nep-ino New Economics Papers
on Innovation
Issue of 2017‒10‒29
twenty-six papers chosen by
Uwe Cantner
University of Jena

  1. How Antitrust Enforcement Can Spur Innovation: Bell Labs and the 1956 Consent Decree By Martin Watzinger; Thomas A. Fackler; Markus Nagler; Monika Schnitzer
  2. Firm Innovation under Import Competition from Low-Wage Countries By Ujjayant Chakravorty; Runjuan Liu; Ruotao Tang
  3. Financing Innovation through Minority Acquisitions By Ibrahim Bostan; Mariana Spatareanu
  4. BIG Data - BIG Gains? Understanding the Link Between Big Data Analytics and Innovation By Niebel, Thomas; Rasel, Fabienne; Viete, Steffen
  5. BIG SCIENCE, LEARNING AND INNOVATION: EVIDENCE FROM CERN PROCUREMENT By Anna Giunta; Massimo Florio; Francesco Giffoni; Emanuela Sirtori
  6. Technological catching-up, sales dynamics and employment growth: evidence from China's manufacturing firms By Giovanni Dosi; Xiaodan Yu
  7. ICT Use, Connectivity, and Innovation Capability in Japanese SMEs By Shigeno, Hidenori; Tsuji, Masatsugu; Matsuzaki, Taisuke; Shinohara, Sobee
  8. Do Bank Shocks Hamper Firms’ Innovation? By Mariana Spatareanu; Vlad Manole; Ali Kabiri
  9. Welfare effects of R&D support policies By Takalo, Tuomas; Tanayama, Tanja
  10. Innovation, Skills and Investment: A Digital Industrial Policy for Europe By Gruber, Harald
  11. Spillover from the Haven: Cross-border Externalities of Patent Box Regimes within Multinational Firms By Schwab, Thomas; Todtenhaupt, Maximilian
  12. Price controls versus compulsory licensing: effects on patent-holders and consumers By Eric W Bond; Kamal Saggi
  13. Regulation, Institutions, and Productivity: New Macroeconomic Evidence from OECD Countries By Balazs Egert
  14. Engel's Law in the Global Economy: Demand-induced Patterns of Structural Change, Innovation, and Trade By Matsuyama, Kiminori
  15. Frontier Knowledge and Scientific Production: Evidence from the Collapse of International Science By Iaria, Alessandro; Schwarz, Carlo; Waldinger, Fabian
  16. Computerization and Immigration: Theory and Evidence from the United States By Gaetano Basso; Giovanni Peri; Ahmed Rahman
  17. A public R&D resource allocation model for 5G mobile industry in Korea By Kim, Suwon; Nam, Chan-gi; Lee, Sangwoo; Kim, Seongcheol
  18. Rise of the Machines Redux – Education, Technological Transition and Long-run Growth By Ahmed S. Rahman
  19. The importance of value creation in smart city initiatives: An ecosystem approach By Oomens, Ivette M. F.; Sadowski, Bert M.
  20. Ambidextrous Learning in Innovation-Active Companies of BRIC: Convergence or Divergence Trends? By Alsufyev, Artem I.; Zavyalova, Elena K.
  21. Engineering Growth: Innovative Capacity and Development in the Americas By William F. Maloney; Felipe Valencia Caicedo
  22. Patent Validity Challenges and The America Invents Act By Talia Bar; Brendan Costello
  23. Technology, Market Structure and the Gains from Trade By Impullitti, Giammario; Licandro, Omar; Rendahl, Pontus
  24. Can Competition Extend the Golden Age of Antibiotics? By Eswaran, Mukesh; Gallini, Nancy
  25. Data Portability on the Internet: An Economic Analysis By Wohlfarth, Michael
  26. Assessing the impact of mobile consolidation on innovation and quality: An evaluation of the Hutchison/Orange merger in Austria By Pedrós, Xavier; Bahia, Kalvin; Castells, Pau; Abate, Serafino

  1. By: Martin Watzinger; Thomas A. Fackler; Markus Nagler; Monika Schnitzer
    Abstract: We study the 1956 consent decree against the Bell System to investigate whether patents held by a dominant firm are harmful for innovation and if so, whether compulsory licensing can provide an effective remedy. The consent decree settled an antitrust lawsuit that charged Bell with having foreclosed the market for telecommunications equipment. The decree forced Bell to license all its existing patents royalty-free. The compulsory licensing increased follow-on innovation building on Bell patents by 17%. This effect is driven mainly by young and small companies. Yet, innovation increased only outside the telecommunications equipment industry, suggesting that compulsory licensing without structural remedies is ineffective in ending market foreclosure.
    Keywords: innovation, antitrust, intellectual property, compulsory licensing
    JEL: O30 O33 O34 K21 L40
    Date: 2017
  2. By: Ujjayant Chakravorty; Runjuan Liu; Ruotao Tang
    Abstract: In recent years, manufacturing firms in the United States have faced increasing import competition from low-wage countries, especially China. Does this competition hurt or help innovation by firms? This paper studies the effect of the surge in imports from China on innovation in the US manufacturing sector. We combine patent, firm and trade data during 1990-2006 for US publicly-listed firms in the Compustat dataset. We find consistent evidence that Chinese import competition had a positive effect on firm innovation, as measured by citation-weighted patent applications. This positive effect persists when we instrument import competition in the US by using Chinese import penetration in the United Kingdom. Next we investigate this relationship between import competition and innovation by considering industry and firm heterogeneity. We find that firms in low-tech industries and those with a lower degree of product differentiation show a significant positive response to import competition. Firms with a higher capital intensity and lower labor productivity also exhibit a greater response. These results are shown to be robust to a variety of measures for import penetration and innovation.
    Keywords: import competition, innovation, international trade, manufacturing firms, patents
    JEL: F10 F14 O31 O32
    Date: 2017
  3. By: Ibrahim Bostan; Mariana Spatareanu
    Abstract: This study unveils the financing role of minority equity purchases on innovation activities of US target firms. We provide evidence of increased innovation following minority acquisitions accompanied by cash flows to financially constrained target firms, and to firms with relatively small patent portfolios prior to acquisition. To address endogeneity concerns we create matched control groups of firms that were targets of minority acquisitions without cash transfers, and show that the positive effects of minority equity purchases on target firms’ innovation are nonexistent if minority acquisitions are not accompanied by cash flow transfer to target firms. We also create a sample of similar firms which were targets of failed minority acquisitions, and find that those targets experience no change in their innovation activity.
    Keywords: acquisitions, finance, innovation
    JEL: G34
    Date: 2016–02
  4. By: Niebel, Thomas; Rasel, Fabienne; Viete, Steffen
    Abstract: This paper analyzes the relationship between firms’ use of big data analytics and their innovative performance for product innovations. Since big data technologies provide new data information practices, they create new decision-making possibilities, which firms can use to realize innovations. Applying German firm-level data we find suggestive evidence that big data analytics matters for the likelihood of becoming a product innovator as well as the market success of the firms’ product innovations. The regression analysis reveals that firms which make use of big data have a higher likelihood of realizing product innovations as well as a higher innovation intensity. Interestingly, the results are of equal magnitude in the manufacturing and services industries. The results support the view that big data analytics have the potential to enable innovation.
    Keywords: Big data,data-driven decision-making,innovation,product innovation,firmlevel data
    JEL: D22 L20 O33
    Date: 2017
  5. By: Anna Giunta; Massimo Florio; Francesco Giffoni; Emanuela Sirtori
    Abstract: We study the way in which public procurement by big research infrastructures enhances suppliers’ performance. Using survey data on 669 CERN suppliers, we built a unique data set to analyse, through an ordered logit model and Bayesian networks, the determinants of suppliers’ sales, profits and development activities. We find that collaborative relations between CERN and its suppliers improve suppliers’ performance and increase positive spill overs along the supply chain. This suggests that public procurement for innovation policies should promote cooperative relations and not only market mechanisms.
    Keywords: Big Science, Public Procurement, CERN, Suppliers
    JEL: O31 O33 O38 C11
    Date: 2017–10
  6. By: Giovanni Dosi; Xiaodan Yu
    Abstract: This paper investigates the microeconomics of employment dynamics, using a Chinese manufacturing firm-level dataset over the period 1998-2007. It does so in the light of a scheme of "circular and cumulative causation", whereby firms' heterogeneous productivity gains and sales dynamics, and innovation activities ultimately shape the patterns of employment dynamics. Using firm's productivity growth as a proxy for process innovation, our results show that the latter correlates negatively with firm-level employment growth. Conversely, relative productivity levels, as such a general proxy for the broad technological advantages/disadvantages of each firm, do show positive effect on employment growth in the long-run through replicator-type dynamics. Moreover, firm-level demand dynamics play a significant role in driving employment growth, which more than compensate the labour-saving effect due to technological progress. Finally, and somewhat puzzlingly, the direct effects of product innovation and patenting activities on employment growth appear to be negligible.
    Keywords: Employment Growth, Demand, Product Innovation, Process Innovation, Export, China catching-up
    Date: 2017–10–24
  7. By: Shigeno, Hidenori; Tsuji, Masatsugu; Matsuzaki, Taisuke; Shinohara, Sobee
    Abstract: This paper seeks to construct a new theory on SME innovation by reviewing and comprehending findings and knowledge obtained to date from a unified perspective. Conventional research on innovation in general has focused thematically on individual factors such as absorptive capability, R&D, and open innovation. While this approach has its advantages, it is critical to research innovation as a single process from a broad perspective and framework. This analyzes how SMEs acquire new information and ideas that are the source of innovation, organize and conduct R&D to integrate these ideas with management resources within the frim, and finally, how they produce the concrete output of these steps that lead to the development of new products. Our research especially seeks to answer what elements are needed in this process, and how they should be combined. In addition, this paper focuses on internal innovation capability which includes factors such as technologies that the company own, human resources (human factor), managerial organizational form (organization), leadership, and so on. These factors also consist of detailed sub-factors. The examples of the third layer contain as the following factors, for example. The technological factor includes the following factors: (a) ratio of R&D expenditure to sales; (b) the number of intellectual property right owned; and (c) technical and management systems such as R&D. (ii) Managerial organization indicates whether the managerial organization is designed and functioning to encourage exchange and share information among employees or communications inside the firm for innovation. This consists of the following sub-factors: (d) practicing QC circle; (e) cross-functional team; (f) information sharing system using ICT; and (g) the traditional background to stimulate discussions and communications among sections of the firms. Finally, the human resources is an important factor for engaging in innovation activities as well as for design and managing R&D, which consist of the following sub-factors: (h) ability of top management such as degrees or experiences; (i) leadership of top management; (j) degrees and experiences of employees; and (k) the Human Resource Development scheme (HRD) such as OJT (On-the-job training) or OFFJT (Off-the-job training). This paper particularly focuses on factors such as technology, R&D, and ICT use.
    Keywords: External linkages,SEM,causality,open innovation
    Date: 2017
  8. By: Mariana Spatareanu; Vlad Manole; Ali Kabiri
    Abstract: Using a unique matched bank-firm-innovation data for the UK, this paper finds that bank shocks negatively affected firms’ innovations during the recent crises. After carefully controlling for several potential biases in estimation we find that firms whose relationship banks were distressed patented less, and those patents were of lower technological value, less original and of lower quality. The impact is larger in the case of small and medium enterprises (SMEs). We also show that banks’ specialization in financing innovation mitigates the impact of bank distress on firms’ innovation. The results highlight the significantly negative impact of distress in the banking sector on firm’s innovation and potential future economic growth.
    Keywords: innovation, bank distress, crisis, UK
    JEL: G21 G34 O16 O30
    Date: 2017–09
  9. By: Takalo, Tuomas; Tanayama, Tanja
    Abstract: We conduct a welfare analysis of R&D subsidies and tax credits using a model of innovation policy in corporating externalities, limited R&D participation and finanial market imperfetions. We estimate the model using R&D projet level data from Finland. The optimal R&D tax credit rate (0.24) is lower than the average R&D subsidy rate (0.36). The intensive, not the extensive margin of R&D is important for poliy. Tax credits and subsidies inrease R&D investments and spillovers compared to laissez-faire but to levels below the first best. R&D support policies don't improve welfare.
    JEL: O38 O31 L53 C31
    Date: 2017–10–16
  10. By: Gruber, Harald
    Abstract: This paper identifies the main factors for Europe’s delays in embracing the well proven growth enhancing effects of digital technologies. It argues that market failures, including externalities from knowledge spillovers, cybersecurity and first mover advantages justify public support. The whole value added chain of digital production is entailed, starting with infrastructure investment and R&D relevant for digital sectors, along with qualified skills of researchers and of workers, coming to skill sets provided by the education sector. Emphasis is put on the efficient leverage effects that can be achieved by combining public and private sector funds through financial instruments.
    Keywords: Industrial policy,ICT,R&D,Innovation,Investment,Education
    JEL: L52 O16 O38
    Date: 2017
  11. By: Schwab, Thomas; Todtenhaupt, Maximilian
    Abstract: We analyze cross-border externalities of patent box regimes. Tax cuts in one location of a MNE reduce the user cost of capital for the whole group if they have no nexus requirement. This spillover effect of foreign tax cuts raises domestic R&D activity. The implementation of a patent box in an affiliate country of a MNE, increases domestic R&D by about 1% per implied tax rate differential. Furthermore, patent boxes generate negative spillovers on average patent quality.
    JEL: H23
    Date: 2017
  12. By: Eric W Bond (Vanderbilt University); Kamal Saggi (Vanderbilt University)
    Abstract: We extend the model of Bond and Saggi (2014) in which a patent-holder chooses between direct entry and the voluntary licensing of its technology to a local firm in a developing country. We compare two scenarios: one where the country imposes a price control on the patent-holder and another where it issues a compulsory license to the local firm if the patent-holder decides to neither enter nor license its technology voluntarily. A price control makes entry less attractive to the patent-holder relative to voluntary licensing whereas the threat of compulsory licensing has the opposite effect. While a price control always makes the patent-holder worse off, the option of compulsory licensing can sometimes be to its advantage.
    Keywords: Patented Goods, Compulsory Licensing, Voluntary Licensing, Price Controls, Quality, Welfare
    JEL: F1
    Date: 2017–10–21
  13. By: Balazs Egert
    Abstract: Empirical research on the drivers of multi-factor productivity (MFP) is abundant at the firm- and industry level but surprisingly little research has been conducted on the determinants of MFP at the macroeconomic level. In this paper, we seek to understand the drivers of country-level MFP with a special emphasis on product and labour market policies and the quality of institutions. For a panel of OECD countries, we find that anticompetitive product market regulations are associated with lower MFP levels and that higher innovation intensity and greater openness go in tandem with higher MFP. We also find that the impact of product market regulations on MFP may depend on the level of labour market regulations. Better institutions, a more business friendly environment and lower barriers to trade and investment amplify the positive impact of R&D spending on MFP. Finally, we also show that cross-country MFP variations can be explained to a considerable extent by cross-country variation in labour market regulations, barriers to trade and investment and institutions (including corruption).
    Keywords: multi-factor productivity, trade openness, innovation, product market regulation, labour market regulation, institutions, policy interactions, OECD
    JEL: C23 C51 J20 L43 L51 O40
    Date: 2017
  14. By: Matsuyama, Kiminori
    Abstract: Endogenous demand composition across sectors due to nonhomothetic demand (Engel's Law) affects i) sectoral compositions in employment and in value-added, ii) variations in innovation rates and in productivity change across sectors, iii) intersectoral patterns of trade across countries, and iv) migration of industries from rich to poor countries. This paper offers a unifying perspective on how economic growth and globalization affects the patterns of structural change, innovation and trade across countries and across sectors in the presence of Engel's Law. To this end, we develop a two-country model of directed technological change with a continuum of sectors under nonhomothetic preferences, which is rich enough to capture all these effects as well as their interactions. Among the main messages is that globalization amplifies, instead of reducing, the power of endogenous domestic demand composition differences as a driver of structural change.
    Keywords: Factor price convergence; Implicit (direct and indirect) additivity; Isoelastically nonhomothetic CES; Leapfrogging; log-supermodularity; Monotone comparative statics; The Linder effect; The Schmookler effect; Trade patterns reversal; Vernon's product cycle hypothesis
    JEL: O11 O19 O33
    Date: 2017–10
  15. By: Iaria, Alessandro; Schwarz, Carlo; Waldinger, Fabian
    Abstract: We show that WWI and the subsequent boycott against Central scientists severely interrupted international scientific cooperation. After 1914, citations to recent research from abroad decreased and paper titles became less similar (evaluated by Latent Semantic Analysis), suggesting a reduction in international knowledge flows. Reduced international scientific cooperation led to a decline in the production of basic science and its application in new technology. Specifically, we compare productivity changes for scientists who relied on frontier research from abroad, to changes for scientists who relied on frontier research from home. After 1914, scientists who relied on frontier research from abroad published fewer papers in top scientific journals, produced less Nobel Prize-nominated research, introduced fewer novel scientific words, and introduced fewer novel words that appeared in the text of subsequent patent grants. The productivity of scientists who relied on top 1% research declined twice as much as the productivity of scientists who relied on top 3% research. Furthermore, highly prolific scientists experienced the starkest absolute productivity declines. This suggests that access to the very best research is key for scientific and technological progress.
    JEL: I23 J44 N3 N30 N4 N40 O3 O31 O5
    Date: 2017–10
  16. By: Gaetano Basso; Giovanni Peri; Ahmed Rahman
    Abstract: The changes in technology that took place in the US during the last three decades, mainly due to the introduction of computerization and automation, have been characterized as “routine-substituting.” They have reduced the demand for routine tasks, but have increased the demand for analytical tasks. Indirectly they have also increased the demand for manual tasks and service oriented occupations. Little is known about how these changes have impacted immigration, or task specialization between immigrants and natives. In this paper we show that such technological progress has attracted skilled and unskilled immigrants, with the latter group increasingly specialized in manual-service occupations. We also show that the immigration response has helped to reduce the polarization of employment for natives. We explain these facts with a model of technological progress and endogenous immigration. Simulations show that immigration in the presence of technological change attenuates the drop in routine employment and the increase in service employment for natives.
    JEL: J15 J24 O15 O33
    Date: 2017–10
  17. By: Kim, Suwon; Nam, Chan-gi; Lee, Sangwoo; Kim, Seongcheol
    Abstract: 5G needs to be viewed as a request for network upgrade driven by demands for innovative services, not only by demands for enhanced mobile networks per se. The R&D plan of the Korean government has been discordant with the vision of 5G, maintaining the tradition of sector- or issue-based R&D project support. This study proposed a strategic decision model for the 5G mobile industry, focusing on public R&D resource allocation, in response to the call for a revision of the ICT policy framework in Korea. The proposed model employed a criteriabased, quantitative, and comprehensive approach, using the AHP method, and an expert survey was conducted. The results showed that service platform is the critical layer that deserves priority in strategic public R&D resource input. Also, the ICT experts in Korea formed a consensus that upgrading physical networks per se is not the main driver of the next generation mobile industry, which verified the validity of the model.
    Keywords: 5G mobile,R&D,resource allocation,analytic hierarchy process,policy revision
    Date: 2017
  18. By: Ahmed S. Rahman (United States Naval Academy)
    Abstract: We develop a growth model with over-lapping generations that endogenizes skill acquisition and two forms of technical change, one that automates existing production processes, and one that invents new production processes. The former kind of technological change obso- letes certain middle-range skills; the latter has the potential to increase such skills. This work suggests that 1) early industrialization generates greater automation; 2) employment polarization caused by automation also fosters education polarization, potentially affecting future growth; 3) the economy naturally transitions from automation to innovation; and 4) such a transition today will lessen wage inequality but may not bring back mid-skilled jobs as it had historically.
    Date: 2017–10
  19. By: Oomens, Ivette M. F.; Sadowski, Bert M.
    Abstract: Within the growing literature on smart cities, much research has focused on issues related to the formation stage and the roles of different actors in these initiatives. The large number of failures of smart city initiatives, however, points at an existing gap between the understanding of the formation of these initiatives and the practice of their management. In this context, the purpose of this paper is to address this research gap by discussing determinants of smart city initiatives and the experiences in smart city management. By taking an innovation ecosystem perspective, the paper focuses on the management experiences of four smart city initiatives (WoonConnect, Mobilty Portal, Vehicle2Grid, Straatkubus) in the Netherlands. The empirical research has been undertaken during the period May and June 2016. In linking to the discussion on smart cities, the research shows that most studies on smart cities have focused on the formation stage of the initiative and the roles of partners in these initiatives. In order to better understand problems surrounding smart city projects, it is necessary to examine the fundamental business model underlying these initiatives (i.e. processes of value creation and appropriation) and the role of business partners in these ventures. By using an innovation ecosystem perspective, the paper is able to identify shortcomings of existing approaches in smart city research related to the (static) form of analysis and the firm-level type of analysis. For smart city managers, key issues related to smart city projects are rooted in the second stage of managing these ventures (i.e. the coordination stage) and the role of private firms in this stage.
    Date: 2017
  20. By: Alsufyev, Artem I.; Zavyalova, Elena K.
    Abstract: The purpose of the study is to identify the specific characteristics of HRM practices aimed at ambidextrous learning in innovation-active companies of the BRIC countries. The study for the first time compares the ambidextrous learning practices and their trends for convergence in BRICs. The methodology involves descriptive analysis of HRM practices in 200 innovation active companies of BRICs. Results of the study indicate that there are considerable convergence trends within innovation-active companies of BRIC. All countries in general are oriented on knowledge exploitation with their use of specific HRM practices. There are however significant differences within BRIC countries with regard to knowledge exploration.(pp. 7-9)
    Keywords: ambidextrous learning, personnel training, personnel development, comparative analysis, BRIC,
    Date: 2016
  21. By: William F. Maloney; Felipe Valencia Caicedo
    Abstract: This paper offers the first systematic historical evidence on the role of a central actor in modern growth theory - the engineer. It collects cross-country and state level data on the labor share of engineers for the Americas, and county level data on engineering and patenting for the US during the Second Industrial Revolution. These are robustly correlated with income today after controlling for literacy, other types of higher order human capital (e.g. lawyers, physicians), demand side factors, and after instrumenting engineering using the Land Grant Colleges program. A one standard deviation increase in engineers in 1880 accounts for a 16% increase in US county income today, and patenting capacity contributes another 10%. We further show engineering density supported technological adoption and structural transformation across intermediate time periods. Our estimates help explain why countries with similar levels of income in 1900, but tenfold differences in engineers diverged in their growth trajectories over the next century. The results are supported by historical case studies from the US and Latin America.
    Keywords: innovative capacity, human capital, engineers, technology diffusion, patents, growth, structural transformation, development, history
    JEL: O11 O30 N10 I23
    Date: 2017
  22. By: Talia Bar (University of Connecticut); Brendan Costello (Yale Law School)
    Abstract: Patent reexamination or patent review systems can lower the cost of challenging patent validity and help improve patent quality. We empirically investigate post-grant patent validity challenges at the U.S. Patent and Trademark Office, and how the 2011 America Invents Act affected them. We compare the inter partes reexamination procedure with the inter partes review procedure that replaced it after the reform. To identify the effect of the policy changes, we exploit the fact that patents filed before the act passed, but granted after the new inter partes review system took effect, are not eligible for reexamination in the old system. We find that more patent challenges end with a patentee win after the policy change. Still, at least one patent claim is canceled in more than 60% of the cases. Litigated patents issued to small entities more often had at least one claim canceled compared to other patents.
    Keywords: Patent; Inter Partes Reexamination; Inter Partes Review; The America Invents Act; Post Grant Challenge, Patent Validity
    JEL: O34 K10 K23
    Date: 2017–10
  23. By: Impullitti, Giammario; Licandro, Omar; Rendahl, Pontus
    Abstract: We study the gains from trade in an economy with oligopolistic competition, firm heterogeneity, and innovation. Oligopolistic competition together with free entry make markups responsive to firm productivity and trade costs. Lowering trade costs reduces markups on domestic sales but increases markups on export sales, as firms do not pass the entire reduction in trade costs onto foreign consumers. Nevertheless, the downward pressure dominates and the average markup declines, deterring firms from entering the market and leading to higher market concentration. Neither the increased concentration nor the incomplete pass-through of trade costs to export markups are strong enough to compensate for the increase in competition on domestic sales. Thus the overall effect of trade on markups is pro competitive and a key source of the associated welfare gains. In addition to markups, selection and innovation provide additional channels through which the trade-induced effect on competition impacts welfare. In a quantitative exercise, we decompose the total gains from trade into these three contributing channels; we find that innovation plays a small but non-negligible role, while the main component is equally split between the pro-competitive and the selection channel.
    Keywords: Endogenous Market Structure; Endogenous Markups; Gains from trade; Heterogeneous Firms; Innovation; oligopoly
    JEL: F12 F13 O31 O41
    Date: 2017–10
  24. By: Eswaran, Mukesh; Gallini, Nancy
    Abstract: Countries world wide face an imminent global health crisis. As resistant bacteria render the current stock of antibiotics ineffective and the pipeline of back-up drugs runs dry, pharmaceutical companies are abandoning their research in antibiotics. In this paper we ask: Why are pharmaceutical companies closing antibiotic research labs when the stakes are so high? Implementing a simple dynamic framework, we show that the environment for new antibiotics is relatively hostile, compared to other medicines, due to market failures that result in excessive use and acceleration of natural selection. The analysis reveals, however, that increased competition between drugs can actually slow down the rate of resistance without, in some cases, diluting research incentives. This result, which is bolstered by scientific evidence, arises from a fundamental interplay between economic and biological externalities. We propose a patent-antitrust regime for aligning drug research and usage with those of the social planner, which implies an alternative justification of the patent system.
    Keywords: antibiotic resistence, market competition, R&D incentives, patents
    JEL: I11 I12 I13 O31 O38
    Date: 2017–10–19
  25. By: Wohlfarth, Michael
    Abstract: Data portability allows users to transfer data from one online service to another service. As data gets increasingly valuable for online services and users alike, and as data portability will be politically enforced within the European Union by the General Data Protection Regulation (GDPR), we develop a game-theoretic model that incorporates the competitive effects arising from a right to data portability. We show, among others, that although data portability is designed to protect users, a right to data portability may hurt customers because new services increase the amount of collected data compared to the case without a right to data portability. However, profits for new services and total surplus unambiguously increase with a right to data portability, improving innovation and service variety. Consequently, policy makers should be aware that the decision to enforce data portability is far more complex than currently realized and should consider the case-specific effects.
    Keywords: Data portability,Regulation of online services,Market entry and innovation,Consumer protection,Switching costs,GDPR
    Date: 2017
  26. By: Pedrós, Xavier; Bahia, Kalvin; Castells, Pau; Abate, Serafino
    Abstract: Assessing the impact of a merger – or predicting the impact of a merger – follows competition law and relies on economic practice. Competition authorities strive for consistency of approach, with assessments generally based on an analysis of the impact on prices, quality and innovation for consumers. Experience has shown, however, that the main measurement relied on by competition authorities is pricing; could the proposed merger increase prices in the short-term? How harmful would this be for the consumer? In the case of mergers in general, and mobile mergers in particular, we argue that whilst price is an important factor, there has been an over reliance on this single aspect of consumers outcomes and less consideration of quality and innovation.
    Date: 2017

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