nep-ino New Economics Papers
on Innovation
Issue of 2018‒03‒12
nineteen papers chosen by
Uwe Cantner
University of Jena

  1. Persistence in innovation and innovative behavior in unstable environments By Joana Costa; Anabela Botelho; Aurora Teixeira
  2. The Role of Business Model Innovation for Product Innovation Performance By Bengtsson, Lars; Tavassoli, Sam
  3. Horizontal Mergers and Innovation By Jullien, Bruno; Lefouili, Yassine
  4. University invention and the abolishment of the professor’s privilege in Finland By Ejermo, Olof; Toivanen, Hannes
  5. Absorptive Capacity and Firms’ Generation of Innovation - Revisiting Zahra and George’s Model By Dina Pereira; João Leitão
  6. Religious Tolerance as Engine of Innovation By Francesco Cinnirella; Jochen Streb
  7. U.S. Federal Laboratories and their Research Partners: A Quantitative Case Study By Chen, ChuChu; Link, Albert; Oliver, Zachary
  8. Innovation and the economic downturn: Insights from Portuguese firms By Hugo Pinto; Tiago Santos Pereira; Elvira Uyarra
  9. Propensity to Patent and Firm Size for Small R&D-Intensive Firms By Link, Albert; Scott, John
  10. Taste for Science, Academic Boundary Spanning and Inventive Performance of Scientists and Engineers in Industry By Arts, Sam; Veugelers, Reinhilde
  11. Creative and science-oriented employees and firm-level innovation By Birkeneder, Antonia; Brunow, Stephan; Rodríguez-Pose, Andrés
  12. Opportunity versus Necessity Entrepreneurship: Two Components of Business Creation By Robert W. Fairlie; Frank M. Fossen
  13. Rethinking Public Funding of Biomedical Science By Link, Albert; Danziger, Robert; Scott, John
  14. Intellectual Property Rights and the Ascent of Proprietary Innovation in Agriculture By Matthew S. Clancy; GianCarlo Moschini
  15. Inflation and Growth: A Non-Monotonic Relationship in an Innovation-Driven Economy By Zheng, Zhijie; Huang, Chien-Yu; Yang, Yibai
  16. Dilution effects, population growth and economic growth under human capital accumulation and endogenous technological change By Bucci, Alberto; Eraydın, Levent; Müller, Moritz
  17. Valuing Product Innovation: Genetically Engineered Varieties in U.S. Corn and Soybeans By Federico Ciliberto; GianCarlo Moschini; Edward D. Perry
  18. The efficiency of Portuguese Technology Transfer Offices and the importance of university characteristics By Aurora Teixeira; André Monteiro
  19. Waiting for the payday? The market for startups and the timing of entrepreneurial exit By Arora, Ashish; Fosfuri, Andrea; Rønde, Thomas

  1. By: Joana Costa (Universidade de Aveiro); Anabela Botelho (Universidade de Aveiro); Aurora Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto)
    Abstract: The analysis of persistence in innovation can improve the understanding of firm dynamics, anticipate the effects of the different policy actions, correct macroeconomic disequilibria, help in designing the correct policies to boost R&D and, consequently, generate prosperity. Persistence of innovation is empirically explored mostly using the case of innovation leaders or followers, which may not apply to countries with poorer performances in terms of innovation. Studying the case of a moderate innovator may shed some light into the different conditions of firms and their attitude towards persistence, as well as the adoption of different policy actions to observe this heterogeneity. Additionally, the effect of firm size and industry has not yet been fully explored by the literature on innovation persistence. The present paper analyses the persistence of innovation using a dynamic panel comprising 1099 firms operating in all economic sectors of a moderate innovator country, Portugal. Firms are observed in three waves of the Portuguese part of the Community Innovation Survey (CIS), from 2004 to 2010. Using the random effects probit model, the persistence hypothesis fails to be corroborated. Such result suggest that innovation policy programs do not have long-lasting effect on innovative behavior of firms and it is unlikely that incumbent past innovators be the drivers of creative accumulation and future innovation. There is, however, some evidence that new, smaller, innovators might lead the creative wave. In this vein, there might be a rational to encourage public policies targeting start-up firms and new market entrants when innovation is the main primary funding goal.
    Keywords: Persistence, Innovation, State dependence, Firms, Community Innovation Survey, Portugal
    JEL: D22 L20 O31 O32
    Date: 2018–02
  2. By: Bengtsson, Lars (Faculty of Engineering, Lund University); Tavassoli, Sam (RMIT)
    Abstract: We analyze the effect of Business Model Innovation (BMI) on the product innovation performance of firms, based on a dynamic capabilities theoretical framework. Our empirical study is based on a large-scale representative sample of cross-industry Swedish firms participating in the last three waves of the Community Innovation Survey (CIS) from 2006–2012. Our findings provide support for the dynamics capabilities theoretical framework as well as broad evidence of a significant and positive association between BMI and product innovation performance. Our results imply that BMI in the form of product innovations combined with different complementary innovations will act as isolating mechanisms towards replication by competitors. Therefore, managers should frame product innovations as part of a business model innovation and dynamically adapt the key elements of the firm’s business model.
    Keywords: Business model innovation; Business models; Dynamic capabilities; product innovation; Innovation performance; Community Innovation Survey
    JEL: D22 L20 O31 O32
    Date: 2018–02–27
  3. By: Jullien, Bruno; Lefouili, Yassine
    Abstract: This paper discusses the effects of horizontal mergers on innovation. We rely on the existing academic literature and our own research work to present the various positive and negative effects of mergers on innovation. Our analysis shows that, even in the absence of technological spillovers and R&D complementarities, the overall impact of a merger on innovation may be positive. We derive a number of policy implications regarding the way innovation effects should be handled by competition authorities in merger control and highlight the differences with the analysis of price effects.
    Keywords: Merger Policy; Innovation; R&D Investments
    JEL: K21 L13 L40
    Date: 2018–02
  4. By: Ejermo, Olof (Department of Economic History, Lund University); Toivanen, Hannes (Teqmine)
    Abstract: In 2007 Finland changed ownership rights to inventions from its employees – "the professor’s privilege" – to universities. We investigate how this change affected academic patenting using new data on inventors and patenting in Finland for the period 1995- 2010. Matched sample panel data regressions using difference-in-differences show that patenting by individuals dropped by at least 29 percent after 2007. Unlike other countries studied, in Finland the reform was known before implementation. Adding the period after announcement to the reform period increases the drop in academic patenting to 46 percent. Our and others’ results call into question whether the European reform of the professor’s privilege were good innovation policy.
    Keywords: academic patenting; Finland; professor’s privilege; university ownership
    JEL: I23 I28 O31 O32 O34 O38
    Date: 2018–03–02
  5. By: Dina Pereira (University of Beira Interior (UBI), UBImedical, CEG-IST, University of Lisbon); João Leitão (University of Beira Interior (UBI), CEG-IST, University of Lisbon & C-MAST, UBI, Instituto Multidisplinar de Empresa, Universidad de Salamanca)
    Abstract: The firm’s absorptive capacity triggers its propensity to capture external knowledge, spurred by internal levers and cooperation liaisons, stimulating innovativeness. This paper revisits Zahra and George’s model of absorptive capacity and others, analysing the firm’s internal and liaison factors that affect its absorptive capacity, in order to predict their influence on innovation. Being the firm an open system, managers acknowledging such effects can design a more efficient open innovation business model in order to generate more innovation. We analyse firm-level internal indicators measuring firm’s absorptive capacity and a set of liaison factors, using a Portuguese sample of 571 service firms and 562 manufacturing firms that participated in the European Community Innovation Survey (CIS), 2010. Results reveal that internal R&D, acquisition of external R&D, acquisition of external knowledge (i.e., equipment, software, licenses and employee training) affect firms' generation of innovation, according to the different sub-samples, which provides several implications for science and innovation policy.
    Keywords: Absorptive Capacity; Innovation; Liaisons; Internal and External Knowledge
    JEL: M20 M21 L25 L26 O32
    Date: 2018–02
  6. By: Francesco Cinnirella; Jochen Streb
    Abstract: We argue that, for a given level of scientific knowledge, tolerance and diversity are conducive to technological creativity and innovation. In particular, we show that variations in innovation within Prussia during the second industrial revolution can be ascribed to differences in religious tolerance that developed in continental Europe from the Peace of Westphalia onwards. By matching a unique historical dataset about religious tolerance in 1,278 Prussian cities with valuable patents for the period 1877-1890, we show that higher levels of religious tolerance are strongly positively associated with innovation during the second industrial revolution. Religious tolerance is measured through population’s religious diversity, diversity of churches, and diversity of preachers and religious teachers, respectively. Endogeneity issues are addressed using local variation across cities, within counties. Estimates using preindustrial levels of religious tolerance address issues of reverse causality. As for the channels of transmission, we find significant complementarity between religious tolerance and human capital. Furthermore, we find that cities with higher levels of religious tolerance attracted a larger share of migrants. Finally, higher levels of religious diversity in the population translated into higher levels of religious diversity in the workforce by industrial sector. This result suggests that religious diversity did not generate labor market segmentation by denomination but might have fostered interaction of different denominations.
    Keywords: tolerance, openness, pluralism, diversity, innovation, patenting activity
    JEL: N13 N33 O14 O31 Z12
    Date: 2017
  7. By: Chen, ChuChu (University of North Carolina at Greensboro, Department of Economics); Link, Albert (University of North Carolina at Greensboro, Department of Economics); Oliver, Zachary (RTI International, Innovation Economics Program)
    Abstract: The Stevenson-Wydler Technology Innovation Act of 1980 made explicit the technology transfer responsibilities of U.S. Federal laboratories. The Federal Technology Transfer Act of 1986 and the National Competitiveness Technology Transfer Act of 1989 further enhanced the technology transfer activities of laboratories by permitting Cooperative Research and Development Agreements (CRADAs). However, very little is known about the characteristics of CRADA activity in Federal laboratories. Using a new, robust dataset of CRADA activity at the National Institute of Standards and Technology (NIST), we describe research partnerships over the years 1978 through 2014, and we explore several research questions. When did the Federal Technology Transfer Act have an impact on CRADA activity at NIST? Is CRADA activity at NIST a cyclical phenomenon? At what frequency do private sector establishments engage in CRADA activity with NIST? We find suggestive evidence that the Federal Technology Transfer Act began to influence NIST’s CRADA activity within two to three years after its passage, and we find that CRADA activity moves with the business cycle. We also find that most establishments that were engaged in CRADA activity were engaged only once over this time period; it was only the larger establishments that continued to engage in CRADAs with NIST. We speculate about the implications of these findings, and we suggest a broader research agenda into CRADA activity in Federal laboratories.
    Keywords: CRADA; Program management; Federal laboratory; NIST; technology; Schumpeterian hypothesis; evaluation; assessment
    JEL: H11 H40 O31 O32 O33
    Date: 2018–02–13
  8. By: Hugo Pinto (Centre for Social Studies, University of Coimbra, Coimbra, Portugal / Faculty of Economics, University of Algarve, Faro, Portugal); Tiago Santos Pereira (Centre for Social Studies, University of Coimbra, Coimbra, Portugal); Elvira Uyarra (Manchester Institute of Innovation Research, Alliance Manchester Business School, University of Manchester, Manchester, UK)
    Abstract: Recent research has found evidence of a variety of business profiles regarding innovation during the economic downturn. Several studies reported that firms were reducing or abandoning innovation activities and dropping related expenses while other authors have found that some firms are exploring the economic turbulence as an opportunity for creative destruction and to gain competitive advantage. This article explores the data collected from the last waves of CIS (Community Innovation Survey) in Portugal (2006-2008-2010-2012) to understand the changes in the determinants of the development of innovation activities, product and process innovation, before, during and in the peak of the crisis. The empirical study presents limited dependent variable models to analyse the relevance of structural factors, absorptive capacity and strategic variables in the different periods. The article concludes with implications for the behaviour of firms and innovation resilience.
    Keywords: CIS; crisis; exploitation; exploration; innovation; persistence; resilience
    JEL: C21 C25 O31 O32 O38
    Date: 2018–03
  9. By: Link, Albert (University of North Carolina at Greensboro, Department of Economics); Scott, John (Dartmouth College, Department of Economics)
    Abstract: The Schumpeterian hypothesis about the effect of firm size on research and development (R&D) output is studied for a sample of R&D projects for R&D-intensive firms that are small but have substantial variance in their sizes. Across the distribution of firm sizes, the elasticity of patenting with respect to R&D ranged from 0.41 to 0.55, with the elasticities being largest for intermediate levels of firm size and also varying directly with the extent to which the projects are Schumpeterian in the cost or value senses. The paper’s findings at the R&D project level are compared with the literature’s findings at the line of business, firm, and industry levels, and the findings are consistent with the literature’s findings for small firms.
    Keywords: Patents; Research and Development (R&D); Firm Size; Schumpeterian hypothesis; Technological Progress; Innovation
    JEL: L10 L20 L25 O30
    Date: 2018–01–24
  10. By: Arts, Sam; Veugelers, Reinhilde
    Abstract: Matching survey data on Ph.D. scientists and engineers currently working in an R&D job in industry with their publications and patents, we study the relationship between their individual traits and the nature of their inventive performance. We find that individuals with a strong taste for science, i.e. motivated by intellectual challenge, independence, and contribution to society, create more novel and impactful patents. Academic boundary spanning, proxied by scientific publications co-authored with academic scientists, mediates the effect of taste for science, but only partly and only on impact-weighted inventive output. For novelty of inventive output, we find no mediation through academic boundary spanning. Individuals with a strong taste for salary collaborate less with academic scientists, fully mediating the negative effect of taste for salary on impact-weighted inventive output.
    Keywords: industry-science links; taste for science
    JEL: O31
    Date: 2018–02
  11. By: Birkeneder, Antonia; Brunow, Stephan; Rodríguez-Pose, Andrés
    Abstract: This paper examines the link between innovation and the endowments of creative and science-oriented STEM - Science, Technology, Engineering and Mathematics - workers at the level of the firm and at the city-/regional-level in Germany. It also looks into whether the presence of these two groups of workers has greater benefits for larger cities than smaller locations, thus justifying policies to attract these workers in order to make German cities 'smarter'. The empirical analysis is based on a probit estimation, covering 115,000 firm-level observations between 1998 and 2015. The results highlight that firms that employ creative and STEM workers are more innovative than those that do not. However, the positive connection of creative workers to innovation is limited to the boundaries of the firm, whereas that of STEM workers is as associated to the generation of considerable innovation spillovers. Hence, attracting STEM workers is more likely to end up making German cities smarter than focusing exclusively on creative workers.
    Keywords: Creative workers; Germany; Innovation; Smart Cities; Spillover; STEM workers
    JEL: J24 R23
    Date: 2018–02
  12. By: Robert W. Fairlie; Frank M. 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.
    Date: 2018
  13. By: Link, Albert (University of North Carolina at Greensboro, Department of Economics); Danziger, Robert (University of Illinois at Chicago); Scott, John (Dartmouth College, Department of Economics)
    Abstract: This paper offers the perspective that public policy should provide incentives to make university ideas freely available and widely disseminated. Then, industrial R&D, in some cases with university partners, could develop patentable, commercializable biomedical products, and the industrial R&D would provide feedback to stimulate new directions for university research and ideas.
    Keywords: R&D; innovation; Bayh-Dole Act; industry-university partnerships
    JEL: H41 O31 O34
    Date: 2018–01–04
  14. By: Matthew S. Clancy; GianCarlo Moschini (Center for Agricultural and Rural Development (CARD))
    Abstract: Biological innovations in agriculture did not enjoy protection by formal intellectual property rights (IPRs) for a long time, but the recent trend has been one of considerable broadening and strengthening of these rights. We document the nature of these IPRs and their evolution, and provide an assessment of their impacts on innovation. We integrate elements of the institutional history of plant IPRs with a discussion of the relevant economic theory and a review of applicable empirical evidence. Throughout, we highlight how the experience of biological innovation mirrors, or differs from, the broader literature on IPRs and innovation. We conclude with some considerations on the relation between IPRs and market structure and the pricing of proprietary inputs in agriculture
    Date: 2017–01
  15. By: Zheng, Zhijie; Huang, Chien-Yu; Yang, Yibai
    Abstract: This paper investigates the effects of monetary policy on long-run economic growth via different cash-in-advance constraints on R&D in a Schumpeterian growth model with vertical and horizontal innovation. The relationship between inflation and growth is contingent on the relative extents of CIA constraints and diminishing returns to two types of innovation. The model can generate a mixed (monotonic or non-monotonic) relationship between inflation and growth, given that the relative strength of monetary effects on growth between different CIA constraints and that of R&D-labor-reallocation effects between different diminishing returns vary with the nominal interest rate. In the empirically relevant case where horizontal R&D suffers from greater diminishing returns than vertical R&D, inflation and growth can exhibit an inverted-U relationship when the CIA constraint on horizontal R&D is sufficiently larger than that on vertical R&D. Finally, the model is calibrated to the US economy, and we find that the growth-maximizing rate of inflation is around 2.8%, which is closely consistent with recent empirical estimates.
    Keywords: Inflation; Endogenous growth; CIA constraint on R&D
    JEL: E41 O30 O40
    Date: 2018–02–21
  16. By: Bucci, Alberto; Eraydın, Levent; Müller, Moritz
    Abstract: This paper answers the following two questions: 1) In the data, can we find a dilution effect of population growth also on per-capita human capital investment? If yes, 2) how can we use this fact to explain theoretically the existence of a differential impact of population change on economic growth across countries? In the first part of the article we document empirically the considerable across-countries heterogeneity of a dilution effect of population growth also in regard to the process of per-capita human capital formation and observe that, at a country's level, population growth may be relevant (either positively or negatively) for economic growth depending on the specific way it affects the process of schooling-acquisition by agents. In the second part of the paper we use these results in order to build a multi-sector growth model which is capable of accounting (depending on the strength of the found dilution effect of population growth on per-capita human capital formation) for the non-monotonous correlation between demographic and economic growth rates in the long-run.
    Keywords: Human Capital Investment,Economic Growth,Population Growth,Dilution Effects,Research & Development
    JEL: J10 J24 O33 O41
    Date: 2018
  17. By: Federico Ciliberto; GianCarlo Moschini (Center for Agricultural and Rural Development (CARD)); Edward D. Perry
    Abstract: We develop and estimate a discrete-choice model of differentiated products for the corn and soybean seed industry in the United States to assess the welfare impact of genetically engineered (GE) crop varieties. We use a unique dataset, spanning the period 1996-2011, that contains rich information on the adoption of GE traits. Using a two-level nested logit model, we estimate that U.S. farmers are willing to pay a significant premium for GE traits, and this value has increased over time. Over the last five years of the sample, our results imply that farmers' average willingness to pay for glyphosate tolerance in soybeans was $24/acre/year. During the same period, farmers' willingness to pay for a common triple-stack in corn that includes two insect resistance traits and glyphosate tolerance was $35/acre/year. To compute overall welfare estimates, we evaluate counterfactual scenarios in which GE varieties are not available, with counterfactual non-GE seed prices predicted by a hedonic price equation. Counterfactual scenarios are adjusted to account for the fact that GE crop varieties crowded out non-GE varieties by the end of our sample. We estimate that GE innovations increased farmers' welfare by more than $14 billion over the period of study. We also find that the development and diffusion of GE traits increased U.S. corn and soybean seed industry revenues by nearly $23 billion over this period. Thus, seed firms have been able to appropriate the larger share of the ex post value of innovation created by GE technologies. Key Words: Discrete choice, Innovation, Nested logit, Product characteristics, Seed demand, Transgenic crops, Welfare JEL Codes
    Date: 2017–12
  18. By: Aurora Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC Tec; OBEGEF); André Monteiro (Faculdade de Economia, Universidade do Porto)
    Abstract: Studies on the efficiency of TTOs have mainly focused on well-developed countries (US and UK), whereas intermediate technology countries have been rather neglected. This study intends to complement existing empirical work on this matter by providing evidence on Portugal, an intermediate technology country, which has invested quite heavily in technological support infrastructures (including TTOs) in the last decade. Using the Data Envelopment Analysis approach to 18 Portuguese TTOs over the period 2007-2011, we found that TTOs had improved their efficiency especially in the more upstream stages of the technology transfer process (invention disclosures and priority filings). Additionally, based on econometric models, we found that universities characteristics do matter, with universities with a large number of accumulated patents and publications being associated to more efficient TTOs in terms of invention disclosures and priority filings. Moreover, the regional industrial basis, most notably the weight of the manufacturing industry and new high- and medium-tech firms in regions where the university is located, contributes significantly to the efficiency of TTOs, in both the more upstream (invention disclosure and priority filings) and downstream (start-ups) phases, reflecting the importance of strong business regional spillovers for TTOs efficiency.
    Keywords: Technology Transfer Offices, Efficiency, Data Envelopment Analysis, Universities, Portugal
    JEL: O34 O39 C14
    Date: 2018–02
  19. By: Arora, Ashish; Fosfuri, Andrea; Rønde, Thomas
    Abstract: Most technology startups are set up for exit through acquisition by large corporations. In choosing when to sell, startups face a tradeoff. Early acquisitions reduce execution errors but later acquisitions improve the likelihood of finding a better match because there are fewer buyers in the early market as early acquisitions require costly absorptive capacity. Moreover, the decision of buyers to invest in absorptive capacity is related to the decision of startups on the timing of the exit sale. In this paper, we build a model to capture this complexity and the related tradeoffs. We find that the early market for startups is inefficiently thin when the timing of exit is a strategic choice, i.e. startups have to commit whether to go early or late. Too few startups are sold early and too few buyers invest in absorptive capacity. Venture capital paradoxically aggravates the inefficiency. Instead, when the timing of exit is a tactical choice, i.e., startups can choose to go late after observing the early offers, there are too many early acquisitions and too much investment in absorptive capacity by incumbents.
    Keywords: absorptive capacity; Entrepreneurial exit; markets for technology
    JEL: L26 O31 O33
    Date: 2018–02

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