nep-ino New Economics Papers
on Innovation
Issue of 2017‒12‒11
nineteen papers chosen by
Uwe Cantner
University of Jena

  1. The Changing Geography of Innovation and the Role of Multinational Enterprises By Davide Castellani
  2. Who Becomes an Inventor in America? The Importance of Exposure to Innovation By Alexander M. Bell; Raj Chetty; Xavier Jaravel; Neviana Petkova; John Van Reenen
  3. Regional Innovator Networks - A Review and an Application with R By Holger Graf
  4. Exploring the Relationship Between Human Capital and Innovation at the Firm Level: A study on a Sample of European Firms By D'AMORE, Rosamaria; IORIO, Roberto; LUBRANO LAVADERA, Giuseppe
  5. Modelling the joint impact of R&D and ICT on productivity: A frontier analysis approach By Fabio Pieri; Michela Vecchi; Francesco Venturini
  6. Incumbents' responses to innovative entrants: A multi-country dynamic analysis By Diekhof, Josefine; Cantner, Uwe
  7. BIG data - BIG gains? Empirical evidence on the link between big data analytics and innovation By Niebel, Thomas; Rasel, Fabienne; Viete, Steffen
  8. Electricity (De)Regulation and Innovation. By Marianna Marino; Pierpaolo Parrotta; Giacomo Vallettaz
  9. The lost race against the machine: Automation, education, and inequality in an R&D-based growth model By Prettner, Klaus; Strulik, Holger
  10. Boosting productivity in Switzerland By Patrice Ollivaud
  11. Technological Spillovers, Product Market Rivalry and R&D Investment By Thomas Grebel; Lionel Nesta
  12. Explaining firm sensitivity to R&D subsidies within a dose-response model: The role of financial constraints, real cost of investment, and strategic value of R&D By Giovanni Cerulli; Bianca Poti'
  13. Cross-faculty proximity and academic entrepreneurship: The role of business schools By Maximilian Goethner; Michael Wyrwich
  14. Location of R&D abroad. An analysis on Global Cities By Davide Castellani; Katiuscia Lavoratori
  15. Unleashing Innovation and Entrepreneurship in Europe: People, Places and Policies By Leceta, José Manuel; Renda, Andrea; Könnölä, Totti; Simonelli, Felice
  16. The real exchange rate, innovation and productivity By Alfaro, Laura; Cunat, Alejandro; Fadinger, Harald; Yanping, Liu
  17. Global temperature, R&D expenditure, and growth By Donadelli, Michael; Grüning, Patrick; Jüppner, Marcus; Kizys, Renatas
  18. Reproduction Structure and Technological Progress in Economy: The Role of Talents as Capital By Tochimoto, Michio
  19. Missing Growth from Creative Destruction By Philippe Aghion; Antonin Bergeaud; Timo Boppart; Peter J. Klenow; Huiyu Li

  1. By: Davide Castellani (Henley Business School, University of Reading)
    Abstract: This paper provides descriptive evidence of the changing geography of inventive activity and the role of MNEs international R&D activities, with quite an extensive geographical coverage. Results highlight that ‘local buzz’ is crucial for the development of knowledge in local economies, and it leads to persistence in innovative activities. However, ‘global pipelines’ are also becoming a crucial element for the successful development of local knowledge. In particular, we first find that the number of regions involved in patenting has increased threefold since the 1980s. Second, despite this increase in the number of regions patenting, 70% of inventions come from the top 100 regions. Third, although the hierarchy of the top patenting regions is not immobile, the propensity to patent is quite dependent on previous innovation. Fourth, international collaboration in patenting has been steadily on the rise over the last three decades. Fifth, international R&D investments of MNEs are indeed also very concentrated in a few locations, which can also be quite distant from the MNEs headquarters’ location.
    Keywords: geography of innovation, MNEs, regions, local buzz, global pipelines
    JEL: F23 R11 O33
    Date: 2017–02
  2. By: Alexander M. Bell; Raj Chetty; Xavier Jaravel; Neviana Petkova; John Van Reenen
    Abstract: We characterize the factors that determine who becomes an inventor in America by using de-identified data on 1.2 million inventors from patent records linked to tax records. We establish three sets of results. First, children from high-income (top 1%) families are ten times as likely to become inventors as those from below-median income families. There are similarly large gaps by race and gender. Differences in innate ability, as measured by test scores in early childhood, explain relatively little of these gaps. Second, exposure to innovation during childhood has significant causal effects on children's propensities to become inventors. Growing up in a neighborhood or family with a high innovation rate in a specific technology class leads to a higher probability of patenting in exactly the same technology class. These exposure effects are gender-specific: girls are more likely to become inventors in a particular technology class if they grow up in an area with more female inventors in that technology class. Third, the financial returns to inventions are extremely skewed and highly correlated with their scientific impact, as measured by citations. Consistent with the importance of exposure effects and contrary to standard models of career selection, women and disadvantaged youth are as under-represented among high-impact inventors as they are among inventors as a whole. We develop a simple model of inventors' careers that matches these empirical results. The model implies that increasing exposure to innovation in childhood may have larger impacts on innovation than increasing the financial incentives to innovate, for instance by cutting tax rates. In particular, there are many “lost Einsteins” — individuals who would have had highly impactful inventions had they been exposed to innovation.
    JEL: E0 H0 J0 O3
    Date: 2017–11
  3. By: Holger Graf (FSU Jena)
    Abstract: The article serves as an introduction to the empirical analysis of innovation or knowledge networks based on patent data with a particular focus on regional networks. I provide a review of the literature of innovation networks and how it connects to systemic approaches within the field of innovation studies. The SNA methodology is introduced by performing a comparative regional network study based on the publicly available OECD patent databases.
    Keywords: Regional Innovation, Network Analysis, Patent Data
    JEL: L14 O31 R11
    Date: 2017–11–08
  4. By: D'AMORE, Rosamaria (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy); IORIO, Roberto (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy); LUBRANO LAVADERA, Giuseppe (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)
    Abstract: In this paper, we explore the relationship between the human capital “embodied” in the workforce and the innovative capabilities of the firm, adopting an international comparative perspective. In fact data come from a survey (EFIGE) run in seven European countries during the 2007-2009 period. They are analysed with several models of multivariate analysis also with the support of a semi-parametric model. Our results show a positive relationship between the ratio of graduated employees and the percentage of turnover from innovative products, being the share of personnel employed in R&D constant. This relationship is not linear: we find decreasing marginal returns for human capital and R&D. We then find a complementarity between human capital and R&D: the strength of the link between human capital and innovation is higher when the firm’s R&D increases. We also find some significant differences in the intensity of the human capital/innovation link across different countries.
    Keywords: Human capital; R&D; Innovation;
    JEL: D22 J24 O32
    Date: 2017–04–29
  5. By: Fabio Pieri; Michela Vecchi; Francesco Venturini
    Abstract: This study explores the channels through which technological investments affect productivity performance of industrialized economies. Using a Stochastic Frontier Model (SFM) we estimate the productivity effects of R&D and ICT for a large sample of OECD industries between 1973 and 2007, identifying four channels of transmission: input accumulation, technological change, technical efficiency and spillovers. Our results show that ICT has been particularly effective in reducing production inefficiency and in generating inter-industry spillovers, while R&D has raised the rate of technical change and favoured knowledge spillovers within sectors. We also quantify the contribution of technological investments to output and TFP growth documenting that R&D and ICT accounted for almost 95% of TFP growth in the OECD area.
    Keywords: Research & Development, Information and Communication Technology, Productivity, Stochastic frontier models
    JEL: O14 O32 O47
    Date: 2017
  6. By: Diekhof, Josefine; Cantner, Uwe
    Abstract: The influence of innovative entrants on incumbents is considered important for technological change. We analyze this influence for the global transition towards alternative technology vehicles (ATVs). Our results indicate that entrants' ATV-related knowledge accumulation stimulates average incumbent's ATV-related research. Regarding global entrants, incumbents with higher ATV patent stocks increased patenting stronger; supporting previous literature on competitive reactions to entry. Responding to domestic entrants, however, incumbents with low ATV patent stocks increased whereas incumbents with high stocks decreased patenting; suggesting that advanced incumbents outsource research or overtake entrants. Further, certain characteristics and not merely the quantity of entrants drive incumbents' responses.
    Keywords: Environmental Economics,Sustainable Development,Technological Innovation,Firm Behavior: Empirical Analysis,Entrepreneurship,Industry Dynamics,Automobile Industry,Electric Vehicle
    JEL: Q01 Q55 D22 L26 L62 O31
    Date: 2017
  7. By: Niebel, Thomas; Rasel, Fabienne; Viete, Steffen
    Abstract: This paper analyzes the relationship between firms' use of big data analytics and their innovative performance in terms of product innovations. Since big data technologies provide new data information practices, they create novel decision-making possibilities, which are widely believed to support firms' innovation process. Applying German firm-level data within a knowledge production function framework we find suggestive evidence that big data analytics is a relevant determinant for the likelihood of a firm becoming a product innovator as well as for the market success of product innovations. These results hold for the manufacturing as well as for the service sector but are contingent on firms' investment in IT-specific skills. Subsequent analyses suggest that firms in the manufacturing and service sector rely on different data sources and data-related firm practices in order to reap the benefits of big data. Overall, the results support the view that big data analytics have the potential to enable innovation.
    Keywords: big data,data-driven decision-making,product innovation,firm-level data
    JEL: D22 L20 O33
    Date: 2017
  8. By: Marianna Marino; Pierpaolo Parrotta; Giacomo Vallettaz
    Abstract: In this paper we study the effect of deregulation on innovation in the electricity sector using a sample composed of 31 OECD countries. Exploiting sharp reductions in the level of product market regulation, explicitly linked to changes in the legal framework, we perform a difference-in-difference analysis by matching data retrieved from the OECD International Regulation, OECD Patent Grants, and UN World Development Indicators databases. Our main findings suggest that a decrease in regulation intensity following a significant reform has a negative impact on patents (granted by the European Patent Office), and that this impact is mainly due to the degree of market contestability. Consistent with the results of Aghion et al. [1], we also find evidence of an inverted U-shaped relationship between regulation and innovation. This may imply that the effect of deregulation on innovation depends on the strength of the deregulatory process.
    Keywords: Regulation, patents, innovation, electricity.
    JEL: K23 L51 L94 O31
    Date: 2017
  9. By: Prettner, Klaus; Strulik, Holger
    Abstract: We analyze the effects of automation and education on economic growth and inequality in an R&D-based growth model with two types of labor: high-skilled labor that is complementary to machines and low-skilled labor that is a substitute for machines. The model predicts that innovation-driven growth leads to increasing automation, an increasing skill premium, an increasing population share of college graduates, increasing income and wealth inequality, and a declining labor share. In contrast to conventional wisdom, our theory predicts that faster economic growth promotes inequality. Because education and technology are endogenous, redistribution to low-skilled individuals may actually not improve disposable low-skilled income, irrespective of whether it is financed by taxes on labor income or machine input in production. We extend the model by fair wage concerns and show how automation implies involuntary low-skilled unemployment.
    Keywords: Automation,R&D-Based Growth,Inequality,Wealth Concentration,Unemployment,Redistribution
    JEL: E23 E25 O31 O33 O40
    Date: 2017
  10. By: Patrice Ollivaud
    Abstract: Swiss GDP per capita stands amongst the top OECD performers. However, to face medium-term challenges productivity developments will be key to allow the country to maintain its enviable position. Recent trends have not been favourable, with productivity growth underperforming peer countries. Based on macroeconomic analysis and supported by firm-level data, results point to a significant role for competition, innovation, education, firm characteristics and entrepreneurship. The regulatory environment is a crucial element driving productivity and could explain some of the differences across cantons. It is also an important factor for productivity differences across sectors. Other issues weighing on Switzerland’s future performance include risks from ageing, which can have major consequences on productivity via its influence on economic sectors and also via the age structure and the evolution of productivity through working life. Fully utilising the potential of underrepresented population segments would also be beneficial, notably encouraging full-time participation of women and better integrating immigrants. More enterprise creation could be achieved with increased entrepreneurship education, expanded non-bank financing and a reduced regulatory burden. R&D, while an obvious success in Switzerland, has apparently not produced commensurate returns in output. Diversification, more knowledge sharing, a stronger role for higher education institutions and promotion of start-ups would help reinforce the links from R&D to productivity. This Working Paper relates to the 2017 OECD Economic Survey of Switzerland ( y-switzerland.htm).
    Keywords: firm-level data, labour productivity, research and development, Switzerland
    JEL: O10 O30 O40 O52
    Date: 2017–12–12
  11. By: Thomas Grebel (Technische Universität Ilmenau, Germany); Lionel Nesta (Université Côte d'Azur; GREDEG CNRS; OFCE Sciences Po.; SKEMA Business School)
    Abstract: We investigate the determinants of the sign of R&D reaction functions of two rival firms. Using a two-stage Cournot competition game, we show that this sign depends on four types of environments in terms of product rivalry and technology spillovers. We test the predictions of the model on the world's largest manufacturing corporations. Assuming that firms make R&D investments based on the R&D effort of the representative rival company, we develop a dynamic panel data model that accounts for the endogeneity of the decision of the rival firm. Empirical results corroborate the validity of the theoretical model.
    Keywords: Process R&D, Spillovers, Product substitution, Reaction function, GMM
    JEL: D43 L13
    Date: 2017–11
  12. By: Giovanni Cerulli; Bianca Poti'
    Abstract: This paper analyzes the determinants of firm additional R&D behavior within a second-generation dose-response model. We consider three sets of R&D behavior’s explanatory factors: (i) firm financial constraints; (ii) investment adjustment costs; and (iii) firm R&D market relevance. Using a sample of Italian manufacturing firms, we find a positive effect of R&D subsidization, mainly driven by companies receiving a comparatively lower share of R&D covered by public support: no more than around 20% (or 15%) for gross (or net) R&D (i.e., threshold effect). Three clear conclusions are then drawn from further inspection: (i) liquidity constraints (or funding structure) discriminate between different firm response to public subsidy; (ii) investment adjustment costs, approximated by the size of the R&D project (including the amount of subsidy), discourage firm additionality behavior, and (iii) firm size and strategic relevance of R&D make companies more responsive to public support.
    Keywords: R&D public subsidies; policy evaluation; dose-response models
    Date: 2016
  13. By: Maximilian Goethner (Friedrich Schiller University Jena, School of Economics and Business Administration); Michael Wyrwich (Friedrich Schiller University Jena, School of Economics and Business Administration)
    Abstract: Over the past decades, entrepreneurial activity has started to be considered a third mission of higher education institutions. Our study examines the extent to which entrepreneurship at universities is driven by spatial proximity between university faculties. To this end, we use a new dataset that links information on business idea generation by faculties of German universities between 2007 and 2014 with comprehensive data on structural characteristics of these universities and faculties (e.g., number of academic staff, students, industry funding). Our analysis shows that the emergence of entrepreneurial ideas in natural sciences is positively affected by proximity to business schools. This pattern suggests the presence of knowledge flows between university faculties as an important source of science-based and technology-oriented business ideas.
    Keywords: Academic entrepreneurship, Knowledge Spillover, Spatial Proximity, Entrepreneurial Human Capital
    JEL: D24 L26 M13 O31 O32
    Date: 2017–12–01
  14. By: Davide Castellani (Henley Business School, University of Reading); Katiuscia Lavoratori
    Abstract: This paper investigates the determinants of the location of MNEs’ overseas R&D activities, by focusing on two major drivers. On the one hand, external location factors lead the firm to separate its activities along the value chain and geographically disperse these activities in different locations. On the other hand, the R&D location choice may be driven by the existence of internal (within-firm) linkages that motivate firms to locate their value chain activities in the same location (co-location within-firm). Using data from the fDi Markets database, the study examines 2,580 location decisions of new R&D greenfield investments made by MNEs in 110 global cities worldwide, over the period 2003-2014. Results from Conditional and Mixed Logit econometric models reveal that both external and internal factors matter. Findings confirm the strong role of external agglomeration economies, but also suggest that previous R&D and production activities of the same MNE increase the probability to locate R&D in a given global city.
    Keywords: location of international R&D, empirical methodology
    JEL: F23 O30 R30
    Date: 2017–10
  15. By: Leceta, José Manuel; Renda, Andrea; Könnölä, Totti; Simonelli, Felice
    Abstract: This report sets out the elements for the design of a streamlined and future-proof policy on innovation and entrepreneurship in Europe. It is the result of a collective effort led by CEPS, which formed a Task Force on Innovation and Entrepreneurship in the EU, composed of authoritative scholars, industry experts, entrepreneurs, practitioners and representatives of EU and international institutions. The result of these deliberations is a set of policy recommendations aimed at improving the overall environment and approach for entrepreneurship and innovation in Europe and a new paradigmatic understanding of the role that innovation and entrepreneurship can and should play within the overall context of EU policy. These recommendations are based on a new, multi-dimensional approach to both innovation and entrepreneurship as social phenomena and to the policies that are meant to promote them.
    Date: 2017–02
  16. By: Alfaro, Laura; Cunat, Alejandro; Fadinger, Harald; Yanping, Liu
    Abstract: We evaluate manufacturing firms' responses to changes in the real exchange rate (RER) using detailed firm-level data for a large set of countries for the period 2001-2010. We uncover the following stylized facts: In emerging Asia, real depreciations are associated with faster growth of firm-level TFP, sales and cashow, higher probabilities to engage in R&D and export. We find no significant effects for firms from industrialized economies and negative effects for firms in other emerging economies, which are less export-intensive and more import-intensive. Motivated by these facts, we build a dynamic model in which real depreciations raise the cost of importing intermediates, but increase demand and the profitability to engage in exports and R&D, thereby relaxing borrowing constraints and enabling more firms to overcome the fixed-cost hurdle for financing R&D. We decompose the effects of RER changes on productivity growth into these channels and explain regional heterogeneity in the effects of RER changes in terms of differences in export intensity, import intensity and financial constraints. We estimate the model and quantitatively evaluate the different mechanisms by providing counterfactual simulations of temporary real exchange rate movements. Effects on physical TFP growth, while different across regions, are non-linear and asymmetric.
    Keywords: real exchange rate , firm level data , innovation , productivity , exporting , importing , credit constraints
    JEL: F O
    Date: 2017
  17. By: Donadelli, Michael; Grüning, Patrick; Jüppner, Marcus; Kizys, Renatas
    Abstract: We shed new light on the macroeconomic effects of rising temperatures. In the data, a shock to global temperature dampens expenditures in research and development (R&D). We rationalize this empirical evidence within a stochastic endogenous growth model, featuring temperature risk and growth sustained through innovations. In line with the novel evidence in the data, temperature shocks undermine economic growth via a drop in R&D. Moreover, in our endogenous growth setting temperature risk generates non-negligible welfare costs (i.e., 11% of lifetime utility). An active government, which is committed to a zero fiscal deficit policy, can offset the welfare costs of global temperature risk by subsidizing the aggregate capital investment with one-fifth of total public spending.
    Keywords: Global Temperature,R&D,Welfare Costs
    JEL: E30 G12 Q00
    Date: 2017
  18. By: Tochimoto, Michio
    Abstract: Human activities in concrete production are diversified from product manufacturing, service production to management technology. Technological progress is organized into such various human activities. This paper is written on our “Talents capital hypothesis”, after surveying the genealogy of economic thought since Smith, and, carefully examining the theoretical basis of the hypothesis. The concept “Talents capital” comprehensively captures the human activities. The hypothesis is that realistic technological progress should be based on qualitative development of "Talents capital", that is, accumulation and succession of production-related knowledge and technology, embodied in workers group (=personal owner of individual enterprises as well as employee (including corporate officer) in general enterprises) .
    Keywords: Talents Capital; technological Progress; economic reproduction structure
    JEL: B00 D24 D29 D33
    Date: 2017–12–03
  19. By: Philippe Aghion; Antonin Bergeaud; Timo Boppart; Peter J. Klenow; Huiyu Li
    Abstract: Statistical agencies typically impute inflation for disappearing products based on surviving products, which may result in overstated inflation and understated growth. Using U.S. Census data, we apply two ways of assessing the magnitude of "missing growth" for private nonfarm businesses from 1983-2013. The first approach exploits information on the market share of surviving plants. The second approach applies indirect inference to firm-level data. We find: (i) missing growth from imputation is substantial — at least 0.6 percentage points per year; and (ii) most of the missing growth is due to creative destruction (as opposed to new varieties).
    Date: 2017–11

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