nep-ino New Economics Papers
on Innovation
Issue of 2018‒02‒26
fourteen papers chosen by
Uwe Cantner
University of Jena

  1. Innovation Responses of Japanese Firms to Chinese Import Competition By YAMASHITA Nobuaki; YAMAUCHI Isamu
  2. Public investment in R&D in reaction to economic crises: A longitudinal study for OECD countries By Pellens, Maikel; Peters, Bettina; Hud, Martin; Rammer, Christian; Licht, Georg
  3. Towards a Holistic Innovation Policy: Can the Swedish National Innovation Council Serve as a Role Model? By Edquist, Charles
  4. Knowing me, knowing you: Inventor mobility and the formation of technology-oriented alliances By Stefan Wagner; Martin C. Goossen
  5. Opportunity versus Necessity Entrepreneurship: Two Components of Business Creation By Robert W. Fairlie; Frank Fossen
  6. Disentangling Occupation- and Sector-specific Technological Change By Barany, Zsofia; Siegel, Christian
  7. Wage Inequality and Structural Change By Tyrowicz, Joanna; Smyk, Magdalena
  8. Adopt or Innovate: Understanding Technological Responses to Cap-and-Trade By Raphael Calel
  9. The (Self-) Funding of Intangibles By Döttling, Robin; Ladika, Tomislav; Perotti, Enrico C
  10. Notice failure revisited: Evidence on the use of virtual patent marking By Gaétan de Rassenfosse
  11. Technological development and software piracy By Martínez-Sánchez, Francisco; Romeu, Andrés
  12. Supply chain innovations and partial ownership By Hunold, Matthias; Shekhar, Shiva
  13. Promoting Academic Engagement: University context and individual characteristics By Zhiyan, Zhao; Broström , Anders; Jianfeng, Cai
  14. Declining Business Dynamism By Bijnens, Gert; Konings, Jozef

  1. By: YAMASHITA Nobuaki; YAMAUCHI Isamu
    Abstract: This paper examines innovation response of a panel of Japanese firms to the intensified import competition from China for the period 1994-2009. We build a comprehensive firm-level dataset linking innovation activities including patenting and research and development (R&D) merged to cross-industry measures of Chinese import competition. Carefully accounting for a simultaneity bias between innovation and importing and the possible heterogeneous effects across firms, it is found that firms filed for more patents in response to increased import competition from China. However, this effect is only evident for a group of globally engaged firms. At the same time, Chinese import competition has adversely affected the quality of innovation as measured by citations. Overall, firms with a more domestic market focus are the ones who have felt most of the Chinese import competition, which is also reflected in their declined R&D efforts.
    Date: 2017–12
  2. By: Pellens, Maikel; Peters, Bettina; Hud, Martin; Rammer, Christian; Licht, Georg
    Abstract: The paper investigates the reaction of public R&D spending on economic crises. We are interested in two counteracting motives: On the one hand, public R&D spending can be seen as a means to fight the crisis, and governments may decide to increase their R&D budgets. On the other hand, a crisis reduces public income and urges governments to cut spending, which may negatively affect public R&D budgets. Using panel data from 26 OECD countries over the period 1995 to 2015, we investigate how public R&D expenditure changes over the business cycle for different types of government R&D expenditure. On average, we find evidence for a strong pro-cyclical effect on public R&D investments. But country heterogeneity matters. Whereas European innovation leaders and non-EU countries pursue a counter-cyclical strategy, innovation followers and moderate innovators behave pro-cyclical. This leads to an increasing innovation gap in Europe. Short-run and long-run financing conditions (budget surplus and government debt levels) also significantly affect public R&D spending. However, there is no evidence that economic crises systematically affect the composition of public R&D spending along different thematic areas or by beneficiaries.
    Keywords: public R&D expenditure,economic crisis,OECD,panel data
    JEL: H54 H12 H61
    Date: 2018
  3. By: Edquist, Charles (CIRCLE, Lund University)
    Abstract: A holistic innovation policy is defined in this article as a policy that integrates all public actions that influence or may influence innovation processes. The Swedish National Innovation Council (NIC) was created by the Swedish Prime Minister, Stefan Löfven, in February 2015. It is personally chaired by the Prime Minister, which is unusual for similar councils in other countries. Another atypical characteristic of the Swedish NIC is that it has a dominant and wide focus on innovation policy. In other countries, such councils focus predominantly on science and/or research policy and treat innovation policy, if at all, as an “appendix” to research policy. The purpose of this article is to answer the following four questions: A. Has Swedish innovation policy recently been moving in the direction of a more holistic innovation policy? If so, how and in what respects? B. Has the Swedish National Innovation Council (NIC) had an influence on Swedish innovation policy and has it played a role in the transition towards a holistic innovation policy? Which role and how? C. Have conceptual specifications and advancements, such as innovation systems (in a broad sense), functional public procurement, additionality, and holistic innovation policy played a role in the changes in Swedish innovation policy? D. Can Sweden serve as a role model for other countries in these respects?
    Keywords: Innovation; Innovation policy; Holistic innovation policy; Research policy; Linear view; Systems of innovation
    JEL: O30 O38 O49 O52
    Date: 2018–02–01
  4. By: Stefan Wagner (ESMT European School of Management and Technology); Martin C. Goossen (Tilburg University)
    Abstract: We link the hiring of R&D scientists from industry competitors to the subsequent formation of collaborative agreements, namely technology-oriented alliances. By transferring technological knowledge as well as cognitive elements to the hiring firm, mobile inventors foster the alignment of decision frames applied by potential alliance partners in the process of alliance formation thereby making collaboration more likely. Using data on inventor mobility and alliance formation amongst 42 global pharmaceutical firms over 16 years, we show that inventor mobility is positively associated with the likelihood of alliance formation in periods following inventor movements. This relationship becomes more pronounced if mobile employees bring additional knowledge about their prior firm’s technological capabilities and for alliances aimed at technology development rather than for agreements related to technology transfer. It is weakened, however, if the focal firm is already familiar with the competitor’s technological capabilities. By revealing these relationships, our study contributes to research on alliance formation, employee mobility, and organizational frames.
    Keywords: Inventor mobility, alliance formation, interfirm collaboration, technological capabilities, pharmaceuticals
    Date: 2018–02–08
  5. By: Robert W. Fairlie; Frank Fossen
    Abstract: A common finding in the entrepreneurship literature is that business creation increases in recessions. This counter-cyclical pattern is examined by separating business creation into two components: “opportunity” and “necessity” entrepreneurship. Although there is general agreement in the previous literature on the conceptual distinction between these two factors driving entrepreneurship, there are many challenges to creating a definition that is both objective and empirically feasible. We propose an operational definition of opportunity versus necessity entrepreneurship using readily available nationally representative data. We create a distinction between the two types of entrepreneurship based on the entrepreneur’s prior work status that is consistent with the standard theoretical economic model of entrepreneurship. Using this definition we document that “opportunity” entrepreneurship is pro-cyclical and “necessity” entrepreneurship is counter-cyclical. We also find that “opportunity” vs. “necessity” entrepreneurship is associated with the creation of more growth-oriented businesses. The operational distinction proposed here may be useful for future research in entrepreneurship.
    Keywords: entrepreneurship, opportunity, necessity, self-employment, business cycle
    JEL: L26
    Date: 2018
  6. By: Barany, Zsofia; Siegel, Christian
    Abstract: To study the drivers of the employment reallocation across sectors and occupations between 1960 and 2010 in the US we propose a model where technology evolves at the sector-occupation cell level. Since the framework does not a priori impose a specific form of technological change, it allows us to quantify the respective role of sector-specific and of occupation-specific technological change. We implement a novel method to extract changes in sector-occupation cell productivities from the data. Using a factor model we find that occupation and sector factors jointly explain 74-87 percent of cell productivity changes, with the occupation component being by far the most important. While in our general equilibrium model both factors imply similar reallocations of labor across sectors and occupations, quantitatively the bias in technological change across occupations is much more important than the bias across sectors.
    Keywords: biased technological change; employment polarization; structural change
    JEL: J24 O33 O41
    Date: 2018–01
  7. By: Tyrowicz, Joanna (University of Warsaw); Smyk, Magdalena (University of Warsaw)
    Abstract: Income inequality in the context of large structural change has received a lot of attention in the literature, but most studies relied on household post-transfer inequality measures. This study utilizes a novel and fairly comprehensive collection of micro data sets from between 1980's and 2010 for both advanced market economies and economies undergoing transition from central planning to market based system. We show that wage inequality was initially lower in transition economies and immediately upon the change of the economic system surpassed the levels observed in advanced economies. We find a very weak link between structural change and wages in both advanced and post-transition economies, despite the predictions from skill-biased technological change literature. The decomposition of changes in wage inequality into a part attributable to changes in characteristics (mainly education) and a part attributable to changes in rewards does not yield any leading factors.
    Keywords: wage inequality, structural change, transition, skill biased technological change
    JEL: E24 D31 N34 O57 P36 P51
    Date: 2017–12
  8. By: Raphael Calel
    Abstract: Environmental regulations have consistently been found to spur innovation in ‘clean’ technologies, with one significant exception. Past cap-and-trade programs have encouraged adoption of existing pollution control technologies, but had little effect on innovation. Several explanations have been offered, including secondary market failures and a lack of polluter sophistication. In this paper I argue that it likely has more to do with the state of the technologies. Using a newly constructed panel of British companies, I show that the European carbon market - the world’s largest cap-and-trade program - has, contrary to past experience, encouraged innovation rather than adoption. I discuss how these contrasting findings can be reconciled, and the implications for planned reforms.
    Keywords: EU emissions trading system, induced innovation, directed technological change, technology diffusion
    JEL: O30 Q55 Q58
    Date: 2018
  9. By: Döttling, Robin; Ladika, Tomislav; Perotti, Enrico C
    Abstract: We model how technological change leads to a shift in corporate investment towards intangible capital, and test its implications for corporate financial policy. While tangible assets can be purchased and funded externally, most intangible capital is created by skilled workers investing their human capital, so it requires lower upfront outlays. Indeed, U.S. high-intangibles firms have larger free cash flows and lower total investment spending, and do not appear more financially constrained. We model and test how these firms optimally retain cash for both a precautionary as well as a retention motive. The optimal reward for risk-averse human capital involves deferred compensation and a commitment to retain cash. High-intangibles firms also should favor a payout policy of repurchases over dividends to avoid penalizing unvested claims. Our empirical evidence supports these predictions.
    Keywords: cash holdings; corporate leverage; deferred equity; equity grants; Human Capital; intangible assets; share vesting.; Technological change
    JEL: G32 G35 J24 J33
    Date: 2018–01
  10. By: Gaétan de Rassenfosse
    Abstract: One source of uncertainty in the patent system relates to the difficulty in identifying products that are protected with a patent. This paper studies the adoption by U.S. patentees of “virtual patent marking,” namely the online provision of constructive notice to the public that an article is patented. It proposes a simple model of the decision to adopt patent marking and empirically examines factors that affect adoption. Data suggest that about 12 percent of patent holders overall provide virtual marking information (and perhaps about 25 percent of commercially active assignees). Econometric analysis suggests that the most discriminant factor of the adoption of virtual marking is the size of the patent portfolio. The likelihood of adoption increases with portfolio size, consistent with evidence that firms with a larger patent portfolio are more likely to be infringed.
    JEL: D23 K29 O34
    Date: 2018–02
  11. By: Martínez-Sánchez, Francisco; Romeu, Andrés
    Abstract: In this paper, the authors analyze the differences in piracy rates from one country to another. Like previous papers on the topic, they find that more developed countries have lower incentives for pirating. Unlike previous papers, they find that the piracy rate is positively correlated with the tax burden rate but negatively correlated with the domestic market size and exports over GDP. The authors also separate the impacts of education and R&D on piracy, and find two effects with opposite signs. Moreover, they find that those countries with smaller, more efficient bureaucracies are likely to protect intellectual property more effectively. Finally, they show that the spread of access to the Internet is negatively correlated with the software piracy rate.
    Keywords: piracy rate,education,R&D,quality bureaucracies,intellectual property,internet
    JEL: K42 L86 O3 O57
    Date: 2018
  12. By: Hunold, Matthias; Shekhar, Shiva
    Abstract: We show that competing downstream firms may rather invest in their inefficient inhouse production than help improve the technology of the efficient supplier, even if this is costless. Even worse, a downstream firm can have strong incentives to decrease the efficiency of the supplier in order to improve its outside options. We demonstrate that non-controlling partial backward ownership can align the incentives of the supplier and its customers with respect to supply chain innovations.
    Keywords: knowledge spillover,innovation,minority shareholdings,supply chain efficiency,vertical partial ownership
    JEL: L22 L40
    Date: 2018
  13. By: Zhiyan, Zhao (School of Management, Northwestern Polytechnical University); Broström , Anders (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Jianfeng, Cai (School of Management, Northwestern Polytechnical University,)
    Abstract: This paper aims to explore the impact of organizational context on individuals’ industry activities in Chinese universities. Academic engagement, which includes collaborative research, contract research, consulting and other informal outreach activities, is posited as being jointly determined by organizational and individual level factors. Based on 564 Chinese scientists’ survey responses, our results show that scientists perceiving their university as having a strong entrepreneurial mission or supportive policy context are more active in academic engagement. This relationship is, however, moderated by individual-level factors. Specifically, entrepreneurially oriented university mission and supportive policy are more strongly associated with intra-individual differences in academic engagement for junior scientists, and for scientists with established personal networks to industry. Our analysis also shows that several individual-level predictors of academic engagement identified in studies set in Europe and the US carry over to the Chinese context.
    Keywords: academic engagement; entrepreneurial mission; policy context; individual characteristics
    JEL: J18 L52 O31
    Date: 2018–02–19
  14. By: Bijnens, Gert; Konings, Jozef
    Abstract: We build on Decker et al. (2016) who show that business dynamism and entrepreneurship in the U.S. have declined over recent decades and that the characteristics of this decline changed around 2000. Since 2000 the U.S. decline in dynamism has been accompanied by a decline in high-growth, young firms. Using 30 years of data from all for-profit firms incorporated in Belgium, we now offer evidence that Belgium, a far more rigid economy than the U.S., experienced a similar decline in dynamism. Furthermore, the decline set in around 2000 as well. We attribute this not only to the declining share of young firms that become high-growth firms, but more importantly also to the declining propensity for small (not necessarily young) firms to experience fast growth. We do not yet know what caused this decline. Since there are remarkable similarities between Belgium and the U.S. with respect to the secular decline in business dynamism, global trends rather than country specific changes are most likely to be at the basis of this evolution. A possible global trend causing dynamism to decline, is the ICT revolution that started the second half of the '90s. We find preliminary indications that industries with higher ICT intensity have experienced a dynamism trend change during that same period and show a steeper dynamism decline.
    Keywords: business dynamism; Entry; high-growth firms
    Date: 2018–01

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