heili Hein
    Abstract: Companies engaged in innovation and research and development (R&D) are often engaged in business on an international scale and their success is critically dependent on international R&D networking and the ability to absorb new knowledge. Foreign ownership, joint ventures and trade are among the channels that enable companies to learn from abroad. This brief analysis aims to describe these learning patterns and look for associations between R&D engagement and foreign interactions. Using data from eleven Central and Eastern European countries for the years 2007-2009 and 2012-2014 reveals that exporting is the only foreign channel that has a clear positive relationship with R&D engagement.
    Date: 2017–08–31
  9. By: Koutroumpis, Pantelis; Leiponen, Aija; Thomas, Llewellyn D W
    Abstract: Abstract Inventions depend on skills, experience, and information exchange. Information is shared among individuals and organizations both intentionally and unintentionally. Unintentional flows of knowledge, or knowledge spillovers, are viewed as an integral element of technological progress. However, little is known about the overall patterns of knowledge flows across technology sectors or over long periods of time. This paper explores whether it is possible to identify “invention machines” – technologies that help create new inventions in a wide range of other sectors – and whether shifts in the patterns of knowledge flows can predict future technological change. In the spirit of big data we analyze the entire PatStat database of 90 million published patents from 160 patent offices over a century of invention and exploit variation within and across countries and technology fields over time. The direction and intensity of knowledge spillovers measured from prior-art citations highlight the transition from mechanical to electrical instruments, especially industrial control systems, and the rise of information and communication technologies as “invention machines” after 1970. Most recently, the rapidly increasing impact of digital communications on other fields may herald the emergence of cloud computing and the industrial internet as the new dominant industrial paradigm.
    Keywords: Innovation, patents, electrical instruments, instruments, information technology
    JEL: O32 O31 O12
    Date: 2017–08–23
  10. By: Haraguchi, Junichi; Matsumura, Toshihiro
    Abstract: We investigate how cost conditions of private firms affect optimal privatization policy and private firms' profits. We find that the optimal degree of privatization is decreasing with the costs of private firms unless the public firm is fully privatized in equilibrium. A cost reduction in a private firm increases the degree of privatization and benefits for all private firms. Therefore, each private firm's profit is increasing with its rival private firms' costs, which is in contrast to the result when the degree of privatization is given exogenously. This interesting property yields two important results. The profit of each private firm can increase with the number of private firms, and the positive externality of innovation accelerates private firms' R&D.
    Keywords: partial privatization, cost-reducing R&D, asymmetric private firms, constant marginal costs
    JEL: D43 H44 L33
    Date: 2017–08–22
  11. By: Dorothea Lazaro from the ESCAP Subregional Office for East and North-East Asia. (United Nations Economic and Social Commission for Asia and the Pacific)
    Abstract: The experiences of major economies in the East and North-East Asia subregion point to at least three desirable aspects of public policies and strategies in promoting clean energy innovation. These aspects include a well-designed governance structure, balanced policy mix of incentives and regulations and an enabling financial system. The list is clearly not comprehensive as other policy aspects, such as the need to develop a large pool of educated workers and to have an open trade policy to facilitate technology transfer, are equally crucial.
  12. By: Kadri Männasoo; Heili Hein
    Abstract: Private research and development (R&D) and innovation activity is believed to fall below the socially optimal level. The credit constraints that R&D companies face due to asymmetric information and credit market imperfections may hinder innovation. This descriptive analysis aims to provide a comparative insight into the credit demand and supply patterns of R&D and non-R&D companies in Central and Eastern European countries during and after the Global Financial Crisis. The study uses company-level data from rounds IV and V of the Business Environment and Enterprise Performance Survey, covering the years 2007-2009 and 2012-2014. It reveals that the dependence of R&D companies on bank credit dropped significantly over the two survey rounds, mirroring substantial self-selection into R&D, with a smaller number of able and well-capitalised companies continuing R&D activity after the crisis. We do not subsequently find convincing evidence that R&D firms that remained in business after the crisis are notably credit-constrained.
    Date: 2017–08–31
  13. By: Benjamin Montmartin (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique); Marcos Herrera (Universidad Nacional de Salta, CONICET - Consejo Nacional de Investigaciones Científicas y Técnicas); Nadine Massard (UGA - Université Grenoble Alpes, GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes)
    Abstract: Using a unique database containing information on the amount of R&D tax credits and regional, national and European subsidies received by firms in French NUTS3 regions over the period 2001-2011, we provide new evidence on the efficiency of R&D policies taking into account spatial dependency across regions. By estimating a spatial Durbin model with regimes and fixed effects, we show that in a context of yardstick competition between regions, national subsidies are the only instrument that displays total leverage effect. For other instruments internal and external effects balance each other resulting in insignificant total effects. Structural breaks corresponding to tax credit reforms are also revealed.
    Keywords: structural breaks,R&D investment,spatial panel,Additionality,French policy mix
    Date: 2017–07
  14. By: Michael Webb (Stanford University); John Van Reenen (Sloan School of Management, MIT); Charles Jones (Stanford University); Nicholas Bloom (Stanford)
    Abstract: In many growth models, economic growth arises from people creating ideas, and the long-run growth rate is the product of two terms: the effective number of researchers and the research productivity of these people. We present a wide range of evidence from various industries, products, and firms showing that research effort is rising substantially while research productivity is declining sharply. A good example is Moore’s Law. The number of researchers required today to achieve the famous doubling every two years of the density of computer chips is more than 75 times larger than the number required in the early 1970s. Across a broad range of case studies at various levels of (dis)aggregation, we find that ideas — and in particular the exponential growth they imply — are getting harder and harder to find. Exponential growth results from the large increases in research effort that offset its declining productivity.
    Date: 2017
  15. By: James D. Adams; Albert N. Link
    Abstract: Research Joint Ventures (RJVs) are projects that combine the research resources of different firms. A sample of RJVs supported by the U.S. Advanced Technology Program shows that the projects yield revenues that are far less than costs. Related to this point, the RJVs are subject to commercialization delays, loss of intellectual property, and product market competition. Partner firms undertake joint research, but if they commercialize at all, they do so separately, to avoid splitting of revenues from new products. Ultimately, difficulties with the RJVs occur because frequently, firms are potential competitors.
    JEL: D23 K21 L24 O31 O34 O38
    Date: 2017–08
  16. By: Vincent Vandenberghe (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: Vandenbussche et al (2006), Aghion et al. (2009) posit and show that when economies operate close to the technical frontier, their ability to generate efficiency gains rests on the contribution of workers with advanced forms of education (i.e. those who attended tertiary education). The main originality of this empirical paper is to revisit and improve the analysis of that assumption in the context of firms located in advanced economics, assuming that something that has been verified for OECD countries or US states is likely to be observed also at a much more desegregated level. To that purpose, we analyse a rich panel of Belgian firm-level data, covering the 2008-14 period. In the first step, we concentrate on properly estimating each firm’s distance/proximity to frontier. Step 2 consists in regressing each firm's efficiency growth rate on [1] the share of workers by education attainment [2] its (initial) distance/proximity to the frontier and [3] (the main variable of interest here) the interaction between [1] & [2], whose sign provides a direct test of the Vandenbussche/Aghion assumption. The main result of the paper supports the idea that the closer the firms are from the frontier, the more educated workers matter for efficiency gains.
    Keywords: Efficiency growth, Highly-educated workers, Frontier Firms, Proximity to frontier
    JEL: J24 I20 E24 O30 O40
    Date: 2017–08–21
  17. By: Viive Pille; Viiu Tuulik; Aaro Hazak
    Abstract: We seek to identify how working hours spent at the workplace relate to work outcomes and the tiredness of the employee. Our study covers Estonian creative R&D employees – product developers, IT developers as well as academic and applied researchers. It appears that the greater the share of working time spent at the workplace, the more tired employees feel. Furthermore, the more time the employee does his or her work at the office, the more they perceive the results of the work as lower. Tiredness may be related to the obligation to do the work in a place and at a time that does not coincide with the employee’s creative mood. In view of these results, employers may wish to consider whether sitting at a desk at work for a fixed number of hours is the best way to organise the work of creative employees.
    Date: 2017–08–31
  18. By: Aaro Hazak
    Abstract: Reports, applications, formalities and administrative tasks – these are common elements in the work of R&D employees. We performed a study among Estonian creative R&D employees to identify what the link is between the share of creative work in total working time, and the results of the work, as well as the sleepiness, tiredness and wellbeing of the employee. We find that the more creative the R&D employee’s work, the more satisfied the person is with his/her work results, while more routine tasks also decrease creative content in work outcomes. Furthermore, the more creative the work, the happier the employee appears to be. We also find that non-creative tasks increase the daytime sleepiness and tiredness of creative R&D employees. It is important that employers as well as R&D governance bodies consider carefully the adverse effects that extensive non-creative work tasks may have on both the R&D work results as well as individual wellbeing.
    Date: 2017–08–31
  19. By: Marko Virkebau; Aaro Hazak; Kadri Männasoo
    Abstract: Flexible working time and teleworking have provided grounds for debate among employers, employees, researchers and HR experts. With our study among 153 Estonian creative R&D employees we seek to better understand what the links are between flexible work arrangements and creative work results. We find that flexibility in choosing to work fully or at least partially from home or elsewhere outside the office has a positive effect on the employee’s satisfaction with his/her work results. In regard to working time arrangements, we find that men as well as those with a better education have much better chances of getting jobs that offer flexitime. This in turn has implications for the work outcome, as positions that include flexible working time options are filled by a certain type of employee. Another result from our research is that clearly evening and clearly morning types of people – “owls” and “larks” – are in general more satisfied with their creative work results. This may be due to part of their creative work being done outside normal office hours, providing a potentially less stressful work environment. Overall, employers should consider providing employees more flexibility in the timing and place of work in order to facilitate improved work results – at least in creative R&D jobs.
    Date: 2017–08–31
  20. By: Heili Hein; Aaro Hazak; Kadri Männasoo
    Abstract: It is a known fact from previous studies that on average, women earn less than men. Although the size of the gender pay gap differs from country to country, this statement is true almost everywhere. This brief study aims to contribute to the discussion on the gender pay gap by examining the earnings of a specific demographic – Estonian creative R&D employees. Not surprisingly, we discovered that gender is an important and statistically significant driver of salary levels with women being less likely than men to receive higher levels of salaries. In addition, we find that age is a further statistically significant determinant of salary levels. The effect of age on earnings forms an inverse-U-shape with younger and older employees having a lower likelihood of earning higher salaries compared to their middle-aged colleagues.
    Date: 2017–08–31
  21. By: Heili Hein; Kadri Männasoo
    Abstract: Investment in research and development (R&D) is often long-term, making R&D companies extremely sensitive to their environment. Using data from the Business Environment and Enterprise Performance Survey rounds IV (2007-2009) and V (2012-2014), we examine the differences in how severe R&D and non-R&D manufacturing companies in Central and Eastern Europe perceive business obstacles to be. Overall, R&D companies were relatively more troubled by various institutional and regulatory obstacles in their business environment than were non-R&D companies, whose main business concern was the tax rate. Over both rounds of the survey, R&D companies perceived labour and trade regulations as more severe obstacles than non-R&D companies did. During the post-crisis period, R&D companies were also relatively more concerned about political instability, courts and corruption.
    Date: 2017–08–31

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