nep-ino New Economics Papers
on Innovation
Issue of 2018‒11‒05
seventeen papers chosen by
Uwe Cantner
University of Jena

  1. Monopoly Capital and Innovation: An Exploratory Assessment of R&D Effectiveness By Lambert, Thomas
  2. New perspectives in European innovation policy By Krieger, Bastian; Licht, Georg; Pellens, Maikel
  3. Firm Scope and Spillovers from New Product Innovation: Evidence from Medical Devices By Matthew Grennan; Charu Gupta; Mara Lederman
  4. Specialization, diversification and environmental technology life-cycle By Nicoló Barbieri; François Perruchas; Davide Consoli
  5. Innovation induced by public procurement: A firm-level analysis for Italy and Norway By Divella, Marialuisa; Sterlacchini, Alessandro
  6. How Does the Global Network of Research Collaboration Affect the Quality of Innovation? By IINO Takashi; INOUE Hiroyasu; SAITO Yukiko; TODO Yasuyuki
  7. Causal Effects of Software Patents on Firm Growth: Evidence from a policy reform in Japan By YAMAUCHI Isamu
  8. Connecting to Power: Political Connections, Innovation, and Firm Dynamics By Ufuk Akcigit; Salomé Baslandze; Francesca Lotti
  9. Digital Innovation Hubs in Smart Specialisation Strategies By Gabriel Rissola; Jens Sorvik
  10. Enabling Creative Destruction : An Entrepreneurial Ecosystem Approach to Industrial Policy By F.C. Stam
  11. Age and High-Growth Entrepreneurship By Pierre Azoulay; Benjamin F. Jones; J. Daniel Kim; Javier Miranda
  12. Collaborative Knowledge Creation: Evidence from Japanese patent data By MORI Tomoya; SAKAGUCHI Shosei
  13. Permit Markets, Carbon Prices and the Creation of Innovation Clusters By Gersbach, Hans; Riekhof, Marie-Catherine
  14. High Growth Young Firms: Contribution to Job, Output and Productivity Growth By John Haltiwanger; Ron S. Jarmin; Robert Kulick; Javier Miranda
  15. Financialization and Endogenous Technological Change: a Post-Kaleckian Perspective By Parui, Pintu
  17. Promoting the Energy Transition Through Innovation By Lionel Nesta; Elena Verdolini; Francesco Vona

  1. By: Lambert, Thomas
    Abstract: This research note performs some limited empirical assessments of the Baran and Sweezy (1966) contention that most research and development (R&D) efforts in the US are “wasted” at the macroeconomic level in that as R&D succeeds by absorbing a little of the excess economic surplus generated by a capitalist system, it still fails to generate a lot of innovation of a transformative nature. At an aggregate level, greater R&D efforts are correlated with higher worker productivity and standards of living, which is to be expected according to mainstream economic theory and literature. Yet, R&D efforts regarding job creation, new firm creation, and net business investment show either mixed results or even negative connections. There is some preliminary empirical support in this paper for many aspects of the Baran and Sweezy point of view on R&D, and these findings also hint that R&D is used in a monopoly capital system to further monopolization. The findings of this note also may help to explain how productivity gains and innovation over the last few decades may not be benefitting the typical worker or the creation of small businesses as well.
    Keywords: big business, corporations, entrepreneurship, innovation, monopoly capital, research and development
    JEL: B51 B52 B53 L22 L26 O40
    Date: 2018–10–13
  2. By: Krieger, Bastian; Licht, Georg; Pellens, Maikel
    Abstract: Innovation is essential for economic growth, and governments must encourage firms to increase their investments in innovation. Europe is losing ground to its main Asian competitors when it comes to R&D investment, and is barely keeping pace with the U.S. Moreover, the rate of return on innovation has become significantly weaker in Europe. This has been caused by its relative lack of innovative SMEs, the slow diffusion of innovation, and the increasingly competitive innovation marketplace. In this light, scholars and policy makers are arguing for a new approach to European innovation policy that puts more weight on the development of disruptive innovation and on the diffusion of new technologies throughout the market.
    Date: 2018
  3. By: Matthew Grennan; Charu Gupta; Mara Lederman
    Abstract: When firms span related product categories, spillovers across categories become central to firm strategy and industrial policy, due to their potential to foreclose competition and affect innovation incentives. We exploit major new product innovations in one medical device category, and detailed sales data across related categories, to develop a causal research design for spillovers at the customer level. We find evidence of spillovers, primarily associated with complementarities in usage. These spillovers imply large benefits to multi- vs. single-category firms, accounting for nearly one quarter of sales in the complimentary category (equivalent to four percent of revenue in the focal category).
    JEL: D22 D4 D43 D62 I11 K21 L1 L13 L25 L38 L4 L5 M2 M21 O25 O31 O32 O33
    Date: 2018–10
  4. By: Nicoló Barbieri; François Perruchas; Davide Consoli
    Abstract: The paper analyses whether and to what extent regional related and unrelated variety matter for the development of green technology, and whether their influence differs over the technology life-cycle. Using patent and socio-economic data on a thirty- year (1980-2009) panel of US States, our study finds that unrelated variety is a positive predictor of green innovative activities. When unpacked over the life cycle, we find that unrelated variety is the main driver of green technology development in early stages while related variety becomes more prominent as the technology enters into maturity.
    Keywords: Green technology; Technology life-cycle; Regional Diversification
    JEL: O33 Q55 R11
    Date: 2018–10
  5. By: Divella, Marialuisa; Sterlacchini, Alessandro
    Abstract: In this paper, we focus on public procurement for innovation. We provide a broad characterization of the firms involved in “innovative public procurement” as opposed to firms participating in “regular” (i.e. non innovative) public procurement, including those firms that perform innovation in an autonomous way (i.e. not related to public procurement). Moreover, we identify the main determinants of the firms’ propensity to innovate, when innovative activities are related to a public procurement contract. We carry out this study by using micro-data from two Community Innovation Surveys for Italian and Norwegian firms, which have released information on firms having public procurement contracts. Our main findings highlight important differences between firms engaged in regular or innovative public procurement, in particular regarding the role of firm size and sectors, the presence of in-house R&D activities and the educational level of employees.
    Keywords: public procurement, firms’ innovation, Italy, Norway
    JEL: H57 O31 O33 O38
    Date: 2018–10–19
  6. By: IINO Takashi; INOUE Hiroyasu; SAITO Yukiko; TODO Yasuyuki
    Abstract: This study examines how the research collaboration of firms affects the quality of their innovation outcomes using comprehensive patent data for firms in the world from 1991 to 2010. Identifying research collaboration by co-patenting relationships, we find that research collaboration with other firms, particularly with foreign firms, leads to substantial improvement in innovation quality. We also observe an inverted U-shaped effect of the density of a firm's ego network and a positive effect of brokerage in the global network, especially for firms with international collaboration experiences. These results are applicable to the effect on the quality of innovation achieved individually without any collaboration, suggesting that the knowledge of firms diffuses to and is acquired by their collaboration partners. Finally, we find that the collaboration effect is larger in the 2000s than in the 1990s and varies across countries.
    Date: 2018–10
  7. By: YAMAUCHI Isamu
    Abstract: The patentability of software dramatically expanded in the United States, European Union, and Japan during the 1990s. Using the exogenous policy change, this paper identifies the causal effect of filing software patents through the policy reform on the firms' subsequent growth. We find that small software firms as well as large firms increase software patent applications due to the expansion of patentable subject matter. However, the results show that such patent explosion has an insignificant effect on larger firms' performance, while it improves the subsequent performance of small and medium-sized enterprises (SMEs). We also find that the number of patent attorneys in the same prefecture has a significant effect only for small firms, which is the main driving factor of improving the firm's performance. These results suggest that broadening the scope of software patents does contribute to innovation, especially for SMEs with a small patent portfolio and business assets through decreasing the cost of patenting activity.
    Date: 2018–09
  8. By: Ufuk Akcigit; Salomé Baslandze; Francesca Lotti
    Abstract: Do political connections affect firm dynamics, innovation, and creative destruction? We study Italian firms and their workers to answer this question. Our analysis uses a brand-new dataset, spanning the period from 1993 to 2014, where we merge: (i) firm-level balance sheet data; (ii) social security data on the universe of workers; (iii) patent data from the European Patent Office; (iv) the national registry of local politicians; and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that industries with a larger share of politically connected firms feature worse firm dynamics. We identify a leadership paradox: When compared to their competitors, market leaders are much more likely to be politically connected, but much less likely to innovate. In addition, political connections relate to a higher rate of survival, as well as growth in employment and revenue, but not in productivity – a result that we also confirm using a regression discontinuity design. We build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity.
    JEL: D70 O3 O4
    Date: 2018–10
  9. By: Gabriel Rissola (European Commission - JRC); Jens Sorvik
    Abstract: This report examines the synergetic place-based relationships of Digital Innovation Hubs (DIH) and Smart Specialisation Strategies (S3) in selected European regions, with DIHs being the policy outcome of a S3 process or an active actor participating in S3 entrepreneurial discovery processes (EDP) and implementing parts of a S3. By supporting the digitisation of the local industry DIHs also enhance the regional innovation ecosystem, either with the provision of horizontal digitalisation support or by leading a S3 priority area. One clear role of DIHs is to make available support easier to find for local SMEs and industry. DIHs work according to different business models and a targeted funding mix plus a matrix of different funding instruments for the digital transformation of SMEs are required for their sustainability. The report compiles 7 relevant examples (1 national and 6 regional).
    Keywords: Digital Innovation Hubs, DIH, Smart Specialisation Strategies, S3, RIS3, digital growth, digital transformation, digitisation, industry, SME, regional policy, regional cases
    Date: 2018–10
  10. By: F.C. Stam
    Abstract: Creative destruction is important for long term economic development, but hard to target with industrial policy. How to stimulate creative destruction? In this article, we set out with a critique of existing industrial policy approaches and make a plea for a “backing challengers†industry policy, which enables the creation of innovative start-ups and Schumpeterian creative destruction. This “backing challengers†policy is least likely to fall prey to the usual information and vested interest problems of industrial policy. We construct an entrepreneurial ecosystem approach to policy, which provides a synthesis of scientific insights into entrepreneurship and economic development, and a more adequate complex system perspective on the economy. We also offer diagnostics for developing policy in consultation of and collaboration with public and private stakeholders. In this way the design and implementation of policy is informed by scientific knowledge on entrepreneurial ecosystems, but also local knowledge about the context-specific bottlenecks, and involvement of the relevant stakeholders that is necessary for a successful implementation of policy.
    Keywords: Entrepreneurial Ecosystems, Industrial Policy, Government Failures, MarketFailures, Innovative Start-ups, Creative Destruction, Tr
    Date: 2018–09
  11. By: Pierre Azoulay; Benjamin F. Jones; J. Daniel Kim; Javier Miranda
    Abstract: Many observers, and many investors, believe that young people are especially likely to produce the most successful new firms. We use administrative data at the U.S. Census Bureau to study the ages of founders of growth-oriented start-ups in the past decade. Our primary finding is that successful entrepreneurs are middle-aged, not young. The mean founder age for the 1 in 1,000 fastest growing new ventures is 45.0. The findings are broadly similar when considering high-technology sectors, entrepreneurial hubs, and successful firm exits. Prior experience in the specific industry predicts much greater rates of entrepreneurial success. These findings strongly reject common hypotheses that emphasize youth as a key trait of successful entrepreneurs.
    Date: 2018–04
  12. By: MORI Tomoya; SAKAGUCHI Shosei
    Abstract: In this paper, we quantitatively characterize the mechanism of collaborative knowledge creation at the individual researcher level a la Berliant and Fujita (2008) by using Japanese patent data. The key driver for developing new ideas is found to be the exchange of differentiated knowledge among collaborators. To stay creative, inventors seek opportunities to shift their technological expertise to unexplored niches by utilizing the differentiated knowledge of new collaborators in addition to their own stock of knowledge. In particular, while collaborators' differentiated knowledge raises the average cited count, average (technological) novelty, and the quantity of patents for which an inventor contributes to the development, it has the largest impact on the average novelty among the three.
    Date: 2018–10
  13. By: Gersbach, Hans; Riekhof, Marie-Catherine
    Abstract: Innovation clusters that combine public basic research and applied research performed by private firms may be needed for greater technological advances to slow down climate change. We use a multi-country model with emissions permit trade to examine how international climate policy can induce countries to create such clusters. We allow for a varying degree of cooperation between the countries, represented by different carbon price targets. We find that a minimal carbon price is needed to attract applied research firms, but countries may nevertheless fail to invest in basic research. We construct a mechanism that can overcome this barrier and that can induce the first-best creation of innovation clusters. The mechanism involves a combination of few permits given to the country with the lowest costs for basic research, fair burden-sharing and maximal grandfathering.
    Keywords: International permit markets,Carbon prices,Innovation clusters,Basic research,Applied R&D,Climate change mitigation,Externalities
    JEL: H23 Q54 O32
    Date: 2018
  14. By: John Haltiwanger; Ron S. Jarmin; Robert Kulick; Javier Miranda
    Abstract: Recent research shows that the job creating prowess of small firms in the U.S. is better attributed to startups and young firms that are small. But most startups and young firms either fail or don’t create jobs. A small proportion of young firms grow rapidly and they account for the long lasting contribution of startups to job growth. High growth firms are not well understood in terms of either theory or evidence. Although the evidence of their role in job creation is mounting, little is known about their life cycle dynamics, or their contribution to other key outcomes such as real output growth and productivity. In this paper, we enhance the Longitudinal Business Database with gross output (real revenue) measures. We find that the patterns for high output growth firms largely mimic those for high employment growth firms. High growth output firms are disproportionately young and make disproportionate contributions to output and productivity growth. The share of activity accounted for by high growth output and employment firms varies substantially across industries - in the post 2000 period the share of activity accounted for by high growth firms is significantly higher in the High Tech and Energy related industries. A firm in a small business intensive industry is less likely to be a high output growth firm but small business intensive industries don’t have significantly smaller shares of either employment or output activity accounted for by high growth firms.
    Date: 2017–02
  15. By: Parui, Pintu
    Abstract: In post-Keynesian literature, Hein (2012a) was the first to incorporate financialization as an influential positive determinant of the rate of technological change. However, financialization is more like a two-edged sword which can affect technological progress negatively as well. We capture both the positive as well as the negative effect of financialization on technological progress which encapsulates the possibility of multiple equilibria. In analyzing the long run of the model we endogenize the financialization parameter as well. We then show how two subsystems (technological progress and financialization dynamics) when interact with each other, can produce instability and cycles for the whole system. We show that under certain circumstances, higher speed of diffusion of technological innovation, more regulated financial markets, and higher intra-class competition among firms are desirable for stabilizing the economy. Finally, we provide some policy prescriptions for the same.
    Keywords: Capital accumulation, Distribution, Financialization, Kaleckian model, Technological progress, Andronov–Hopf bifurcation, Saddle-node bifurcations, Limit cycles
    JEL: C62 C69 D33 E12 G01 O16 O41
    Date: 2018–10–05
  16. By: Raymond C. Niles (Department of Economics and Management, DePauw University)
    Abstract: This paper identifies how capital losses are unavoidably incurred in the discovery of viable entrepreneurial ventures. Losses are proportional to the novelty and perceived profit potential of a prospective venture, exemplified by the high risk/high return nature of high technology start-ups. Venture capitalists internalize the costs and benefits of this discovery process, and set up portfolios where the majority of funded ventures unavoidably fail or earn subpar returns. They incur these losses in order to discover the one Winner venture whose outsize returns will compensate for the capital losses in the failed ventures. The investment in failing ventures is unavoidable and necessary to discover the Winner because the winning business model cannot be determined ex ante. I call this investment “Entrepreneurial Discovery Capital.” This paper hypothesizes that many industry and economy-wide cycles may be the result of such a process that occurs at a much larger scale than a single fund. Venture capital in microcosm provides a model of an economy-wide process where the decisions of myriad market participants are coordinated “as if by an invisible hand” by signals from the capital markets.
    Keywords: venture capital, business cycle, Schumpeter, discovery, innovation, high technology, entrepreneurship, cognitive
    JEL: E32 G01 G24 L26 M13 O31
    Date: 2018–10
  17. By: Lionel Nesta (Observatoire français des conjonctures économiques); Elena Verdolini (Fondazione Eni Enrico Mattei (FEEM), Milan); Francesco Vona (Observatoire français des conjonctures économiques)
    Abstract: With the striking exception of the USA, countries around the world are committed to the implementation of stringent targets on anthropogenic carbon emissions, as agreed in the Paris Climate Agreement. Indeed, for better or for worse, the transition towards decarbonisation is a collective endeavour, with the main challenge being a technological one. The path from a fossil-based to a sustainable and low-carbon economy needs to be paved through the development and deployment of low-carbon energy technologies which will allow to sustain economic growth while cutting carbon emissions. [First paragraph]
    Keywords: Environment; Environmental policies; Sustainable development
    Date: 2018–10

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