nep-ino New Economics Papers
on Innovation
Issue of 2018‒09‒10
eighteen papers chosen by
Uwe Cantner
University of Jena

  1. Technological change and economic development: endogenous and exogenous fluctuations By Marianna Epicoco
  2. Financing innovation: two models of private equity investment By Laure-Anne Parpaleix; Kevin Levillain; Blanche Segrestin
  3. Innovation, Knowledge Diffusion, and Selection By Danial Lashkari
  4. A mathematical toy model of R&D process. How this model may be useful in studying territorial development By Angelo Bonomi
  5. Some Simple Economics of Patent Protection for Complex Technologies By Denicolò, Vincenzo; Zanchettin, Piercarlo
  6. Income Segregation and Rise of the Knowledge Economy By Enrico Berkes; Ruben Gaetani
  7. Labour share developments over the past two decades: The role of technological progress, globalisation and “winner-takes-most” dynamics By Cyrille Schwellnus; Mathilde Pak; Pierre-Alain Pionnier; Elena Crivellaro
  8. Interdisciplinarity of Innovation Assessments in Plant Breeding - A Citation Network Analysis By Gerullis, Maria K.; Sauer, Johannes
  9. A Patent Mining Approach for Technological opportunity Analysis in the Telehealth Industry By Juite Wang; Chun-Hao Huang
  10. Skill variety in entrepreneurship: A literature review and research directions By Krieger, Alexander; Block, Joern; Stuetzer, Michael
  11. Putting China in perspective: a comparative exploration of the ascent of the Chinese knowledge economy By Rodríguez-Pose, Andrés; Wilkie, Callum
  12. Technology-Driven Unemployment By Gregory Casey
  14. How Cross-Boundary Disruptive-from-Above Superseded Incumbents' Sustaining Innovation in the Mobile Industry: Qualitative, Graphical and Computational Insights By Burgelman, Robert A.; Thomas, John K.
  15. Knowledge-Driven Economic Growth: The Case of Sub-Saharan Africa By Stephen Oluwatobi; Isaiah Olurinola; Philip Alege; Adeyemi Ogundipe
  16. Patent Thickets Identification By GÄ…tkowski, Mateusz; Dietl, Marek; Skrok, Lukasz; Whalen, Ryan; Rockett, Katharine
  17. Innovating for the Better? The Role of Advocacy Group Work Experience for Employee Pay By Grimpe, Christoph; Kaiser, Ulrich; Sofka, Wolfgang
  18. Information Distortion, R&D, and Growth By Stephen Terry; Anastasia Zakolyukina; Toni Whited

  1. By: Marianna Epicoco
    Abstract: This paper aims at exploring the endogenous and exogenous forces that determine long-run fluctuations of innovative and economic activity. It proposes that technological paradigm shifts, structural change and major fluctuations of production are the result of the same endogenous process. This is defined as a co-evolutionary process between technological and economic variables based on cumulative multiplier and accelerator feedback effects between investments in innovation and demand. Exogenous factors are supposed to act upon this endogenous process, influencing the length and amplitude of fluctuations. This framework contributes to extant literature as it envisages an explicit endogenous mechanism explaining cyclical fluctuations of innovative and economic activity, and, at the same time, incorporates exogenous factors. Moreover, by combining the Schumpeterian analyses of innovation dynamics with the multiplier and accelerator effects coming from Keynesian theories, the framework integrates the impact of technological variables on economic activity and vice versa. To provide a preliminary supporting evidence, we have fitted the ICT cycle and the economic cycle to patent and productivity data, respectively. Our results suggest that the growth potential of ICT could be declining. This situation may represent an important opportunity, for public policy and socioinstitutional actors, to orient future development toward socially desirable directions.
    Keywords: technological paradigm shift, structural change, economic fluctuations, co-evolution, productivity slowdown, ICT.
    JEL: O33 O40 O11 E32
    Date: 2018
  2. By: Laure-Anne Parpaleix (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique); Kevin Levillain (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique); Blanche Segrestin (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The ability to adapt to fast-paced business change has become critical to firms' competitiveness. Thus, it requires firms to continuously innovate. Extensive research efforts have been conducted to understand the drivers behind a firm's capacity to constantly innovate. If significant advance has been made in the fields of innovation management and design theory, there is still a need for research in finance to integrate these developments. Especially in clarifying the relationship between private equity investment and corporate innovation. Thus, this paper specifically aims at exploring new investment models in private equity to support the development of firm's sustained innovation capabilities. Based on a literature review exploring the existing private equity investment practices and their potential links with innovation, we highlight the main model used by private equity. We show that this model cannot account for the two design regimes (extracted from design theories) required to support innovation capabilities. Therefore, we build a second hypothetical model that could complement the first one to do so. We then conduct an empirical study to assess whether actual private equity funds' practices reflect the use of this second hypothetical model, and if so to refine it. From a managerial point of view, this research contributes to shape new valuation approaches and post-investment strategies that better foster invested firm's innovation capabilities, among which R&D activities.
    Date: 2018–07–02
  3. By: Danial Lashkari (Yale University)
    Abstract: This paper constructs a theory of industry growth through innovation and selection-driven creative destruction. Firms’ ideas determine their productivity and stochastically evolve over time. Firms innovate to improve their ideas and endogenously exit if unsuccessful. Entrants adopt the ideas of incumbents. In this model, when better ideas are innovated or adopted, they selectively replace worse ideas. Innovation externalities vary based on firm productivity: ideas generated by more productive firms create 1) longer-lasting positive externalities due to knowledge diffusion and 2) stronger negative externalities due to dynamic displacement of other firms. Therefore, the net external effect of innovation on aggregate productivity is heterogeneous and market equilibrium misallocates investments across firms. The solution to the social planner's problem suggests that optimal innovation policy instruments should depend on firm productivity. Quantitatively, the misallocations are large when the model is calibrated to firm-level data from US manufacturing and retail trade, and imply first-order considerations for the design of innovation policy.
    Date: 2018
  4. By: Angelo Bonomi (CNR-IRCRES, National Research Council, Research Institute on Sustainable Economic Growth, via Real Collegio 30, Moncalieri (TO) – Italy)
    Abstract: This work describes a mathematical application of a technological model of the R&D process, presented in a previous work, with the objective to contribute to a better knowledge of relation between R&D investments and growth. The model considers R&D as an organized flux of knowledge and capitals generating new technologies and a general knowledge exploitable for further R&D activities. The mathematical model makes an oversimplification of the R&D activity considering R&D investments related to number of R&D projects carried out, and economic growth, stagnation or decline, related to the number of new technologies entering in use. The model considers the circulating knowledge in a territory in term of number of information packages generated by R&D projects and external contributions in term of scientific, technical or other knowledge. A combinatory process with all available packages gives the total number of potential innovative ideas, part of them generating R&D project proposals. The ratio between the number of R&D proposals and the total number of potential innovative ideas may be considered related to the innovative system efficiency of the territory. Proposals are selected forming the number of R&D projects effectively carried out following the adopted strategies for financing R&D projects. The number of new technologies entering in use depends on a selection rate of all R&D projects carried out, and the number of new successful technologies with high rates of return of investment depends on a selection rate of all new technologies entering in use. The study considers an application of the model consisting in the introduction of a variable number of initial R&D projects in a territory with various degrees of innovative efficiency resulting or not, after a certain time, in entering in use of new technologies and possible successful technologies. Calculations show that dependence curves, in term of number of carried out R&D projects as a function of the innovative efficiency of the territory, and following dependence of formation or not of new or successful technologies, delimit three specific areas in the diagram corresponding to development, stagnation and decline of the technological asset of the territory. The results of calculations of the model show how complex is the relation between R&D investments and economic growth, characterized by absence or weak growth at level of R&D investments under a critical value, and exponential growth above due to the autocatalytic effect of R&D. This discontinuity resulting by the model calculations is in contrast with assumed continuity of dependence of growth by R&D investments often considered in econometric models.
    Keywords: Technology innovation, Research & development, R&D model, R&D management, Socio-economic growth, Territorial development
    JEL: C6 O31 O32
    Date: 2017–12
  5. By: Denicolò, Vincenzo; Zanchettin, Piercarlo
    Abstract: We analyze patent protection when innovative technologies are "complex" in that they involve sequential and complementary innovations. We argue that complexity affects the classic Nordhaus trade-off between innovation and static monopoly distortions. We parametrize the degree of sequentiality and that of complementarity and show that the optimal level of patent protection increases with both. We also address the issue of the optimal division of profit among different innovators.
    Keywords: Complementarity; Division of profit; Elasticity of the supply of inventions; Patent design; Sequential innovation
    JEL: O30 O40
    Date: 2018–07
  6. By: Enrico Berkes (Northwestern University); Ruben Gaetani (University of Toronto)
    Abstract: We analyze the effect of the rise of knowledge-based activities on spatial inequality within U.S. cities, exploiting the network of patent citations to instrument for local trends in innovation. We find that innovation intensity is responsible for 20% of the overall increase in urban segregation between 1990 and 2010. This effect is mainly driven by the clustering of employment and residence of workers in knowledge-based occupations. We develop and estimate a spatial equilibrium model to quantify the contribution of productivity and residential externalities in explaining the observed patterns. Endogenous amenities account for two thirds of the overall effect. We illustrate the relevance of the model for policy analysis by studying the impact of four proposed projects for Amazon’s HQ2 on the structure of Chicago.
    Date: 2018
  7. By: Cyrille Schwellnus; Mathilde Pak; Pierre-Alain Pionnier; Elena Crivellaro
    Abstract: Over the past two decades, real median wage growth in many OECD countries has decoupled from labour productivity growth, partly reflecting declines in labour income shares. This paper analyses the drivers of labour share developments using a combination of industry- and firm-level data. Technological change in the investment goods-producing sector and greater global value chain participation have compressed labour shares, but the effect of technological change has been significantly less pronounced for high-skilled workers. Countries with falling labour shares have witnessed both a decline at the technological frontier and a reallocation of market shares toward “superstar” firms with low labour shares (“winner-takes-most” dynamics). The decline at the technological frontier mainly reflects the entry of firms with low labour shares into the frontier rather than a decline of labour shares in incumbent frontier firms, suggesting that thus far this process is mainly explained by technological dynamism rather than anti-competitive forces.
    Keywords: global value chains, Labour share, skills, superstar firms
    JEL: D33 J24 L11 O33
    Date: 2018–09–04
  8. By: Gerullis, Maria K.; Sauer, Johannes
    Abstract: The poster contribution asks how interdisciplinary scientific work has become in fields of research relevant to agricultural science. It targets at shedding more light to the answer of this question for identifying structure and quantity of interdisciplinary scientific work within the body of scientific articles concerned with innovation assessments in plant breeding. With a combination of literature and citation network analysis (NEWMANN, 2006, 2011) different quantitative and qualitative methods targeted at analyzing innovations in plant breeding have been identified and the epistemic connections between the life, social and economic sciences were scrutinized.
    Keywords: Crop Production/Industries, Research and Development/Tech Change/Emerging Technologies, Research Methods/ Statistical Methods
    Date: 2017–08–15
  9. By: Juite Wang (Graduate Institute of Technology Management, National Chung Hsing University); Chun-Hao Huang (Graduate Institute of Technology Management, National Chung Hsing University)
    Abstract: Early identification of emerging technological opportunities is crucial for companies to formulate technology strategies that can provide a core competitive advantage over competitors in the future. This research develops a dynamic patent citation analysis methodology based on the theory of social network evolution to analyze patent documents for technological opportunity discovery in the telehealth industry. We found several technological opportunities, including healthcare administration, vital sign detection methods, transaction-based healthcare network management, movement disorder therapeutic system, health related services for IOT devices, alarm management for vital signs, and teleconference among medical practitioners. The research findings are useful for telehealth firms to understand the technological trend and explore potential technological opportunities, while formulating technology strategies to provide a core competitive advantage over competitors in the future.
    Keywords: Patent mining, technology opportunity analysis, technology strategy, telehealth.
    JEL: O31 O32 O33
    Date: 2018–07
  10. By: Krieger, Alexander; Block, Joern; Stuetzer, Michael
    Abstract: Lazear’s concept of skill variety has been established in entrepreneurship research and is con-sidered an important extension to human capital theory. The literature on skill variety, its de-terminants and its effects on entrepreneurial outcomes is growing. But especially the literature on determinants of skill variety as well as the relation between gender and skill variety is still in its infancy. Thus, this article takes stock of the academic knowledge collected about skill variety, its outcomes and determinants, its measurement alternatives as well as the role of gender. Overall, it can be summarized that skill variety is an important driver of entrepreneur-ship - above all for the entry-decision into entrepreneurship. The literature on skill variety and entrepreneurial success shows mixed evidence. Looking at the determinants of skill variety, extant literature is scarce. The debate whether the acquisition of skill variety is driven by a purposeful investment strategy or by the possession of certain endowment factors (such as risk aversion or a taste for variety) has not come to a conclusion. Regarding the topic of gender and skill variety, the studies under investigation report negative correlations between being female and skill variety. Measurement alternatives of skill variety used in academic research are diversely and sometimes inconsistently used. This makes it difficult to compare the results of different studies.
    Keywords: Skill variety; Balanced Skills, Literature Review
    JEL: I25 L26 M13
    Date: 2018
  11. By: Rodríguez-Pose, Andrés; Wilkie, Callum
    Abstract: This article traces the ascent of China from knowledge economy laggard to world leader over the last two decades, using a comparative perspective. Chinese trends in R&D and patenting are compared to those of the countries of the ‘triad’ (the European Union, Japan and the US), as well as to those of other large emerging economies (Brazil, India, Mexico and South Africa). The analysis demonstrates how both in innovation inputs and outputs China reflects an innovation reality closer to that of the most developed areas of the world than to that of other emerging countries. However, the rapid ascent of Chinese innovation has generated a distinct set of territorial dynamics, with innovation much more geographically concentrated than elsewhere in the world and more reliant on agglomeration forces than on more traditional ‘innovative’ drivers. Such a distinct geography of innovation may have until now facilitated the innovation surge in China, but poses serious future risks in terms of the sustainability of the system.
    Keywords: innovation; knowledge economy; R&D; patenting; regions; China
    JEL: N0
    Date: 2016–11–01
  12. By: Gregory Casey (Brown University)
    Abstract: To examine the relationship between technological progress and unemployment, I study a model that features putty-clay production, directed technical change, and wage bargaining. The first goal of this project is to understand the forces that deliver a constant steady state unemployment rate in the presence of labor-saving technical change. Labor-saving technical change increases unemployment, which lowers wages and creates incentives for future investment in labor-using technologies. In the long run, this interaction generates a balanced growth path that is observationally equivalent to that of the standard neoclassical growth model, except that is also incorporates a positive steady state level of unemployment. The second goal is to understand the effects of technological breakthroughs that permanently lower the cost of creating new labor-saving technologies. Breakthroughs lead to faster growth in output per worker and wages, but also yield higher long-run unemployment and a lower labor share of income. Despite increasing the speed of technological progress, breakthroughs also slow economic growth in the short-run.
    Date: 2018
  13. By: Jingong Huang (University of Melbourne)
    Abstract: This paper develops a multi-sector endogenous growth model which embeds a technology network that captures heterogeneous intersectoral knowledge spillovers. Each sector serves both as a distributor and a consumer of knowledge: the former depends on a sector's position in the network; the latter depends on its efficiency in utilising knowledge. The interaction of these forces influences long-run economic growth, sectoral shares and the firm size distribution. The sparsity of the network imposes an upper bound on the impact of knowledge spillovers. In this model, sectors converge to the same growth rate if they belong to the same irreducible network. However, their contributions to economic growth differ substantially, depending on their positions in the technology network and their efficiency in conducting innovation. Consequently, the model has implications for the allocation of innovation subsidies. The gain in economic growth derived from promoting innovation in the sector that utilises knowledge most efficiently is over 10,000 times larger than gain derived from promoting innovation in the least efficient sector.
    Date: 2018
  14. By: Burgelman, Robert A. (Stanford University); Thomas, John K. (?)
    Abstract: This study of the transformation of the mobile device industry examines how cross-boundary disruption (XBD) superseded the incumbents' sustaining innovation, which helps explain the rapid rise of Apple and Google Android and the equally rapid fall of Nokia and other incumbents between 2007 and 2013. Four concatenated strategic factors limited the incumbents' capacity to adapt: (1) incumbents' market myopia about latent unserved needs of the high-end customer segment, (2) incumbents' dynamic capabilities gaps for meeting these needs, (3) demand shift timing of high-end customers toward the disruptors' radically innovative products, and (4) the rapid growth of novel ecosystems around the disruptors' technology platforms. Graphical interpretation further elucidates these concatenated strategic factors and suggests computational implications. The paper's qualitative, graphical and computational insights help formulate a conceptual framework of XBD-from-above, which contributes to theory development about inter-industry disruption and transformation.
    Date: 2018–08
  15. By: Stephen Oluwatobi (Covenant University, Nigeria); Isaiah Olurinola (Covenant University, Nigeria); Philip Alege (Covenant University, Nigeria); Adeyemi Ogundipe (Covenant University, Nigeria)
    Abstract: The experience of South Korea, India, China and Singapore reveals that developing economies can fasttrack development, leapfrog the stages of development and catch up with advanced economies by putting knowledge capital as the driver of development. If the knowledge economy is therefore an accelerant of development for both advanced and developing economies, it is possible for Sub-Saharan African (SSA) economies to also catch up with advanced economies. It was on this basis that this study assessed the knowledge capacity of SSA and the effect it has on its economic advancement. Given the importance of the interrelatedness among the knowledge economy elements, this study, thus, examined how the interaction effect between the elements of the knowledge economy affects economic growth in 32 SSA countries, for which data were available, over the period of 17 years (1996-2012). Using the System Generalized Method of Moments (SGMM), the study found out that institutions and human capital in SSA mitigate the effect of innovation on economic growth in the region, thus, making it a lean knowledge economy.
    Keywords: Economic Growth; Human Capital; ICT; Innovation; Institutions; Knowledge Economy
    JEL: O10 O30 O38 O55 O57
    Date: 2018–01
  16. By: GÄ…tkowski, Mateusz; Dietl, Marek; Skrok, Lukasz; Whalen, Ryan; Rockett, Katharine
    Abstract: Patent thickets have been identified by various citations-based techniques, such as Graevenitz et al (2011) and Clarkson (2005). An alternative direct measurement is based on expert opinion. We use natural language processing techniques to measure pairwise semantic similarity of patents identified as thicket members by experts to create a semantic network. We compare the semantic similarity scores for patents in different expert-identified thickets: those within the same thicket, those in different thickets, and those not in thickets. We show that patents within the same thicket are significantly more semantically similar than other pairs of patents. We then present a statistical model to assess the probability of a newly added patent belonging to a thicket based on semantic networks as well as other measures from the existing thicket literature (the triples of Graevenitz and Clarkson’s density ratio). We conclude that combining information from semantic distance with other sources can be helpful to isolate the patents that are likely to be members of thickets.
    Keywords: Patent Thickets Identification, Intellectual Property, Patenting, Patent Thickets, Semantic Distance, Latent Semantic Analysis, Natural Language Processing, Complexity
    Date: 2018–09–04
  17. By: Grimpe, Christoph (Copenhagen Business School); Kaiser, Ulrich (University of Zurich); Sofka, Wolfgang (Copenhagen Business School)
    Abstract: How valuable is work experience with advocacy groups, e.g. Greenpeace, for new hires of innovative firms? We integrate strategic human capital with stakeholder theory and suggest that this experience creates scarce human capital (knowledge, skills, abilities) facilitating innovations acceptable and legitimate for stakeholders such as regulators or residents. We argue that such human capital is complementary to firm resources and leads to a value surplus. Individuals with advocacy group work experience can subsequently appropriate at least parts of that surplus through higher salaries. Using matched data for 10,303 employees in Denmark, we find that new hires of innovative firms with advocacy group human capital enjoy salary premiums which are stronger in mature and technologically concentrated firms. Our findings have important implications for HR decision making.
    Keywords: resource complementarity, advocacy groups, scarce human capital, stakeholder theory, value creation and capture
    JEL: J24 J6 C21
    Date: 2018–06
  18. By: Stephen Terry (Boston University); Anastasia Zakolyukina (The University of Chicago); Toni Whited (University of Michigan)
    Abstract: Does firms' opportunistic information disclosure affect investment in R&D? To answer this question, we estimate a dynamic model that incorporates a trade-off between R&D investment and accruals manipulation. This trade-off arises because both are effective tools for distorting observable earnings. Distortion incentives stem from the combination of incomplete investor information and short-term manager compensation incentives based on the stock price. These incentives alone hurt shareholder value by 13%. With these incentives in place, regulations preventing information distortion further distort real investment, whose volatility rises by 10%. This excess volatility lowers firm value by 0.5%.
    Date: 2018

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