nep-ino New Economics Papers
on Innovation
Issue of 2018‒10‒01
thirteen papers chosen by
Uwe Cantner
University of Jena

  1. Young SMEs: Driving innovation in Europe? By Veugelers, Reinhilde; Ferrando, Annalisa; Lekpek, Senad; Weiss, Christoph T.
  2. A review of the offshore wind innovation system in Poland By Jakub Sawulski; Marcin Galczynski; Robert Zajdler
  3. How does the state destroy incentives in innovation financing? By Berlinger, Edina
  4. Government Intervention, Innovation, and Entrepreneurship By Meng Wei Chen; Yu Chen; Zhen-Hua Wu; Ningru Zhao
  5. The effect of clusters on the innovation performance of enterprises: traditional vs new industries By Miroslav Žižka; Vladimíra Valentová; Natalie Pelloneová; Eva Štichhauerová
  6. Recalibrating the Reported Returns to Agricultural R&D: What if We All Heeded Griliches? By Rao, Xudong; Hurley, Terrance M.; Pardey, Philip G.
  7. When Spillovers Enhance R&D Incentives By Chatterjee, Rittwik; Chattopadhyay, Srobonti; Kabiraj, Tarun
  8. Royalty Taxation under Tax Competition and Profit Shifting By Steffen Juranek; Dirk Schindler; Andrea Schneider
  9. The Cyclical Composition of Startups By Eran Hoffmann
  10. Private R&D Investment in the U.S. Food and Agricultural Sectors, 1950-2014 By Lee, Kyuseon; Pardey, Philip G.; Dehmer, Steven P.; Miller, Steve J.
  11. Resource and Competence (Internal) View vs. Environment and Market (External) View when defining a Business By Yngve Dahle; Martin Steinert; Anh Nguyen Duc; Roman Chizhevskiy
  12. R&D network formation with myopic and farsighted firms By MAULEON Ana,; SEMPERE-MONERRIS Jose J.,; VANNETELBOSCH Vincent,
  13. Technological Change, Household Debt, and Distribution By Eric Kemp-Benedict; Yun K. Kim

  1. By: Veugelers, Reinhilde; Ferrando, Annalisa; Lekpek, Senad; Weiss, Christoph T.
    Abstract: Using large scale EIB Investment Survey evidence for 2016 covering 8,900 non-financial firms from all size and age classes across all sectors and all EU Member States, we identify different innovation profiles based on a firm's R&D investment and/or innovation activities. We find that "basic" firms - i.e. firms that do not engage in any type of R&D or innovation - are more common among young SMEs, while innovators - i.e. firms that do R&D and introduce new products, processes or services- are more often old and large firms. This hold particularly for "leading innovators", ie those introducing innovations new to the market. To further explore why young SMEs are not more active in innovation, we explore their access to finance. We confirm that young small leading innovators are the most likely to be credit constrained. Grants seem to at least partly addressing the external financing access problem for leading innovators, but not for young SMEs.
    Keywords: young small companies,innovation,access to finance
    JEL: G24 O31 O38
    Date: 2018
  2. By: Jakub Sawulski; Marcin Galczynski; Robert Zajdler
    Abstract: In recent years offshore wind has become one of the fastest growing forms of renewable energy technology worldwide. Nevertheless, there are still several markets with large potential for deployment. In this paper we assess the offshore wind innovation system in Poland. We apply the Technological Innovation System approach. This procedure has been widely used to describe the offshore wind innovation system in Europe. However, the existing literature concerned European countries located at the technological frontier, while in this publication we examine this issue in a follower country, which is still waiting to deploy its first offshore wind installation. The upcoming transition of the Polish energy system, resulting from depletion of current coal resources and EU climate policy goals, makes Poland one of the most promising markets for renewable technologies, and the geographical location puts Poland in position of the main actor in kick-starting the offshore wind market on the Baltic Sea. However, in our study we identify a number of challenges for offshore wind technology deployment in Poland. Some of these challenges include the unpredictable public policies, limited grid infrastructure, rather poor quality of research provided by scientific organisations and weak interactions between science and business. To address these issues, we propose a set of policy instruments, which, we believe, will significantly contribute to the development of offshore wind technology in Poland.
    Keywords: RES, offshore wind, innovation system, TIS
    JEL: O31 O33 Q42 Q55
    Date: 2018–09
  3. By: Berlinger, Edina
    Abstract: We investigate the effect of state subsidy on the behavior of entrepreneur and venture capitalist in a double moral hazard and fixed investment model under positive externalities. We infer that investment subsidy and success fee improve the incentives, ease credit rationing, hence boost private financing, which explains the popularity of hybrid venture capital systems. The main disadvantage of these systems is, however, that the entrepreneur is encouraged to minimize his/her own capital investment and to ask for the maximal state subsidy available. It may happen that public sources go to entrepreneurs capable to finance their projects privately, so state subsidies increase state deficit (and private profits) without any effects on public welfare leaving other important areas underfinanced. We also prove that state guarantee definitely creates perverse incentives, hence it is not recommended in our model.
    Keywords: innovation financing, venture capital, state subsidy, moral hazard
    JEL: D21 G38 H32 H50 O38
    Date: 2018–09
  4. By: Meng Wei Chen (Indiana University at Bloomington, USA); Yu Chen (University of Graz, Austria); Zhen-Hua Wu (Nanjing University, China); Ningru Zhao (Nanjing Audit University, China)
    Abstract: We study how government intervention affects innovation and entrepreneurship, using a model in which two agents (e.g., one entrepreneur and one venture capitalist) engage in teamwork to launch a new business in which a moral hazard problem may persist for both parties. One feature of our model is that the government's financial support (grant) may have (positive) externalities on the teamwork of both parties, but is also constrained by budget costs. We compare two major forms of government intervention: indirect intervention and direct intervention. In the former, government intervention always raises the efforts of both parties and promotes social surplus (welfare). In the latter, government intervention may not always raise the efforts of both parties or promote social surplus relative to the case without government intervention. It may, however, deliver even higher social surplus than indirect financing when the government's share in the enterprise is dominant and its marginal contribution to the project is sufficiently high.
    Keywords: Government intervention; Double moral hazard; Direct financing; Indirect financing; Innovation, entrepreneurship
    JEL: G24 G32 G34 D80 D86
    Date: 2018–09
  5. By: Miroslav Žižka (Technical University of Liberec); Vladimíra Valentová (Technical University of Liberec); Natalie Pelloneová (Technical University of Liberec); Eva Štichhauerová (Technical University of Liberec)
    Abstract: The present paper assesses the effect of the formation of cluster organisations on the innovation performance of member enterprises in two different industries – the traditional textile manufacturing industry and the new nanotechnology industry. Innovation performance is explored using Data Envelopment Analysis in two phases. In the first phase, it examines the ability of enterprises to transform resources (labour force, long-term capital, intellectual capital) into registered industrial property rights: patents, utility models, industrial designs, and trademarks. In the second phase, it assesses the ability of enterprises to commercialise industrial property rights and generate profits. Innovation performance then integrates both phases. In each industry, two samples were assessed: member enterprises of cluster organisations, and enterprises that operate in the same industry and region but are not members of a cluster organisation. The results of the research show that the existence of a cluster organisation has a greater effect on innovation performance in the traditional textile manufacturing industry. In contrast, in the new nanotechnology industry, the existence of a cluster organisation did not prove to have any significant effect on innovation effectiveness. In this industry, the existence of a cluster organisation had only a partial effect related to better industrial property rights commercialisation. Research shows that the type of industry is an important factor in the innovation performance of clustered enterprises.
    Keywords: innovation effectiveness,data envelopment analysis,innovation efficiency,cluster organisation,industry cluster,textile cluster,nanotechnological cluster,innovation performance
    Date: 2018–06–29
  6. By: Rao, Xudong; Hurley, Terrance M.; Pardey, Philip G.
    Keywords: Productivity Analysis, Agricultural and Food Policy, International Development
    Date: 2017–06–15
  7. By: Chatterjee, Rittwik; Chattopadhyay, Srobonti; Kabiraj, Tarun
    Abstract: It is commonly believed that spillover reduces R&D incentives of a firm. This happens because of the non-appropriability problem. However, some empirical literature shows the possibility of enhanced R&D incentives under spillovers. While this is explained in the literature under incomplete information, we show that this may hold even under complete information. We show in particular that in a duopoly there are situations when with no spillovers only one firm invests in R&D, but under spillovers both the firms invest. This occurs when there is complementarity in research and the spillover is below a critical level.
    Keywords: R&D spillovers, non-appropriability problem, complete information, R&D incentives.
    JEL: D43 L13 O31
    Date: 2018–08–30
  8. By: Steffen Juranek; Dirk Schindler; Andrea Schneider
    Abstract: The increasing use of intellectual property as a means to shift profits to low-tax jurisdictions or jurisdictions with so-called ‘patent boxes’ is a major challenge for the corporate tax base of medium- and high-tax countries. Extending a standard tax competition model for capital-enhancing technology, royalty payments, and profit shifting, this paper suggests a simple fix: It is optimal to set a withholding tax on (intra-firm) royalty payments equal to the corporate tax rate and deny any deductibility of royalties. As the tax applies to the full payment, the problem of identifying the arm’s-length component in a digital economy (OECD BEPS Action 1) does not apply. Most importantly, the denial of royalty deductions is the Pareto-efficient solution under coordination and the unilaterally optimal policy under competition for mobile capital. In the latter case, a weakened thin capitalization rule is a crucial part of the policy package in order to avoid negative investment effects. Our results question the ban of royalty taxes in double tax treaties and the EU Interest and Royalty Directive.
    Keywords: source tax on royalties, tax competition, multinationals, profit shifting
    JEL: H25 F23
    Date: 2018
  9. By: Eran Hoffmann (Stanford University)
    Abstract: This paper proposes a new theory of business cycles based on the idea that financial uncertainty shocks change the nature of innovation. When investors become more risk tolerant, they fund riskier startups with greater growth potential. As these ambitious startups grow, the initial shock propagates and generates a boom in output and employment. I develop a heterogeneous firm industry model of the US business sector with countercyclical risk premia and innovation by startups and existing firms. The quantitative implementation of the model jointly matches time series properties of stock returns and macroeconomic aggregates, as well as micro evidence on firm cohort growth over the cycle.
    Date: 2018
  10. By: Lee, Kyuseon; Pardey, Philip G.; Dehmer, Steven P.; Miller, Steve J.
    Keywords: Agribusiness, Industrial Organization, Agricultural and Food Policy
    Date: 2017–06–15
  11. By: Yngve Dahle; Martin Steinert; Anh Nguyen Duc; Roman Chizhevskiy
    Abstract: Startups is a popular phenomenon that has a significant impact on global economy growth, innovation and society development. However, there is still insufficient understanding about startups, particularly, how to start a new business in the relation to consequent performance. Toward this knowledge, we have performed an empirical study regarding the differences between a Resource and Competence View (Internal) vs Environment and Market View (External) when defining a Business. 701 entrepreneurs have reflected on their startups on nine classes of Resources (values, vision, personal objectives, employees and partners, buildings and rental contracts, cash and credit, patents, IPR's and brands, products and services and finally revenues and grants) and three elements of the Business Mission ("KeyContribution", "KeyMarket" and "Distinction"). It seems to be a tendency to favour the Internal View over the External View. This tendency is clearer in Stable Economies (Europe) than in Emerging Economies (South Africa). There seems to be a co-variation between the tendency to favour the Internal View and the tendency to focus on adding Resources. Finally, we found that an order-based analysis seems to explain the differences between the two views better than a number-based method.
    Date: 2018–08
  12. By: MAULEON Ana, (Université Saint-Louis Bruxelles and CORE); SEMPERE-MONERRIS Jose J., (University of Valencia); VANNETELBOSCH Vincent, (CORE, Université catholique de Louvain)
    Abstract: We study the formation of R&D networks when each firrm benefits from the research done by other firms it is connected to. Firms can be either myopic or farsighted when deciding about the links they want to form. We propose the notion of myopic-farsighted stable set to determine the R&D networks that emerge in the long run. When the majority of firms is myopic, stability leads to R&D networks consisting of either two asymmetric components with the largest component comprises three-quarters of firms or two symmetric components of nearly equal size with the largest component having only myopic firms. But, once the majority of firms becomes farsighted, only R&D networks with two asymmetric components remain stable. Firms in the largest component obtain greater profits, with farsighted firms having in average more collaborations than myopic firms that are either loose-ends or central for spreading the innovation within the component. Besides myopic and farsighted -firms, we introduce yes-firms that always accept the formation of any link and never delete a link subject to the constraint of non-negative profits. We show that yes-firms can stabilize R&D networks consisting of a single component that maximize the social welfare. Finally, we look at the evolution of R&D networks and we find that R&D networks with two symmetric components will be rapidly dismantled, single component R&D networks will persist many periods, while R&D networks consisting of two asymmetric components will persist forever.
    Keywords: networks, R&D collaborations, oligopoly, myopia, farsightedness
    JEL: C70 L13 L20
    Date: 2018–09–05
  13. By: Eric Kemp-Benedict; Yun K. Kim
    Abstract: We present a stylized model to explore the interaction between household debt, the functional income distribution, and technological change. We assume that weak labor bargaining power allows firms to set their markups in order to meet a target profit rate. At a low wage share, workers' households are assumed to have limited flexibility in meeting financial goals, so household indebtedness tends to rise as the wage share falls. Rising indebtedness further lowers labor's bargaining power, a phenomenon that was observed in the wave of financialization that began in the late 20th century. Thus, rising debt levels allow firms even greater freedom to raise their target profit rate. We find that the dynamics can be either stable or unstable, with the potential for a self-reinforcing pattern of rising household indebtedness and falling wage share, consistent with trends in the US from the 1980s onward. The unstable cycle can be triggered by increased willingness by workers to incur debt and rising influence of household indebtedness on labor's bargaining strength and income distribution. The model can shed some light on widely-observed trends over recent decades regarding household indebtedness, inequality, and technological changes in the US, and potentially in other OECD countries.
    Date: 2018–08

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