nep-ino New Economics Papers
on Innovation
Issue of 2018‒01‒22
fifteen papers chosen by
Uwe Cantner
University of Jena

  1. Smart Specialisation, seizing new industrial opportunities By Antonio VEZZANI; Marco BACCAN; Alina CANDU; CASTELLI; Mafini DOSSO; Petros GKOTSIS
  2. Duplicative research, mergers and innovation By Denicolò, Vincenzo; Polo, Michele
  3. The organizational design of high-tech startups and product innovation By Grimpe, Christoph; Murmann, Martin; Sofka, Wolfgang
  4. Is necessity the mother of disruption? By Preißner, Stephanie; Raasch, Christina; Schweisfurth, Tim
  5. Cluster dynamics: learning from Competitiveness Cluster policy. The case of ‘Secure Communicating Solutions’ in the French Provence-Alpes-Côte d’Azur Region By Christian Longhi
  6. Creative disruption: the everyday innovation practices of intrapreneurs at a technology company By Whitelaw, Lisa Anne; Garcia-Lorenzo, Lucia
  7. A Tax Plan for Endogenous Innovation By Croce, Mariano; Karantounias, Anastasios G.; Raymond, Stephen; Schmid, Lukas
  8. The Diffusion of New Institutions: Evidence from Renaissance Venice's Patent System By Stefano Comino; Alberto Galasso; Clara Graziano
  9. Entrepreneurship and Sustainability Goals: The Need for Innovative and Institutional Solutions By Adel Ben Youssef; Sabri Boubaker; Anis Omri
  10. Revised proposal for the revision of the statistical definitions of biotechnology and nanotechnology By Steffi Friedrichs; Brigitte van Beuzekom
  11. Innovation and Industry: Policy for the Next Decade By Pietro Moncada-Paterno-Castello; Nicola Grassano; Antonio Vezzani
  12. Trading Financial Innovation By Kinda Hachem; Ana Babus
  13. The Social Origins of Inventors By Aghion, Philippe; Akcigit, Ufuk; Hyytinen, Ari; Toivanen, Otto
  14. Why do firms collaborate with local universities? By Rune Dahl Fitjar; Martin Gjelsvik
  15. The Importance of Education and Skill Development for Economic Growth in the Information Era By Charles R. Hulten

  1. By: Antonio VEZZANI (European Commission - JRC); Marco BACCAN (Finlombarda S.p.A. (Italy)); Alina CANDU (Finlombarda S.p.A. (Italy)); CASTELLI (Finlombarda S.p.A. (Italy)); Mafini DOSSO (European Commission - JRC); Petros GKOTSIS (European Commission - JRC)
    Abstract: This study offers a novel analytical approach to inform the regional search for new industrial opportunities, as promoted by smart specialisation in the EU Cohesion policy context. The analysis departs from the challenges of practicing smart specialisation and its entrepreneurial discovery process in a dynamic perspective. It argues that the adoption of a dynamic approach to identify new opportunities implies mapping regional business and innovation assets as well as, assessing their position within the global technological and industrial landscape. The study brings a case study of Lombardy region, spurring the S3 Lab initiative (in collaboration with Baden-Württemberg, Catalonia and Lapland), together with a comparative analysis of its technological profile. The empirical study combines patent data from OECD REGPAT and territorial proprietary micro-data from Lombardy region on firm creation in emerging industries (EI) – new industrial sectors or existing sectors evolving into new industries (European Cluster Observatory). These industries represent a priority area for Lombardy's innovation-led development strategy. The initial observations confirm the importance of such industries in the region; they represent more than one-third of employment, almost a half of the regional value-added and feature together the majority of start-ups, suggesting the relevance of the regional strategic development choices. Also, in terms of productive advantages, Lombardy ranks high in some key EI. The mapping of technological competences through patent indicators, e.g. specialisation, diversification and ability to specialise in fast-growing and niche fields gives relevant insights on the technological potential of the region, providing further guidance for better targeted interventions.
    Keywords: smart specialisation, emerging industries, regional search, technological specialisation
    JEL: O25 O33 O38 R58
    Date: 2017–11
  2. By: Denicolò, Vincenzo; Polo, Michele
    Abstract: We show that in the model of Federico, Langus and Valletti (2017) [A simple model of mergers and innovation, Economics Letters, 157, 136-140] horizontal mergers may actually spur innovation by preventing duplication of R&D efforts. This possibility is more likely, the greater is the value of innovations, the less rapidly diminishing are the returns to R&D, and the more highly correlated are the R&D projects of different firms. Federico, Langus and Valletti (2017) do not obtain this result because they focus only on the case in which the merged firm spreads total R&D expenditure evenly across the individual research units of the merging firms -- a strategy which is optimal, however, only if the returns to R&D diminish sufficiently rapidly.
    Keywords: Horizontal mergers; Innovation
    Date: 2017–12
  3. By: Grimpe, Christoph; Murmann, Martin; Sofka, Wolfgang
    Abstract: We investigate whether appointing a middle management level affects startups' innovation performance. Additional hierarchical levels are often suspected to restrict innovative activities. However, founders' capacities for information processing and resource allocation are usually strongly limited while, at the same time, R&D decisions are among the most consequential choices of startups. We argue that middle management is positively related to introducing product innovations because it improves the success rates from recombining existing knowledge as well as managing R&D personnel. In addition, we suggest that the effectiveness of these mechanisms depends on the riskiness of a startup's business opportunity. Based on a sample of German high-tech startups, we find support for our conjectures.
    Keywords: middle management,innovation performance,R&D,startups,organizational design,R&D management
    Date: 2017
  4. By: Preißner, Stephanie; Raasch, Christina; Schweisfurth, Tim
    Abstract: This study investigates the origins of disruptive innovation. According to the canonical model, disruptive innovations do not originate from existing customers - in contrast with what the user innovation literature would predict. We compiled a unique historical and content-analytic dataset based on 62 cases identified from the disruptive innovation literature. We found that 44% of the disruptive innovations in this sample were originally developed by users. Disruptive innovations are more likely to originate from users (producers) if the environment is characterized by high levels of turbulence in customer preferences (technology). Disruptive innovations involving high functional (technological) novelty, tend to be developed by users (producers). Users are also more likely to be the source of disruptive process innovations, and to innovate in weaker appropriability environments. Our paper is among the first to link the disruptive and user innovation literatures. We contribute to both and offer guidance to managers on the likely source of disruptive threats.
    Keywords: user innovation,disruptive innovation,market orientation,radical innovation,environmental turbulence
    JEL: D83 L17 M19 O31 O34
    Date: 2017
  5. By: Christian Longhi (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur)
    Abstract: The paper aims to identify the forms and dynamics of the organizational structures of high-tech clusters overtime. Since Markusen (1996), it is well acknowledged that diversity is an emergent property of clusters, but the interactions between local and non-local actors of the clusters are difficult to trace because of lack of relevant data. The cluster policies developed to fix the network failures between the heterogeneous actors – large and small firms, universities, research institutes – of the current processes of innovation provide new information opportunities. In France, Competitiveness Clusters work as a “factories of project”; the information they produce on collective R&D projects applying for subsidies provides a proxy of local and non-local relations of the clusters. Social network analysis is used to infer the organizational structure of the collective learning networks and trace their dynamics. The case studies considered are Sophia-Antipolis and Rousset, two high tech clusters which belong to the same Competitiveness Cluster, ‘Secure Communicating Solutions’ in the Provence-Alpes-Côte d’Azur Region. The paper highlights the decoupling of the two clusters overtime as a consequence of distinctive organizational structures. The diversity of the dynamics of the collective learning networks which emerges through the analysis of the collective R&D projects in the two high tech clusters shows that knowledge creation and innovation can follow different paths and questions the public policies implemented.
    Keywords: Innovation, Collective Learning Networks, Competitiveness Cluster, Social Network Analysis, Rousset,Cluster Policy, Sophia Antipolis
    Date: 2017
  6. By: Whitelaw, Lisa Anne; Garcia-Lorenzo, Lucia
    Abstract: This article makes a contribution to disruptive innovation studies by exploring the micro-dynamics of everyday 'creative disruption' – the creative practices intrapreneurs engage in during their daily work to advance innovation projects inside organizations. Drawing on a practice-based approach and a qualitative action research case study at Thales UK, a multinational technology organization, this article asks how intrapreneurs as key innovative agents foster disruptive innovation practices in their day-to-day work. The analysis of 55 interviews, 25 diary accounts, 29 observations of innovation related events plus a number of documents and reflexive notes following the development of 6 innovation projects as they happen, shows intrapreneurs navigating organizational tensions resulting from disruptive innovation efforts by constantly developing creative disruption practices in response to contextual demands to progress their innovation projects. The results help to expand our understanding of the notion of disruptive innovation in organizations, re-framing it as a micro-level generative process. NOTE: We have the explicit permission and consent from the UK division of Thales to use its real name in disseminating our research.
    Keywords: disruptive innovation; intrapreneurship; micro-practices
    JEL: J50
    Date: 2017–01–01
  7. By: Croce, Mariano (University of North Carolina at Chapel Hill,); Karantounias, Anastasios G. (Federal Reserve Bank of Atlanta); Raymond, Stephen (University of North Carolina at Chapel Hill); Schmid, Lukas (Duke University)
    Abstract: In times when elevated government debt raises concerns about dimmer global growth prospects, we ask: How can the government provide incentives for innovation in a fiscally sustainable way? We address this question by examining the Ramsey problem of finding optimal tax and subsidy schemes in a model in which growth is endogenously sustained by risky innovation. We characterize the shadow value of growth and entry in the innovation sector. We find that a profit tax is required to replicate the first-best in order to balance the externalities associated with innovative activity. At the second-best, the profit tax is designed to optimally respond to growth shocks above and beyond what is prescribed by the standard tax-smoothing incentives in economies with exogenous growth. The interplay of risk and innovation opens a new margin for optimal taxation.
    Keywords: innovation; R&D investment; endogenous growth; government debt; labor tax; subsidy; profit tax
    JEL: E32 E62 H21 H63 O3
    Date: 2017–11–01
  8. By: Stefano Comino; Alberto Galasso; Clara Graziano
    Abstract: What factors affect the diffusion of new economic institutions? This paper examines this question by exploiting the introduction of the first regularized patent system, which appeared in the Venetian Republic in 1474. We begin by developing a model that links patenting activity of craft guilds with provisions in their statutes. The model predicts that guild statutes that are more effective at preventing outsiders' entry and at mitigating price competition lead to less patenting. We test this prediction on a new dataset that combines detailed information on craft guilds and patents in the Venetian Republic during the Renaissance. We find a negative association between patenting activity and guild statutory norms that strongly restrict entry and price competition. We show that guilds that originated from medieval religious confraternities were more likely to regulate entry and competition, and that the effect on patenting is robust to instrumenting guild statutes with their quasi-exogenous religious origin. We also find that patenting was more widespread among guilds geographically distant from Venice, and among guilds in cities with lower political connections, which we measure by exploiting a new database of noble families and their marriages with members of the great council. Our analysis suggests that local economic and political conditions may have a substantial impact on the diffusion of new economic institutions.
    JEL: K23 N23 O33 O34
    Date: 2017–12
  9. By: Adel Ben Youssef (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur); Sabri Boubaker (Champagne School of Management groupe ESC Troyes - Champagne School of Management groupe ESC Troyes); Anis Omri (FSEGN - Faculté des Sciences Economique et de gestion de Nabeul - Faculté des Sciences Economique et de gestion de Nabeul)
    Abstract: The relationship between entrepreneurship and sustainable development has received considerable attention from academics and policymakers, as society searches for solutions leading to sustainability. The role of innovation and institutional quality in reaching sustainability goals is one of the key areas tackled by the current sustainable development debate, particularly in developing countries. Using a modified environmental Kuznets curve model, this study attempts to better improve our understanding of the critical roles of innovation, institutional quality, and entrepreneurship in the structural change toward a sustainable future in Africa. The empirical results show that both formal and informal entrepreneurship are conducive to less environmental quality and sustainability in 17 African countries where the contribution of informal entrepreneurship is much higher compared to the formal one. However, the relationship between entrepreneurship and sustainable development becomes strongly positive when the levels of innovation and institutional quality are higher. This research makes a contribution to this important emerging research area in that it clarifies conditions through which countries and firms in Africa can move toward more sustainable products and services. Formalizing the informal sector can lead to the improvement of the environmental and economic performance.
    Keywords: Innovation,Institutions quality 2,Entrepreneurship,Sustainability
    Date: 2017–12–01
  10. By: Steffi Friedrichs; Brigitte van Beuzekom
    Abstract: Agreement on a harmonised application of clear statistical definitions of technologies is pertinent to the delineation of technology fields both with regard to each other and within the context of wider economic developments. Biotechnology and nanotechnology are both enabling technologies, which find applications and give rise to innovations in many industry sectors, contributing to determine wide ranges of economic and societal impact. This document revises the OECD's statistical definition of biotechnology, which had last been reviewed in 2008, and proposes the adoption of a statistical definition of nanotechnology in the same format. The statistical definitions proposed in this document are indicative rather than exhaustive and are expected to change over time as biotechnology and nanotechnology activities evolve.
    Date: 2018–01–18
  11. By: Pietro Moncada-Paterno-Castello (European Commission - JRC); Nicola Grassano (European Commission - JRC); Antonio Vezzani (European Commission - JRC)
    Abstract: This documents aims at contributing to the discussion on the post-2020 policies that will start with the next EU multiannual financial perspectives and the subsequent preparation of the ninth Framework Programme (FP9). We identify seven major challenges posed by the industrial transformation. These challenges will shape the future economic landscape and should be at the heart of the next generation policies. Four main ingredients are proposed to bake these policies, which should: i) be based on a (truly) new policy vision with aims and objectives; ii) promote coordination, simplification and openness; iii) target EU specificities; and iv)embody experimentation.
    Keywords: R&I, Innovation Policy, Industrial Policy, Innovation.
    Date: 2017–12
  12. By: Kinda Hachem (University of Chicago); Ana Babus (Chicago FED)
    Abstract: Standardized financial securities are frequently traded in over-the-counter markets. This is difficult to reconcile with the view that these markets exist to facilitate the trade of customized contracts. We build a model of financial innovation to explain why standardized securities can be traded in decentralized markets. In our set-up, each dealer designs a security which specifies a payoff for every state of the world. The dealer chooses the states in which the payoff is flat and the states in which the payoff is contingent on the realized state of the world. Investors choose which securities to trade, taking into account how their trades may impact the price of each security. The market structure in which a given security is traded is determined endogenously. We characterize which securities are traded in decentralized rather than centralized markets. We also study the effects of regulations that force all trade to take place in centralized markets.
    Date: 2017
  13. By: Aghion, Philippe; Akcigit, Ufuk; Hyytinen, Ari; Toivanen, Otto
    Abstract: In this paper we merge three datasets - individual income data, patenting data, and IQ data - to analyze the determinants of an individual's probability of inventing. We find that: (i) parental income matters even after controlling for other background variables and for IQ, yet the estimated impact of parental income is greatly diminished once parental education and the individual's IQ are controlled for; (ii) IQ has both a direct effect on the probability of inventing an indirect impact through education. The effect of IQ is larger for inventors than for medical doctors or lawyers. The impact of IQ is robust to controlling for unobserved family characteristics by focusing on potential inventors with brothers close in age. We also provide evidence on the importance of social family interactions, by looking at biological versus non-biological parents. Finally, we find a positive and significant interaction effect between IQ and father income, which suggests a misallocation of talents to innovation.
    Keywords: education; Innovation; inventors; IQ; parental background; Social mobility
    JEL: I24 J18 J24 O31
    Date: 2017–12
  14. By: Rune Dahl Fitjar; Martin Gjelsvik
    Abstract: This paper examines why firms sometimes collaborate locally rather than with higher-quality universities at a distance. Existing research has mostly relied on the localised knowledge spillover, or LKS, model to explain this. This model holds that knowledge transfer across distance is costly, and collaborating locally reduces the risk of information loss when the knowledge is transferred. However, there are various other reasons that could also explain the pattern. If the local university can make a useful contribution, firms might choose to look no further. Firms may also see collaboration as a long-term investment, helping to build up research quality at the local university with the hope of benefiting in the future. Finally, firms may want to contribute to the local community. We extend the LKS model with these additional motivations and explore their validity using data from 23 semi-structured interviews of firms that collaborate intensively with lower-tier local universities.
    Keywords: University-industry linkages, Knowledge spillovers, Geographical proximity, Collaboration
    JEL: O32 D21
    Date: 2017–12
  15. By: Charles R. Hulten
    Abstract: The neoclassical growth accounting model used by the BLS to sort out the contributions of the various sources of growth in the U.S. economy accords a relatively small role to education. This result seems at variance with the revolution in information technology and the emergence of the “knowledge economy”, or with the increase in educational attainment and the growth in the wage premium for higher education. This paper revisits this result using “old fashioned” activity analysis, rather than the neoclassical production function, as the technology underlying economic growth. An important feature of this activity-based technology is that labor and capital are strong complements, and both inputs are therefore necessary for the operation of an activity. The composition of the activities in operation at any point in time is thus a strong determinant of the demand for labor skills, and changes in the composition driven by technical innovation are a source of the increase in the demand for more complex skills documented in the literature. A key result of this paper is that the empirical sources-of-growth results reported by BLS could equally have been generated by the activity-analysis model. This allows the BLS results to be interpreted in a very different way, one that assigns a greater importance to labor skills and education.
    JEL: J24 O47
    Date: 2017–12

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