nep-ino New Economics Papers
on Innovation
Issue of 2017‒10‒08
seventeen papers chosen by
Uwe Cantner
University of Jena

  1. Employment Effects of Innovations over the Business Cycle: Firm-Level Evidence from European Countries By Peters, Bettina; Hud, Martin; Dachs, Bernhard; Köhler, Christian
  2. Imports and Intellectual Property Rights on Innovation in China By Chu, Angus C.; Shen, Guobing; Zhang, Xun
  3. R&D Cyclicality and Composition Effects: A Unifying Approach By Nikolay Chernyshev
  4. Merger effects on innovation: A rationale for stricter merger control? By Haucap, Justus
  5. Lost in Transition? Drivers and Barriers in the Eco-Innovation Road to the Circular Economy By Ana de Jesus; Sandro Mendonça
  6. The Relationship between R&D and Competition: Reconciling Theory and Evidence By Nikolay Chernyshev
  7. Quantity, Quality and Originality: The Effects of Incentives on Creativity By Laske, Katharina; Schröder, Marina
  8. R&D Output Sharing in a Mixed Duopoly and Incentive Subsidy Policy By Lee, Sang-Ho; Muminov, Timur
  9. Do Policy Mix Characteristics Matter for Low-Carbon Innovation? A Survey-Based Exploration for Renewable Power Generation Technologies in Germany By Karoline S. Rogge; Joachim Schleich
  10. Facing Global Competition through Participation in Globalization of Innovation processes: The Case of Mechatronics District in the Veneto Region By Monica Plechero
  11. High-Growth Entrepreneurship By J. David Brown; John S. Earle; Mee Jung Kim; Kyung Min Lee
  12. Venture capitalists at work: what are the effects on the firms they finance? By Raffaello Bronzini; Giampaolo Caramellino; Silvia Magri
  13. Are Ideas Getting Harder to Find? By Bloom, Nicholas; Jones, Charles I; Van Reenen, John; Webb, Michael
  14. The Growth and Human Capital Structure of New Firms over the Business Cycle By Murmann, Martin
  15. Investment-Specific Technical Change and Growth around the World By Samaniego, Roberto M; Yu Sun, Juliana
  16. "Innovation Capability and Customer Relationship Management in Building Competent Young Entrepreneurs" By Intan Widuri Sakti
  17. "Environmental Uncertainty and Market Orientation on Business Performance with Innovation as an Intervening Variable: A Survey of Banking Industry in Indonesia" By Setyani Dwi Lestari

  1. By: Peters, Bettina; Hud, Martin; Dachs, Bernhard; Köhler, Christian
    Abstract: We investigate employment effects of innovations over the business cycle using data of manufacturing firms from 26 EU countries for the period 1998-2010. Using a structural model, our empirical analysis reveals three important findings: 1) The net effect of product innovation on employment growth is pro-cyclical. It is positive in all BC phases except for the recession. 2) Product innovators are more resilient to recessions than non-product innovators. 3) We only find resilience for SMEs.
    JEL: O33 J23 C26 D2
    Date: 2017
  2. By: Chu, Angus C.; Shen, Guobing; Zhang, Xun
    Abstract: In an open-economy R&D-based growth model with two intermediate production sectors, we find that strengthening intellectual property rights (IPR) has a positive effect on innovation in the sector that uses domestic inputs but both positive and negative effects on innovation in the sector that uses foreign inputs. We test these results using an empirical analysis of matching samples that combine Chinese provincial IPR data with industrial enterprises database and customs database.
    Keywords: Intellectual property rights; imports; knowledge spillovers; innovation
    JEL: F43 O31 O34
    Date: 2017–09
  3. By: Nikolay Chernyshev (University of St Andrews)
    Abstract: Existing empirical studies do not concur on whether R&D spending is procyclical or countercyclical: the former hypothesis is supported by studies of aggregate R&D spending, whereas the latter is vindicated by firm-level evidence. In this paper, we reconcile the two facts by advancing a general equilibrium framework, in which, while a single firm's R&D spending profile is countercyclical, aggregate R&D spending is procyclical owing to procyclical fluctuations in the number of R&D performers. Our findings suggest that economic crises might be beneficial for economic performance by fostering individual R&D effort. An advantage of our framework is that it brings together conflicting pieces of empirical evidence, while incorporating and building upon Schumpeter's hypothesis of countercyclical innovation.
    Keywords: Economic cycles, opportunity cost hypothesis, procyclicality of R&D, countercyclicality of R&D
    JEL: E23 E32 L13 L23 O31
    Date: 2017–09–27
  4. By: Haucap, Justus
    Abstract: The question how mergers affect innovation has gained prominence in a number of recent merger cases. Accounting for the likely effects of mergers on innovation is difficult for a number of reasons though. First of all, the relationship between market concentration and innovation is far from clear and not unambiguous. While it is an empirical regularity and, hence, a useful presumption that an increase in market concentration also leads to an increase in price, the case for a similarly general presumption with respect to mergers and innovation is relatively weak. Secondly, while mergers may result in innovation efficiencies, these may be difficult to demonstrate, given that the European Commission requires the efficiencies to accrue in a timely fashion, i.e., within two to four years after the merger. This contrasts with the timespan applied to the theories of harm which the Commission itself employs. This structural asymmetry tends to bias the framework against innovation efficiencies. Thirdly, remedies are notoriously difficult to design, and this is even more valid for innovation markets. In addition, competitors may choose to strategically not disclose part of their research ideas and pipelines in order to sabotage a competing merger if that merger would be procompetitive. Hence, the market test for remedies, which is already difficult in other merger cases, given market participants' strategic interests, will be even more difficult for innovation markets where competing firms can easily hide their intentions, research ides and pipelines.
    Date: 2017
  5. By: Ana de Jesus (CENSE - Universidade Nova de Lisboa, Lisbon, Portugal); Sandro Mendonça (Instituto Universitário de Lisboa (ISCTE-IUL), Business Research Unit (BRU-IUL), Lisboa, Portugal; Research Unit on Complexity and Economics (UECE-ISEG), Lisboa, Portugal; Business, SPRU, University of Sussex, Brighton, UK)
    Abstract: Understanding which drivers and barriers exist in the development of a Circular Economy (CE) is a relevant and timely endeavour. The aim of this paper is to contribute to this debate by analysing evidence regarding the different factors helping and hampering the development of a CE. Specifically, this paper focuses on the eco-innovation (EI) pathway towards a CE, and tries to coordinate available but fragmented findings regarding how “transformative innovation” can foster this transition while removing obstacles to sustainability. Drawing upon a new corpus of both academic and non-academic literature, this work offers a framework for analysis, as well as an evidence-based survey of the challenges, for a green structural change of the economy. We argue that the combination of the innovation systems’ view with the more recent “transformation turn” in innovation studies may provide an appropriate perspective for understanding the transition to a CE. Ultimately, the paper aims to capitalise on these insights to contribute to the design of policy guidelines and organisational strategies.
    Keywords: circular economy; eco-innovation; barriers; drivers; survey
    Date: 2017–09
  6. By: Nikolay Chernyshev (University of St Andrews)
    Abstract: The hypothesis of a hump-shaped relationship between innovation and competition due to Aghion, Bloom, Blundell, Griffith, and Howitt (2005), has been tested for different data sets without garnering conclusive support. In this paper we argue that this lack of agreement is because of a difference in approaches to measuring innovation (either in terms of R&D outcomes or by R&D effort). We develop a unified tractable general-equilibrium framework, in which, while R&D outcomes are a hump-shaped function of competition, R&D effort can be observed to be either increasing, decreasing, or hump-shaped. This enables our paper, first, to reconcile the conclusions by Aghion et al. (2005) with more recent results and, second, to inform further attempts to identify the hump-shaped relationship in data.
    Keywords: Inverted-U (hump-shaped) relationship, research and development, vertical innovation, Cournot-competition
    JEL: L13 O31 O41
    Date: 2017–09–27
  7. By: Laske, Katharina; Schröder, Marina
    Abstract: We introduce a novel experimental design in which creativity is incentivized and measured along three dimensions: quantity, quality and originality of ideas. We implement piece rate incentives for quantity alone, quantity in combination with quality and quantity in combination with originality and compare the results to a baseline with a fixed wage. Studying the effect of incentives on performance in the separate dimensions of creativity, we find that incentives significantly affect the quantity and average quality of ideas, but not the average originality. We show that incentives have both positive direct and negative spillover effects on performance in these dimensions and that organizations, therefore, face tradeoffs when introducing incentives for creative performance. When investigating the effect of incentives on a combined measure of innovation, i.e., the number of creative ideas that are at the same time of high quality and original, we find that incentives for both quantity and originality perform best.
    Keywords: creativity,multitasking,laboratory experiment,real-effort,incentives
    JEL: C91 J33 M52 O30
    Date: 2017
  8. By: Lee, Sang-Ho; Muminov, Timur
    Abstract: This study investigates the incentives for R&D output sharing in a mixed duopoly and shows that public firm chooses full sharing of their R&D output, whereas private firm enjoys free-riding. We then devise an agreement-based incentive R&D subsidy scheme, which can internalize R&D spillovers and induce both firms to earn higher payoffs through full sharing of their R&D output. We also show that an R&D subsidy policy is welfare-superior to a production subsidy policy.
    Keywords: Agreement-based R&D subsidy; Mixed duopoly; Production output subsidy; R&D output sharing
    JEL: H21 L13 L32
    Date: 2017–10–02
  9. By: Karoline S. Rogge (SPRU – Science Policy Research Unit, University of Sussex, Brighton, UK; Fraunhofer Institute Systems and Innovation Research (ISI), Karlsruhe, Germany); Joachim Schleich (Fraunhofer Institute Systems and Innovation Research (ISI), Karlsruhe, Germany; Grenoble Ecole de Management, Grenoble, France; Virginia Polytechnic Institute & State University, Blacksburg, VA, USA)
    Abstract: Policy mixes may play a crucial role in redirecting and accelerating innovation towards low-carbon solutions, thus addressing a key societal challenge. Towards this end, the characteristics of such policy mixes have been argued to be of great relevance, yet with little empirical evidence backing up such claims. In this paper we explore this link between policy mix characteristics and low-carbon innovation, using the research case of the transition of the German electricity system towards renewable energy. Our empirical insights are based on an innovation survey among German manufacturers of renewable power generation technologies which builds on the Community Innovation Survey, but which we adjusted to better capture companies’ perceptions of the policy mix. Employing a bivariate Tobit model we find that companies’ perceptions regarding the consistency and credibility of the policy mix are positively associated with the level of their innovation expenditures for renewable energies, and this positive link intensifies when considering the mutual interdependence of these policy mix characteristics. In contrast, we find no support for such a direct link for the comprehensiveness of the instrument mix or the coherence of policy processes. These findings suggests that future research on low-carbon and eco-innovation more broadly should pay greater attention to the characteristics of policy mixes, rather than focusing on policy instruments only. It also implies a need to rethink the consideration of policy in innovation surveys to enable better informed policy advice regarding the greening of innovation.
    Keywords: policy mix, credibility, consistency, coherence, comprehensiveness, ecoinnovation, renewable energy, sustainability transition, decarbonization
    Date: 2017–09
  10. By: Monica Plechero (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: The paper investigates the mechatronics industrial district of the Veneto region, key for Industry 4.0 and for pursuing development opportunities related to smart specialization strategies. It shows how firms of a local system can gain competitiveness from different modalities of participation to processes of globalization of innovation. Firms' size matters when exploiting own innovation in the international markets, but it is not essential for linking to specific external knowledge sources which can sustain the injection of new knowledge into the system and help firms increase their innovation performances.
    Keywords: Industrial district, innovation, internationalization, global innovation network, mechatronics, Veneto region
    JEL: R11 F23
    Date: 2017–09
  11. By: J. David Brown; John S. Earle; Mee Jung Kim; Kyung Min Lee
    Abstract: We study the patterns and determinants of job creation for a large cohort of start-up firms. Analysis of the universe of U.S. employers reveals strong persistence in employment size from firm birth to age seven, with a small fraction of firms accounting for most employment at both ages, patterns that are little explained by finely disaggregated industry controls or amount of finance. Linking to data from the Survey of Business Owners on characteristics of 54,700 founders of 36,400 start-ups, and defining “high growth” as the top 5% of firms in the size distribution at age zero and seven, we find that women have a 30% lower probability of founding high-growth entrepreneurships at both ages. A similar gap for African-Americans at start-up disappears by age seven. Other differences with respect to race, ethnicity, and nativity are modest. Founder age is initially positively associated with high growth probability but the profile flattens after seven years and even becomes slightly negative. The education profile is initially concave, with advanced degree recipients no more likely to found high growth firms than high school graduates, but the former catch up to those with bachelor’s degrees by firm age seven, while the latter do not. Most other relationships of high growth with founder characteristics are highly persistent over time. Prior business ownership is strongly positively associated, and veteran experience negatively associated, with high growth. A larger founding team raises the probability of high growth, while diversity (by gender, age, race/ethnicity, or nativity) either lowers the probability or has little effect. More start-up capital raises the high-growth propensity of firms founded by a sole proprietor, women, minorities, immigrants, veterans, novice entrepreneurs, and those who are younger or with less education. Perhaps surprisingly, women, minorities, and those with less education tend to choose high growth industries, but fewer of them achieve high growth compared to their industry peers.
    Date: 2017–01
  12. By: Raffaello Bronzini (Bank of Italy); Giampaolo Caramellino (London School of Economics); Silvia Magri (Bank of Italy)
    Abstract: Italian startups financed by venture capitalists (VCs) experience a faster growth in size and become more innovative compared with other startups. VC-backed firms also show a much larger increase in equity and a reduction in their leverage. This evidence is obtained by comparing a representative sample of firms financed by private VCs in the period 2004-2014 with a sample of firms rejected by VC at the very last stage of the screening process or in the due diligence phase. These firms narrowly lost the contest and before VC financing have very similar observable and unobservable characteristics to the VC-backed firms; self-selection is specifically taken into account. The effects on firms' size and innovation are not exclusively explained by equity financing. The results hold when we restrict the comparison to firms in the control group that also increase their equity from investors other than VCs: this suggests that VC effects can also be linked to their managerial expertise and network connection. Finally, the results are exclusively driven by independent VC investors compared with captive VCs.
    Keywords: venture capital, innovation, firm financial structure, differences-in-differences
    JEL: G21 G24 G32 O30
    Date: 2017–09
  13. By: Bloom, Nicholas; Jones, Charles I; Van Reenen, John; Webb, Michael
    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 their research productivity. 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 18 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: 2017–09
  14. By: Murmann, Martin
    Abstract: Recent research based on aggregate data suggests that employment in young firms is more negatively impacted during economic crises than employment in incumbent firms. Using firm-level data, we show that under constant human capital of the firms' founders, employment growth in less than 1 1/2-year-old start-ups reacts countercyclically and employment growth in older start-ups reacts procyclically. The young start-ups realize their countercyclical growth by hiring qualified labor market entrants.
    JEL: E32 J23 L26 M13 L25 L11 D22
    Date: 2017
  15. By: Samaniego, Roberto M (The George Washington University); Yu Sun, Juliana (School of Economics, Singapore Management University)
    Abstract: Investment-specific technical change (ISTC) contributes little to growth in most countries. This is because in many countries the investment process does not become notably more efficient over time. Still, cross-country differences in the contribution of ISTC to growth are significant. Differences in the rate of ISTC appear due to cross-country variation in the use of R&D intensive capital goods, as well as trade costs.
    Keywords: Price of capital; investment-specific technical change; growth accounting; sources of growth; natural resources; trade costs.
    JEL: F43 O11 O13 O16 O33 O41 O47
    Date: 2016–04–28
  16. By: Intan Widuri Sakti (Universitas Widyatama, Indonesia Author-2-Name: Gallang Perdana Dalimunthe Author-2-Workplace-Name: Universitas Pendidikan Indonesia)
    Abstract: "Objective – The study aims to learn effect of Innovation Capability and Customer Relationship Management on young entrepreneur’s competency. Methodology/Technique – Questionnaire used for the data collection in this study. The sampling method is probability sampling with simple random sampling technique. The population is all the Marketing students’ year 2012, and the calculated sampling is 100 respondents Findings – From the analysis and explanation using SEM, it is found that Innovation Capability and CRM have a big influence towards young entrepreneurs. Those variables also stimulate them to sharpen their business intuition. Novelty – The study proves importance of Innovation Capability and CRM on development of entrepreneurs."
    Keywords: Innovation Capability; CRM; Young Entrepreneurs; Structural Equation Modelling; SEM.
    JEL: L26 O32
    Date: 2017–03–20
  17. By: Setyani Dwi Lestari (Budi Luhur University, Indonesia)
    Abstract: "Objective – This causal research is aimed at obtaining information related to the effect of uncertainty environment, market orientation, and innovation in direct and indirect effect on the business performance in a holistic co-alignment perspective. Methodology – In this research, 90 samples were randomly selected and the data were analysed by path analysis after all variables were put into the correlation matrix. Findings –The results showed that: (1) environment uncertainty has a significant direct effect of the innovation; (2) environment uncertainty has a significant direct effect on the business performance; (3) market orientation has a significant direct effect on the innovation; (4) market orientation doesn’t have a significant direct effect on business performance; (5) innovation has a significant direct effect on the business performance; (6) environment uncertainty has a significant indirect effect on the business performance but through the innovation; and (7) market orientation has a significant indirect effect on the business performance but through the innovation. Novelty – Based on those findings, it could be concluded that any change or variation in the business performance was affected by environment uncertainty, market orientation, and innovation. Therefore, to improve variation in the business performance, environment uncertainty, market orientation, and innovation should be put into strategic planning in the banking industry in Indonesia. However, other variables are necessary to be taken into account in the next research."
    Keywords: Environmental Uncertainty; Market Orientation; Business Performance; Innovation.
    JEL: G21 L15 M31
    Date: 2017–04–24

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