nep-ino New Economics Papers
on Innovation
Issue of 2017‒11‒26
nineteen papers chosen by
Uwe Cantner
University of Jena

  1. Innovation in Russia: the territorial dimension By Crescenzi, Riccardo; Jaax, Alexander
  2. Political Uncertainty and Innovation in China By Feng, Xunan; Johansson, Anders C.
  3. Mode of Entry into Hybrid Entrepreneurship: New Venture Start-Up versus Business Takeover By Xi, Guoqian; Block, Jörn; Lasch, Frank; Robert, Frank; Thurik, Roy
  4. Does Economic Insecurity Affect Employee Innovation? By Shai Bernstein; Timothy McQuade; Richard R. Townsend
  5. A comparison of German and Indian innovation pathways in the auto component industry By Kalogerakis, Katharina; Fischer, Luise; Tiwari, Rajnish
  6. The Network Structure between Organizations and the Operational Efficiency of Drug Development By Fumihiko Isada; Yuriko Isada
  7. Positioned for an ideas boom? Productivity and innovation in Australia By Steven Bond-Smith; Rebecca Cassells; Alan S Duncan; Daniel Kiely; Yashar Tarverdi
  8. Diffusing New Technology without Dissipating Rents: Some Historical Case Studies of Knwoledge Sharing By James Bessen; Alessandro Nuvolari
  9. Creative Destruction with Fixed Factor-Augmenting Technical Change: Lego World By Gary Jefferson
  10. Long-Run Market Configurations in a Dynamic Quality-Ladder Model with Externalities By Mario Samano; Marc Santugini
  11. Verifying High Quality: Entry for Sale By Norbäck, Pehr-Johan; Persson, Lars; Svensson, Roger
  12. Could Vertical Integration Increase Innovation? By Chenyu Yang
  13. Interest rates, R&D investment and the distortionary effects of R&D incentives By Uluc Aysun; Zeynep Kabukcuoglu
  14. The Aggregate Implications of Innovative Investment in the Garcia-Macia, Hsieh, and Klenow Model By Ariel Burstein
  15. The sources of growth in a technologically progressive economy: the United States, 1899-1941 By Bakker, Gerben; Crafts, Nicholas; Woltjer, Pieter
  16. Liminal entrepreneuring: the creative practices of nascent necessity entrepreneurs By Garcia-Lorenzo, Lucia; Donnelly, Paul; Sell-Trujillo, Lucia; Imas, J. Miguel
  17. Instruments and Methods of Capturing Knowledge from Customers: Classification and Choice By Plyasunov, Nikita; Kudryavtsev, Dmitry G.
  18. Transitioning beyond coal: Lessons from the structural renewal of Europe’s old industrial regions By Stephanie Campbell; Lars Coenen
  19. The effects of skill-biased technical change on productivity flattening and hours worked By Hutter, Christian; Weber, Enzo

  1. By: Crescenzi, Riccardo; Jaax, Alexander
    Abstract: The debate on Russia’s innovation performance has paid little attention to the role of geography. This paper addresses this gap by integrating an evolutionary dimension in an ‘augmented’ regional knowledge production function framework to examine the territorial dynamics of knowledge creation in Russia. The empirical analysis identifies a strong link between regional R&D expenditure and patenting performance. However, R&D appears inadequately connected to regional human capital. Conversely, Multinational Enterprises (MNEs) play a fundamental role as ‘global knowledge pipelines’. The incorporation of historical variables reveals that the Russian case is a striking example of long-term pathdependency in regional patterns of knowledge generation. Endowment with Soviet-founded science cities remains a strong predictor of current patenting. However, current innovation drivers and policies also concur to enhance (or hinder) innovation performance in all regions. The alignment of regional innovation efforts, exposure to localised knowledge flows and injections of ‘foreign’ knowledge channelled by MNEs make path-renewal and pathcreation possible, opening new windows of locational opportunity.
    Keywords: innovation; R&D; evolutionary economic geography; regions; BRICS; Russia
    JEL: O32 O33 R11 R12
    Date: 2017–08–03
  2. By: Feng, Xunan (Southwestern University of Finance and Economics); Johansson, Anders C. (Stockholm China Economic Research Institute)
    Abstract: We hypothesize that political uncertainty has an adverse effect on investments in activities related to innovation. Combining two hand-collected data sets on changes in local government officials and research and development (R&D) activity at the firm level in China, we examine how political turnover influences investments in R&D. We find that a change in local political leaders is associated with a significant decrease in R&D activity. This result is robust to various robustness tests. The decrease is larger when the new political leader is promoted from outside the city in question. Moreover, the decrease is significantly larger for privately controlled firms, firms operating in regions characterized by weak economic institutions, and firms within R&D-intensive industries. Our findings suggest that political uncertainty constitutes an important channel through which the local political process influences activities related to innovation.
    Keywords: Innovation; R&D expenditures; Political turnover; Political uncertainty; Local officials; China
    JEL: G18 G32 G38 O30 O31 O32
    Date: 2017–11–15
  3. By: Xi, Guoqian (University of Trier); Block, Jörn (University of Trier); Lasch, Frank (Montpellier Business School); Robert, Frank (Montpellier Business School); Thurik, Roy (Erasmus University Rotterdam)
    Abstract: Many entrepreneurs start their ventures while retaining jobs in wage employment; this phenomenon is called hybrid entrepreneurship. Little is known about the entry modes (new venture start-up vs. business takeover) of hybrid entrepreneurs. Our study aims to close this gap by investigating the path to hybrid entrepreneurship. Using a large sample of French hybrid entrepreneurs, we show that educational attainment and management experience are associated with new venture start-up, whereas being female, having worker experience, and having received social benefits are linked to business takeover. With these results, our study contributes to research on hybrid entrepreneurship and entrepreneurship entry modes. Moreover, it informs policy makers about the nature of hybrid entrepreneurship and contributes to the design of effective policies to promote business takeover, which is of high interest, given the growing number of businesses seeking outside successors.
    Keywords: hybrid entrepreneurship, entrepreneurship entry mode, business takeover, new venture
    JEL: L26
    Date: 2017–10
  4. By: Shai Bernstein; Timothy McQuade; Richard R. Townsend
    Abstract: Do household wealth shocks affect employee productivity? We examine this question through the lens of technological innovation, by comparing employees that worked at the same firm and lived in the same metropolitan area, but experienced different housing wealth declines during the 2008 crisis. Following a housing wealth shock, employees are less likely to successfully pursue innovative projects, particularly ones that are high impact, complex, or exploratory in nature. Consistent with employee concerns about financial distress, the effects are more pronounced among those who had little equity in their house before the crisis and among those with fewer outside labor market opportunities. Moreover, run-ups in housing prices before the crisis did not affect employee innovation. The results highlight a “bottom-up” view of innovation, in which individual employees influence the quantity and nature of innovation produced within firms.
    JEL: G01 O3 O31 O32
    Date: 2017–11
  5. By: Kalogerakis, Katharina; Fischer, Luise; Tiwari, Rajnish
    Abstract: This paper is a part of a series of analyses conducted within a BMBF-funded research project to investigate potentials of frugal innovations for Germany. One of the objectives of this project has been to identify innovation pathways that foster frugal innovations. Since auto component suppliers based in India are known to contribute significantly to the development of 'affordable and good quality' vehicles, it was considered useful to conduct comparative studies of the prevalent innovation pathways in Germany with those in India. This paper is based on our investigations of innovation pathways in Indian and German auto component industries and aims to provide a coherent comparative analysis. After discussing similarities and differences in Indian and German innovation pathways, a reference model for frugal innovation pathways is outlined. The results provide insights on how certain elements of frugal innovation pathways could be implemented in Germany in order to create solutions that are affordable, fulfil the requisite quality standards and avoid unnecessary usage (wastage) of resources. Altogether, exploratory connections are identified which provide impetus for further research and can be thought-provoking for relevant business, social and political stakeholders.
    Keywords: Frugal Innovation,Innovation Pathways,Path Dependency,Automotive,Auto-Component Industry
    Date: 2017
  6. By: Fumihiko Isada (The Faculty of Informatics, Kansai University); Yuriko Isada (School of Policy Studies, Kwansei Gakuin University)
    Abstract: The sharp rise in health-care costs is compressing the public finance in various countries today, and an increase in the efficiency of the research and development of pharmaceutical products is required. In order to increase the efficiency of drug development, open innovation through external cooperation between drug manufacturing companies is attracting attention. However, the research findings on previous researches are not necessarily the same regarding the size of the effect of external cooperation between drug manufacturing companies. It is assumed that differences in the kinds of pharmaceutical products and in the mode of inter-organisational relations are two of the causes of the variation in the research findings. For example, with regard to the mode of inter-organisational relation, the operational efficiency of a horizontal international specialization style is high in the IT industry, and the operational efficiency of a vertical integration style is high in the motor industry. Thus, in this research, the pharmaceutical products were classified appropriately and the inter-organisational relation fit for each was clarified empirically. As a method of research, from the intellectual-property database, the joint-application patents for the past ten years were extracted, and the inter-organisational relation was analysed by using the method of social network analysis. As a result, when the pharmaceutical products were classified with the conventional polymer formulation, the bio-drug development and the dosage-form development, the effect of external cooperation changed with differences in product characteristics. In addition, it became clear that the modes of external cooperation fit for each differ. (This work was supported by JSPS KAKENHI Grant Number 16K03916.)
    Keywords: inter-organisational relation, social network analysis, joint-application patent, pharmaceutical product
    JEL: O32
    Date: 2017–10
  7. By: Steven Bond-Smith (Bankwest Curtin Economics Centre (BCEC), Curtin University); Rebecca Cassells (Bankwest Curtin Economics Centre (BCEC), Curtin University); Alan S Duncan (Bankwest Curtin Economic Centre, Curtin University); Daniel Kiely (Bankwest Curtin Economics Centre, Curtin Business School); Yashar Tarverdi (Bankwest Curtin Economic Centre, Curtin University)
    Abstract: Positioned for an Ideas Boom is the fourth report in the Bankwest Curtin Economics Centre Focus on the States series. The report examines an issue of central importance to maintaining economic growth, improving competitiveness and creating jobs – productivity and innovation. The much anticipated National Innovation and Science Agenda launched by Prime Minister Malcolm Turnbull in December 2015 has committed funding of $1.1 billion over four years to twenty eight action areas, which include de-risking start-ups; investing in STEM; attracting and keeping overseas entrepreneurs; and improving university-industry connectedness, amongst others. These measures are welcome not just because of the commitment of financial support to innovation programmes, but also because of the important signal that promoting a culture of innovation is essential to Australia’s economic growth and future prosperity. So is Australia positioned to capitalise on an ideas boom? It is more important now than ever for Australia to both learn from, and drive, prosperity through international collaborations. Australia has the people, the resources, the environment, the knowledge and the creativity to thrive in the future, and to contribute to national and global economic growth. But significant barriers remain, specifically in relation to access to research and development funding and venture capital investment, especially to smaller enterprises and at early stages of business expansion. The National Innovation and Science Agenda provides a credible and coherent prospectus of policies, and significant government funding support, to drive productivity and innovation growth in Australia. The opportunity, and the responsibility, falls on us all government, families, businesses, universities and research institutions – to bring the ideas boom to reality.
    Keywords: Western Australia, productivity and innovation, economic growth, costs of business, employment, research and development
    Date: 2016–03
  8. By: James Bessen; Alessandro Nuvolari
    Abstract: The diffusion of innovations is supposed to dissipate inventors' rents. Yet in many documented cases, inventors freely shared knowledge with their competitors. Using a model and case studies, this paper explores why sharing did not eliminate inventors' incentives. Each new technology coexisted with an alternative for one or more decades. This allowed inventors to earn rents while sharing knowledge, attaining major productivity gains. The technology diffusion literature suggests that such circumstances are common during the early stages of a new technology.
    Keywords: technological change, technology diffusion, knowledge sharing, collective invention, patents
    Date: 2017–11–15
  9. By: Gary Jefferson (Brandeis University)
    Abstract: By resolving the knife-edge condition in Solow’s neoclassical growth model as interpreted by Uzawa, in which a production technology with a non-unitary substitution elasticity is unable to accommodate capital-augmenting technical change, this paper offers a transformative approach to the analysis of economic growth and technical change. With nature fixing the exogenous supplies of both capital and labor, consistent with the Law of the Conservation of Matter, investment in both physical and human capital becomes constrained to equal quantities of creation and destruction; that is, Hicks invention-neutral technical change creates new vintages that replace obsolete vintages of physical matter. Contrasted with the Solow model in which the steady-state rate of growth is unaffected by the savings rate, in this model the exogenous savings rate drives every dimension of the Schumpeterian creative-destruction process – rates of innovation, depreciation, and investment. Rising living standards result entirely from technology deepening; capital deepening becomes a misnomer. The model is a literal implementation of Shumpeterian growth in which creation and destruction are precisely balanced in the steady state, driven by the warranted rates of savings, technology development, and investment. The steady state is that in which savings, technical change, depreciation, and investment are aligned, so that creation and destruction are precisely balanced consistent with nature’s fixed endowment.
    Date: 2017–09
  10. By: Mario Samano; Marc Santugini
    Abstract: We analyze the type of market structures that arise in the long-run when quality externalities and asymmetric R&D capabilities exist in the context of a quality-ladder dynamic model. An example of such externalities is a patent release by the leading fi rm: an improvement of quality of this firm's good a ects the quality of the other fi rms' products. This externality can be thought of as an increase in compatibility in a network. We show that it is possible for this model to generate, in the long-run, multi-modal probability distributions over di fferent market structures from the same parameter values. In some cases, the lagging rm may even become the dominant fi rm depending on the degree of the externality. This may have implications for the estimation and simulation of this class of models.
    Keywords: Differentiated-good markets,Quality-ladder model,Externalities,Industry dynamics,Market structures,
    JEL: C61 C73 L13
    Date: 2017–11–15
  11. By: Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Persson, Lars (Research Institute of Industrial Economics (IFN)); Svensson, Roger (Research Institute of Industrial Economics (IFN))
    Abstract: When and how do entrepreneurs sell their inventions? To address this issue, we develop an endogenous entry-sale asymmetric information oligopoly model. We show that lowquality inventions are sold directly or used for own entry. Inventors who sell post-entry use entry to credibly reveal information on quality. Incumbents are then willing to pay high prices for high-quality inventions to preempt rivals from obtaining them. Using Swedish data on patents granted to small firms and individuals, we find evidence that high-quality inventions are sold under preemptive bidding competition, post entry.
    Keywords: Acquisitions; Innovation; Start-ups; Ownership; Patents; Verification; Quality
    JEL: G24 L10 L20 M13 O30
    Date: 2017–10–30
  12. By: Chenyu Yang (University of Rochester)
    Abstract: This paper studies the effects of vertical integration on innovation in the chipset and smartphone industries. I formulate and estimate a dynamic structural model of the upstream chipset maker Qualcomm and downstream smartphone handset makers. The two sides make dynamic investment decisions and negotiate chipset prices via Nash bargaining. Using the estimates, I simulate market outcomes should Qualcomm merge with a downstream handset maker. I find that the vertical merger would increase innovation rates and social welfare, driven primarily by the investment coordination of the two merged firms.
    Date: 2017
  13. By: Uluc Aysun (University of Central Florida, Orlando, FL); Zeynep Kabukcuoglu (Villanova School of Business)
    Abstract: This paper conducts the first analysis of how interest rates are related to firms' allocation of investment between R&D and non-R&D activities and how R&D incentives alter this relationship. It theoretically predicts that if firms receive incentives mostly in the form of grants and subsidies that reduce their dependence on external nance, their share of R&D spending increases (decreases) during a credit tightening (easing). Conversely, if tax credits are the primary incentive, firms' decrease (increase) their share of R&D spending during a credit tightening (easing). The paper demonstrates empirical support for these predictions by using firm-level financial and sector-level R&D incentives data and a unique methodology that focuses on the within firm allocation of investment.
    Keywords: R&D, finance, grants, tax credits, COMPUSTAT
    JEL: D22 G31 G32 O31 O38
    Date: 2017–11
  14. By: Ariel Burstein (UCLA)
    Abstract: We extend the model firm dynamics of Garcia-Macia, Hsieh, and Klenow (2016) to include a description of the costs of innovative investments as in the model of Klette and Kortum (2004). In this model, aggregate productivity (TFP) grows as a result of innovative investment by incumbent and entering firms in improving continuing products and acquiring new products to the firm. This model serves as a useful benchmark because it nests both Quality-Ladders based Neo-Shumpeterian models and Expanding Varieties models commonly used in the literature and, at the same time, it provides a rich model of firm dynamics as described in GHK. We show how data on firm dynamics and firm value can be used to infer the elasticities of aggregate productivity growth with respect to changes in incumbent firms' investments in improving their incumbent products, incumbent firms' investments in acquiring products new to the firm, and entering firms' investments in acquiring new products. As discussed in Atkeson and Burstein (2015), these elasticities are a crucial input in evaluating the extent to which it is possible to alter the medium term growth path of the macroeconomy through policies aimed at stimulating innovative investments by firms. We use these methods to provide quantitative estimates of these elasticities of aggregate TFP growth with respect to changes in each of the three categories of innovative investment in the model as well as of the rate of social depreciation of innovation expenditures.
    Date: 2017
  15. By: Bakker, Gerben; Crafts, Nicholas; Woltjer, Pieter
    Abstract: We develop new aggregate and sectoral Total Factor Productivity (TFP) estimates for the United States between 1899 and 1941 through better coverage of sectors and better-measured labor quality, and find TFPgrowth was lower than previously thought, broadly based across sectors, and strongly variant intertemporally. We then test and reject three prominent claims. First, the 1930s did not have the highest TFP-growth of the twentieth century. Second, TFP-growth was not predominantly caused by four ‘great inventions’. Third, TFPgrowth was not driven indirectly by spillovers from great inventions such as electricity. Instead, the creativedestruction-friendly American innovation system was the main productivity driver
    Keywords: productivity growth; total factor productivity; great inventions; spillovers; United States — history
    JEL: O51 N0
    Date: 2017–10
  16. By: Garcia-Lorenzo, Lucia; Donnelly, Paul; Sell-Trujillo, Lucia; Imas, J. Miguel
    Abstract: This paper contributes to creative entrepreneurship studies through exploring ‘liminal entrepreneuring’, i.e., the organization-creation entrepreneurial practices and narratives of individuals living in precarious conditions. Drawing on a processual approach to entrepreneurship and Turner’s liminality concept, we study the transition from un(der)employment to entrepreneurship of 50 nascent necessity entrepreneurs (NNEs) in Spain, the United Kingdom, and Ireland. The paper asks how these agents develop creative entrepreneuring practices in their efforts to overcome their condition of ‘necessity’. The analysis shows how, in their everyday liminal entrepreneuring, NNEs disassemble their identities and social positions, experiment with new relationships and alternative visions of themselves, and (re)connect with entrepreneuring ideas and practices in a new way, using imagination and organization-creation practices to reconstruct both self and context in the process. The results question and expand the notion of entrepreneuring in times of socioeconomic stress
    Keywords: creative entrepreneuring; economic crisis; liminality; narratives; nascent necessity entrepreneurs; organization-creation
    JEL: R14 J01 J50
    Date: 2017–10–24
  17. By: Plyasunov, Nikita; Kudryavtsev, Dmitry G.
    Abstract: Customers are the source of insights and ideas that companies use to develop new products and services, to improve existing ones, to develop distribution channels and to plan promotion. The paper analyzes usage of instruments and methods of capturing knowledge from customers, suggests the classification of these instruments and methods and identifies factors that influence their selection. The research methodology of the paper is comparative case study and the sample includes 6 companies: 3 from electrotechnical industry and 3 from software development industry.
    Keywords: customer knowledge, knowledge management, knowledge management tools, domainspecific knowledge, casestudy, new products,
    Date: 2016
  18. By: Stephanie Campbell (Melbourne Sustainable Society Institute, University of Melbourne); Lars Coenen (Melbourne Sustainable Society Institute, University of Melbourne)
    Abstract: It is often assumed that a transition to a low-carbon future will have highly disruptive and potentially devastating effects on coal regions and their communities. However, evidence from the experience of industrial decline and attempted renewal in Europe’s old industrial regions demonstrates that successful regional transition is—while not inevitable—indeed possible. Fundamental transformation of existing industrial, institutional, social and technological structures is not an easy nor straightforward process but fraught with the challenges of creative destruction: while new industrial activities and structures emerge, existing ones are broken down. Drawing on the literature of regional resilience and innovation, the paper offers lessons, insights and cautionary warnings from the experience of renewal initiatives in Europe’s old industrial regions and illustrates the ways in which some of the seeds for a ‘just’ regional transitions to zero-carbon economies may, in fact, lie in a careful understanding of the potential to build on the specific historical context of the regions industrial development and capabilities.
    Keywords: coal transition, old industrial regions, regional development, regional innovation
    JEL: O38 R11
    Date: 2017–11
  19. By: Hutter, Christian (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Weber, Enzo (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "In a structural macroeconometric analysis based on comprehensive micro data, we examine the role of skill-biased technical change for the flattening of productivity growth and effects on hours worked. The results show that more than 60 percent of the slowdown in productivity growth in Germany since the early 2000s can be explained by the SBTC development. Furthermore, skill-biased technology shocks reduce hours worked, while skill-neutral technology shocks have a positive effect in the long run." (Author's abstract, IAB-Doku) ((en))
    JEL: C32 E24 J24
    Date: 2017–11–16

This nep-ino issue is ©2017 by Uwe Cantner. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.