nep-ino New Economics Papers
on Innovation
Issue of 2018‒10‒29
eighteen papers chosen by
Uwe Cantner
University of Jena

  1. Absorptive capacity, economic freedom and the conditional effects of regional policy. By Jonathan Eberle; Thomas Brenner; Timo Mitze
  2. Research & Innovation in Spain 2016 By Ana Fernandez-Zubieta; Irene Ramos-Vielba
  3. The European Patent System: A Descriptive Analysis By Georg von Graevenitz; Antanina Garanasvili
  4. Innovation from science: the role of network content and legitimacy ties By D'Este, Pablo; Mc Kelvey, Maureen; Yegros-Yegros, Alfredo
  5. Social Capital and Innovation - Can Social Trust Explain the Technological Innovation of the High-performing East Asian Economies? By Seo-Young Cho
  6. How Can Intermediaries Promote Business Model Innovation: The Case of ‘Energiesprong’ Whole-House Retrofits in the United Kingdom (UK) and the Netherlands By Donal Brown; Paula Kivimaa; Steve Sorrell
  7. Asymmetric information and heterogeneous effects of R&D subsidies: evidence on R&D investment and employment of R&D personel By Ugur, Mehmet; Trushin, Eshref
  8. The relationships among different types of market knowledge, ambidextrous learning, and different types of innovations By Kuan-Yang Chen; Chih-Hui Hsiao; Po-Yuan Chen; Cheng-Fei Lee
  9. Urban innovation policy in the postdevelopmental era: Lessons from Singapore and Seoul By Kris Hartley, Jun Jie Woo and Sun Kyo Chung
  10. Connections matter: the influence of network sparseness, network diversity and a tertius iungens orientation on innovation By Llopis, Oscar; D’Este, Pablo; Adrián A. Díaz-Faes
  11. The Context of Service Innovation in Alibaba By Mei-Tai Chu
  12. EU regions and the upgrading for the digital age By Antonio Vezzani; Emanuele Pugliese; Petros Gkotsis
  13. How deep are the roots of agricultural innovation? Evidence from patents By Clancy, Matthew S.
  14. Productivity measurement, R&D assets and mark-ups in OECD countries By Paul Schreyer; Belen Zinni
  15. The Effect of Metropolitan Technological Progress on the Non-metropolitan Labor Market: Evidence from U.S. Patent Counts By Hean, Oudom
  16. Data, measurement and initiatives for inclusive digitalization and future of work By Nofal, María B.; Coremberg, Ariel; Sartorio, Luca
  17. What do we know about R&D spillovers and productivity? Meta-analysis on heterogeneity and statistical power By Ugur, Mehmet; Awaworyi Churchill, Sefa; Luong, Hoang Minh
  18. Faraway, so close! technology diffusion and firm heterogeneity in the medium term cycle of advanced economies By Mónica Correa-López; Beatriz de Blas

  1. By: Jonathan Eberle (Department of Geography, Philipps University Marburg); Thomas Brenner (Department of Geography, Philipps University Marburg); Timo Mitze (Department of Business and Economics, University of Southern Denmark)
    Abstract: This paper analyzes the role played by regional conditioning factors, namely absorptive capacity and economic freedom, for the working of regional policy in Germany. We construct synthetic composite indicators to measure differences in these factors across German regions and stratify regions by their respective values. We then identify the subsample-specific transmission channels of regional policies in a spatial panel vector-autoregressive (VAR) framework and compare the direction and magnitude of effects by impulse-response function analysis and ex-post t-tests. The results point to two main channels of policy impact: While regions with low levels of absorptive capacity and economic freedom benefit from public funding only in terms of a traditional funding channel (i.e. higher investment rates and partly increased human capital levels), the link between regional policy, GDP and technology growth is very weak for these regions. In comparison, our findings hint at significant positive effects on regional GDP per workforce and patent activity for regions with a high absorptive capacity and economic freedom (i.e. a knowledge-based funding channel). This underlines the role of regional conditions for the direction and magnitude of funding effects and should be considered by policy makers as a means to trigger policy effectiveness in times of stagnating or decreasing funding volumes.
    Keywords: regional policy, production function, absorptive capacity, economic freedom, SpPVAR, impulse-response functions
    JEL: C33 R11 R58 O38 O47
    Date: 2018–10
  2. By: Ana Fernandez-Zubieta; Irene Ramos-Vielba
    Abstract: The economic situation in Spain continued to improve in 2015, with growth in gross domestic product (GDP) of 3.2% - well above the EU-28 average of 2.2% (Eurostat-2016). The budget deficit as a percentage of GDP reduced over the year by 0.9%, reaching a figure of 5.1%. However, government debt increased to 99.8% of GDP. The unemployment rate has improved considerably over the last year (by 9.8%), but remains among the highest in the EU-28. Spanish business relies heavily on small and medium enterprises (SMEs), particularly micro-companies of less than ten employees (EC, 2016a). Although the share of SMEs in Spain is similar to other EU Member States (MS), the role of SMEs in employment creation and value added is high in European terms (EC, 2016a). There is a significant productivity gap between large enterprises and micro-companies in Spain. Additionally, Spanish firms show a growth rate below the European average (EC, 2016a). Entrepreneurship performance indicators show that Spain is increasing its business creation rate, but it is suffering from increasing firm destruction and decreasing firm survival rates (see section 1.1.2). Self-employment figures have remained quite stable over the crisis period, representing 17.7% of total employment in 2008 and 17.4% in 2015 (OECD, 2016a). However, lack of access to the labour market underlies the increasing figures of entrepreneurship ‘out of need’ (GEM, 2014). Research and innovation (R&I) investment figures remain far from pre-crisis period levels, in both total and relative terms (see section 2). Gross Expenditure on Research and Development (GERD) has declined by 9.8% between 2010 and 2015, reaching a figure of EUR 13,158 million (similar to the levels of 2007). In relative terms, R&D investments declined up to 1.22% of GDP, returning to 2006 levels. This decline in R&D investments indicates that it will be very difficult for Spain to meet the GERD target of 2% of GDP by 2020, which was set in the Spanish Strategy for Science, Technology and Innovation (EECTI) (2013–2020). GERD is also far from the targets set by the Spanish State Plan of Scientific and Technical Research and Innovation (PECTI) (2013–2016) (1.33% for 2013 and 1.48% for 2016). After a slight increase in 2014, the public budget for R&I declined again in 2015 by 6.6% and remains much lower than in the pre-crisis period. Government budget appropriations or outlays on R&D (GBAORD) reached a total figure of EUR 5,388 million in 2015, lower than in 2003 (EUR 5,742). The declining trend of the public budget for R&D (Presupuestos Generales del Estado – PGE-46) hashalted, but was greatly reduced over the crisis period: from EUR 9,673 million in 2009 to EUR 6,425 million in 2016 (ICONO-Ministry of Finance -MINHAP, 2016). In 2016, the R&I budget represented 1.47% of the total budget, a figure that is lower than for 2001 (1.49%) and far from the maximum of of 2.7% achieved in 2008 (ICONO-MINHAP, 2016). Not surprisingly, the role of government in R&D investment is declining and slipping further behind the EU-28 average. There has also been a considerable reduction in the rate of improvement of the main output indicator of the academic sector (scientific publications), the strongest innovation performance indicator of Spain (EC, 2016b). The annual growth rate of international scientific co-publications per million population has dropped form 12% in 2011 to 4.6% in 2015, decreasing the opportunities of the academic sector to become more competitive in international terms. In fact, growth in Spanish participation in world scientific production started to decline in 2013, slowinging from 3.24% in 2012 to 3.21% in 2013 (FECYT, 2016a). Reduction of investment in R&D by the business sector has continued over the post-crisis period (see section 2.3). Business R&D expenditure (BERD) has been declining since 2008, falling behind the EU-28 average. BERD represented 0.64% of GDP in 2015, less than the figure of 0.74% in 2008 and far from the EU-28 average (1.3% in 2015). Whilst the business sector remains the main source of R&D funds (0.57% of GDP in 2014), this is well below from the EU-28 average (1.13% in 2014). The combination of increasing labour productivity of Spain and high unemployment levels indicates that competitive gains are relatively inefficient. The lack of R&I investments explain the overall declining innovation performance of the Spanish R&I system (EC, 2016 b) and could partially explain this inefficient economic growth. In order to identify the most important challenges of the Spanish R&D system it is necessary to take into account both the already existing long-term challenges of the R&I system (OECD, 2006; EC, 2011; ERAC, 2014) and the effect of the economic crisis on the system. The main weaknesses and opportunities with regard to increasing the level of performance of the Spanish R&I system, as identified by Fernández-Zubieta and colleagues (2017).
    Date: 2018–01–08
  3. By: Georg von Graevenitz (Queen Mary, University of London); Antanina Garanasvili (Bournemouth University)
    Abstract: The European Patent System consists of national patent offices (NPOs) and the supranational European Patent Office (EPO). EPO and the NPOs have granted patents in Europe side-by-side since 1980. The resulting patent system is complicated and less coordinated than might be expected. Firms must consider a number of variables when selecting the route of patenting they take within this system: price, rigour of examination, duration of examination, quality of legal redress. To date there is little descriptive evidence on how firms choose between EPO and national offices. This paper provides a rich descriptive analysis of patenting in Europe. We analyze how origin, size and technological focus of companies, affect how they choose among patent offices within the EPS and report differences in examination durations and grant rates across patent offices.
    Keywords: Patents, European Patent System, Validation, Patent Propensity
    JEL: O34 O31 L20 K11
    Date: 2018–10
  4. By: D'Este, Pablo; Mc Kelvey, Maureen; Yegros-Yegros, Alfredo
    Abstract: This study contributes to advance understanding on the micro-level foundations of the relationship between scientific research and innovation. We adopt a relational approach to scientific research networks through the analysis of the content of network ties, in contrast to more standard network approaches which are grounded on structural features of networks. We argue that the perceived legitimacy afforded through ties within research networks play a critical role in reconciling the conflicting logics of science and innovation. The proposed hypotheses are empirically tested in the context of the Spanish biomedical research system, drawing on a large scale survey of biomedical scientists. Our results indicate that the scientists’ acquisition of legitimacy through their research network play a critical role in the context of the translation from scientific research to technological achievements and innovations. Our findings also show that past scientific impact has a reinforcing effect on the relationship between legitimacy acquisition and technological achievements. On the contrary, we find that direct interaction with beneficiaries provides an alternative path to reconcile the conflicting logics of science and market, by compensating for the lack of acquired legitimacy from research network.
    Date: 2018–03–20
  5. By: Seo-Young Cho (University of Marburg)
    Abstract: The economic success and innovative outcomes of the high performing East Asian countries, albeit often characterized as low-trust societies, suggests reexamination of the presumed positive relationship between social trust and innovation. Multi-level analyses conducted in this paper reveal that the role of social capital in innovation is different in East Asia. Shared social norms such as growth primacy and reciprocity and values of accepting competition and performance-based incentives are the most essential driving-force of innovation in the East Asian countries, whereas social trust does not play a positive role there. The importance of the shared social norms and collective goals can be explained by the prominent role of the state in the East Asian development.
    Keywords: social capital; social trust; social norms; social values; competition; innovation; entrepreneurship; high-performing East Asian economies
    JEL: J24 L26 N15 N75 O31 O43
    Date: 2018
  6. By: Donal Brown (SPRU, University of Sussex, UK; The University of Leeds, UK); Paula Kivimaa (SPRU, University of Sussex, UK; Finnish Environmental Institute, Finland); Steve Sorrell (The University of Leeds, UK)
    Abstract: Business model innovation is increasingly important for the diffusion of sustainable innovations - particularly those that are systemic in nature. In this paper we outline how systemic innovations, such as whole-house energy ‘retrofit’, may require new business models before they gain widespread adoption. Through a series of semi-structured interviews and document analysis, we undertake a case study of the ‘Energiesprong’ retrofit business model - contrasting this with the incumbent ‘atomised’ market model. We highlight the central role of an innovation intermediary - the Energiesprong ‘market development team’, in this business model innovation, and how Dutch policymakers sought to promote business model innovation through creation of this intermediary. In doing so we develop a novel framework - combining the components of business models with the functions of intermediaries to illustrate this case. Finally, the paper suggests this case and framework could provide lessons for how intermediaries and in turn policymakers might foster business model innovation in other sectors.
    Keywords: Business models, Energy efficiency retrofit, Systemic innovation, Business model innovation, Intermediaries, Innovation policy
    Date: 2018–10
  7. By: Ugur, Mehmet; Trushin, Eshref
    Abstract: Public subsidies are expected to stimulate business R&D investment by correcting market failures. However, the existing evidence varies considerably and the causes of heterogeneous effect sizes remain largely unexplored. We draw on the theory of contracts to argue that effect-size heterogeneity is due to different levels of informational rents that heterogeneous firm types can extract in a second-best environment of asymmetric information, risk aversion and incomplete contracting. Using two estimators and a panel dataset of 43,650 R&D-active UK firms from 1998-2012, we report that the effect of the subsidy on innovation inputs (i) is smaller or even negative during economic downturns; (ii) is positive among start-ups, younger and smaller firms, but negative among older and larger firms; and (iii) follows an inverted-U pattern when evaluated against the firm’s R&D intensity. Our findings are consistent across two estimation methods (propensity score matching and double robust estimators) and two innovation inputs (privately-funded R&D investment and employment of scientists and technicians).
    Keywords: Contract theory; treatment effect; R&D subsidy; innovation; additionality;
    Date: 2018–10–16
  8. By: Kuan-Yang Chen (National Taipei University of Nursing and Health Sciences); Chih-Hui Hsiao (National Chiayi University); Po-Yuan Chen (National Dong Hwa University); Cheng-Fei Lee (Shih Chien University, Kaohsiung Campus)
    Abstract: In the knowledge economy era, both academia and industry alike have been focused on the impact of market knowledge on innovation performance. However, research addressing the inconsistencies in empirical findings about its impact (such as a negative or insignificant affect) is scarce. Moreover, ambidexterity (exploratory learning/exploitative learning) is one of the central topics in knowledge management. This article marks the first endeavor to adopt the knowledge-based theory and the ambidextrous learning perspective, attempt to create a theoretical framework of knowledge-learning-innovation, and thoroughly examine related causal relationships between different dimensions of the constructs. The empirical results demonstrated the following: market knowledge depth directly and positively impacts process innovation and product innovation; market knowledge breadth indirectly and positively impacts process innovation and product innovation; and there is no significant difference in the effects of the two types of knowledge on the two types of innovation performance. Ambidextrous learning directly and positively affects process innovation and product innovation; ambidextrous organizational learning mediates the effect of market knowledge breadth on process innovation and product innovation, and this mediating effect is more pronounced with exploitative learning; ambidextrous organizational learning does not mediate the effect of market knowledge depth on both types of innovation performance.
    Keywords: market knowledge (depth and breadth), ambidextrous learning, process innovation, product innovation
    JEL: M10
    Date: 2018–07
  9. By: Kris Hartley, Jun Jie Woo and Sun Kyo Chung
    Abstract: This article examines the impact of policies for start†up and entrepreneurship on the developmental model that remains a policy legacy in many Asian countries. The main argument is that the influence of central planning is deeply embedded in the institutions of the Four Asian Tigers, but globalisation and economic liberalisation are disrupting the old developmentalism by incentivising innovation and structural adaptability. In practice, although developmentalism once focused on infrastructure and industrial policy, softer strategies such as attracting educated millennials through urban amenities and creative clustering mimic those of the postindustrial West. Either this trend represents the end of developmentalism or top†down industrial policy is being rebranded to embrace knowledge and service industries. This article examines this issue at the urban scale, examining policies used by Singapore and Seoul to encourage start†ups and entrepreneurship in the context of innovation. Government documents are examined and findings compared.
    Date: 2018–10–05
  10. By: Llopis, Oscar; D’Este, Pablo; Adrián A. Díaz-Faes
    Abstract: This study examines the relationship between personal network characteristics and innovation performance. Specifically, it investigates the effects of two properties of personal networks on actors’ propensities to engage in innovation activities: network sparseness and network diversity. The study contributes also to decoupling social network structure and individual agency (i.e. tertius iungens orientation) as critical factors influencing engagement in innovation. The study highlights the importance of a particular strategic behavioral orientation of individuals to coordinate and mobilize network resources to foster the implementation of innovative ideas. Our findings show an inverted U-shaped relationship between network sparseness, network diversity and innovation, and a positive moderating role of a tertius iungens orientation on the curvilinear relationship between both network properties and innovation. Our hypotheses are tested on a large sample of Spanish biomedical scientists working in diverse institutional settings.
    Keywords: network sparseness, network diversity, brokerage, tertius iungens, innovation
    Date: 2018–03–20
  11. By: Mei-Tai Chu (La Trobe University)
    Abstract: This paper focuses on service innovation through the discovery of Chinese type service innovation in Alibaba. The purpose of service innovation is to provide an effective way to create sustainable competitive advantage for companies. By focusing on or building service strategies can help organizations overcome the barrier of maintaining growth in saturated markets and the problem caused by the effect of digitalization. Firms and industries stand to gain a lot by adopting service based innovation strategies and policy makers and various researchers are becoming increasingly intrigued by service innovations in the East especially China because they have grown exponentially in many industrial economies and are creating a new era in service innovation.Innovation is leading the change in the structure of Chinese economy and the outcomes so far are positive. Alibaba is becoming the prime example of the rise Chinese internet economy in the world. With is global sales of $300 billion dollar, Alibaba has proven itself to be a strong competitor for Amazon. In an interview with Reuters, executives said that by using Alipay, the Chinese consumers? trump card china is planning to attract American partners and enter the US market. This methodology of research includes conducting several in-depth interviews in Hong Kong, Beijing, Hangzhou and Taipei as well as employing the case study of Alibaba?s innovation by collecting public information. It aims to unveil Alibaba?s unique approaches compared to western type innovation.According to experts, it can be difficult to predict whether the Alibaba model is potentially transferrable into other countries. However, the with the rise of the internet of things and development of mobile payment systems, the research outcomes find there is a chance that there will be a new Alibaba era in a few years. The key to success for Alibaba is the fact that the Chinese market is large enough to accommodate a large ecosystem. As Chinese companies are becoming more profitable, they are more interested to invest more, involve mergers and acquisitions, and adopt modern technologies and stating to blow the wind of Chinese innovation to the western world. From the perspective of service innovation, the success of Alibaba helps capture the three aspects of their unique value propositions, profit generation and personnel creativity.
    Keywords: Service Innovation, China, Alibaba
    JEL: O31
    Date: 2018–07
  12. By: Antonio Vezzani (European Commission – JRC); Emanuele Pugliese (European Commission - JRC); Petros Gkotsis (European Commission - JRC)
    Abstract: In this work we use patent data from the European patent office (EPO) to assess the capabilities of EU regions in developing digital technologies especially focusing on those that are more closely related to the digital transformation. More specifically, we measure ICT patents by considering those containing digital codes, as defined by the OECD. The penetration of digital technologies in the development of innovative products is instead captured by the co-occurrence of digital and non-digital codes within patent documents; we call these patents ICT-combining patents.
    Keywords: Industrial transformation, Industry, Digital technologies, ICT, Regional specialisation
    JEL: O30 O14 R10 R58
    Date: 2018–10
  13. By: Clancy, Matthew S.
    Keywords: Productivity Analysis and Emerging Technologies, Industrial Org./Supply Chain Management, Food and Agricultural Policy Analysis
    Date: 2018–06–20
  14. By: Paul Schreyer (OECD); Belen Zinni (OECD)
    Abstract: A key feature of the 2008 revision of the System of National Accounts was the treatment of R&D expenditure as investment. The question arises whether the standard approach towards accounting for growth contribution of assets is justified given the special nature of R&D that provides capital services by affecting the working of other inputs as a whole – akin to technical change and often requires up-front investment with sunk costs. We model R&D inputs with a restricted cost function and compare econometric estimates with those derived under a standard index number approach but find no significant differences. However, we cannot reject the hypothesis of increasing returns to scale. The standard MFP measure is then broken down into a scale effect and a residual productivity effect, each of which explains about half of overall MFP change. The scale effect points to the importance of the demand side and market size for productivity growth. We also compute mark-up rates of prices over marginal cost and find widespread evidence of rising mark-ups for the period 1985-2016.
    Keywords: Mark-ups, Productivity, R&D, Returns to scale
    JEL: D24
    Date: 2018–10–29
  15. By: Hean, Oudom
    Keywords: Household and Labor Economics, Productivity Analysis and Emerging Technologies, Rural/Community Development
    Date: 2018–06–20
  16. By: Nofal, María B.; Coremberg, Ariel; Sartorio, Luca
    Abstract: As the pace of digitalization and automation accelerates globally, and more disruptive innovations in machine learning, artificial intelligence and robotics are expected, new data sources and measurement tools are needed to complement existing valuable statistics and administrative data. This is necessary to better understand the impact of technological change on the labor market and the economy and better inform policy decisions for inclusive people centered growth. In accordance with G20 Roadmap for Digitalisation (2017), points 10, 5 and 7, the authors propose to: i) track technological developments globally in a multidisciplinary and coordinated fashion; ii) develop new methods of measurement for the digital economy; iii) harmonize occupational taxonomies and develop new sources of data and indicators at the international level; iv) Build International Collaborative Platforms for Digital Skills and the Digital Transformation of SMES.
    Keywords: globalization,labor markets,employment polarization,labor share,skills,productivity,innovation,technological change,economic growth
    JEL: E01 J23 J24 J31 E25 O33 O4
    Date: 2018
  17. By: Ugur, Mehmet; Awaworyi Churchill, Sefa; Luong, Hoang Minh
    Abstract: Endogenous growth theory and the knowledge capital model predict that research and development (R&D) investment is associated with increasing returns and positive externalities. These insights have informed public support for R&D investment directly and indirectly. We aim to establish where the balance of the evidence lies, the extent to which the evidence has adequate statistical power, and which factors may explain the variation in the empirical findings. Drawing on 983 spillovers and 501 own-R&D effect-size estimates from 60 empirical studies, we find that the average productivity effect of spillovers: (i) is smaller than what is reported in most narrative reviews; (ii) is even smaller when only adequately-powered evidence is considered; (iii) differs by spillover types; and (iv) is not larger than that of own-R&D. We also report that the percentage of adequately-powered evidence is low (30%-55%). We highlight the implications of these findings for future research and public policy design.
    Keywords: Knowledge externalities; R&D spillovers; productivity; public policy; meta-analysis;
    JEL: C1 D24 O30 O32 O33
    Date: 2018–10–16
  18. By: Mónica Correa-López (Banco de España); Beatriz de Blas (Universidad autónoma de Madrid)
    Abstract: Large US firms, by diffusing embodied technology through trade in intermediates, appear to drive Europe’s output over the medium term. We develop a two-country model of endogenous growth in varieties, cross-country firm heterogeneity and trade to match this evidence. A US TFP slowdown generates a pronounced recession in Europe, while a negative investment-specific shock also imparts a protracted recession in the US, since GDP and firm productivity stay below trend beyond a decade. Heterogeneous firms, with endogenously changing productivity cut-offs, and the responses of innovators and adopters determine medium-term adjustment, as import switching processes unfold.
    Keywords: international business cycles, heterogeneous firms, embodied growth, trade
    JEL: E32 F14 L11 F44 O33
    Date: 2018–10

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