nep-ino New Economics Papers
on Innovation
Issue of 2019‒02‒11
fourteen papers chosen by
Uwe Cantner
University of Jena

  1. Green Innovation And Economic Growth In A North-South Model By Jan Witajewski-Baltvilks; Carolyn Fischer
  2. The Impact of Compatibility on Innovation in Markets with Network Effects By Steven Bond-Smith
  3. Universal Intellectual Property Rights: Too Much of a Good Thing? By Auriol, Emmanuelle; Biancini, Sara; Paillacar, Rodrigo
  4. Innovation and Income Inequality: World Evidence By Benos, Nikos; Tsiachtsiras, Georgios
  5. The transformations of conventions for patent use and the role of legal intermediaries By Christian Bessy
  6. Why do innovators not apply for trademarks? The role of information asymmetries and collaborative innovation By Athreye, Suma; Fassio, Claudio
  7. Do Financing Constraints Matter for the Direction of Technical Change in Energy R&D? By Joelle Noailly; Roger Smeets
  8. Research funding and price negotiation for new drugs By Francesca Barigozzi; Izabela Jelovac
  9. Is innovation obsession good news for employees? How new technology adoption and work organization practices transform job quality and working conditions By Malo Mofakhami
  10. Immigrant Innovators and Firm Performance By Fornaro, Paolo; Maliranta, Mika; Rouvinen, Petri
  11. Immigrant Networking and Collaboration: Survey Evidence from CIC By Sari Pekkala Kerr; William R. Kerr
  12. “Green regions and local firms’ innovation” By Lorena M. D’Agostino; Rosina Moreno
  13. Technological Parasitism By Mario Coccia
  14. Whither the evolution of the contemporary social fabric? New technologies and old socio-economic trends By Dosi, Giovanni; Virgillito, Maria Enrica

  1. By: Jan Witajewski-Baltvilks; Carolyn Fischer
    Abstract: If one region of the world switches its research effort from dirty to clean technologies, will other regions follow? To investigate this question we built a North-South model that combines insights from directed technological change and quality ladder endogenous growth models. We allow researchers in the South to create business-stealing innovations. We found that (i) after the North switches from dirty to clean technologies, the growing value of clean markets will motivate technology firms in the South to follow the switch; however this result is conditional on the North being sufficiently large. (ii) If the two regions invest research effort to different sectors and the outputs of the two sectors are gross substitutes, then the long run growth rates in both regions are smaller than if the global research effort were to be invested in one sector. (iii) If the North switches to R&D in clean technologies, the benevolent central planner in the South would ensure that all South R&D switches too, unless the planner’s discount rate is high.
    Keywords: directed technological change, green growth, endogenous growth model, cross-country spillovers, unilateral climate policy, green R&D subsidies
    JEL: O33 O41 O44 Q55 Q56
    Date: 2018–12
  2. By: Steven Bond-Smith (Bankwest Curtin Economic Centre, Curtin University)
    Abstract: This article analyses the relationship between compatibility and innovation in markets with network effects using a model of competition with endogenous R&D, commercialization and compatibility. Incumbent acquisition of an innovation or profit from entry provides entrepreneurs with an incentive for developing technological improvements. Entrepreneurs receive greater returns for the innovation if larger incumbents offer compatibility with their installed base. As a result, entrepreneurs must innovate strategically to pre-empt an incompatibility response from incumbents. Similarly, small incumbents also bid strategically to block entry or rival acquisition if it also avoids an incompatibility response from a larger incumbent. A credible threat of incompatibility reduces the entrepreneur?s reserve to sell an innovation, but can also increase offers to acquire the innovation from smaller incumbents attempting to avoid incompatibility. This leads to a complex relationship between the strength of network effects, innovation incentives, the entrepreneur?s ambition for improvement and potentially disrupting the compatibility regime. For weak to moderate network effects entrepreneurs are likely to target more substantial, but improbable innovations such that their network is sufficiently attractive for incumbents to offer compatibility. For a small range of sufficiently strong network effects, entrepreneurs target incremental innovations to avoid the incumbent threatening incompatibility.
    Keywords: network effects, innovation, compatibility
    JEL: L15 L26 L50 O31
    Date: 2018–12
  3. By: Auriol, Emmanuelle; Biancini, Sara; Paillacar, Rodrigo
    Abstract: Developing countries' incentives to protect intellectual property rights (IPR) are studied in a model of vertical innovation. Enforcing IPR boosts export opportunities to advanced economies but slows down technological transfers and incentives to invest in R&D. Asymmetric protection of IPR, strict in the North and lax in the South, leads in many cases to a higher world level of innovation than universal enforcement. IPR enforcement is U-shaped in the relative size of the export market compared to the domestic one: rich countries and small/poor countries enforce IPR, the former to protect their innovations, the latter to access foreign markets, while large emerging countries free-ride on rich countries' technology to serve their internal demand.
    Keywords: Intellectual Property Rights; Innovation; Imitation; Duopoly; Developing Countries
    JEL: F12 F13 F15 L13 O31 O34
    Date: 2019–01
  4. By: Benos, Nikos; Tsiachtsiras, Georgios
    Abstract: In this paper we explore the effect of innovation on income inequality using annual country panel data for 29 countries. We demonstrate that innovation activities reduce personal income inequality by matching patents from the European Patent Office with their inventors. Our findings are supported by instrumental variable estimations to tackle endogeneity. The results are also robust with respect to various inequality measures, alternative quality indexes of innovation, truncation bias, the use of patent applications together with granted patents and different ways to split or allocate patents.
    Keywords: top income inequality, overall inequality, innovation, citations, knowledge spillovers
    JEL: D63 O30 O31 O33 O34 O40 O47
    Date: 2019–02–07
  5. By: Christian Bessy (IDHES - Institutions et Dynamiques Historiques de l'Économie et de la Société - ENS Cachan - École normale supérieure - Cachan - UP1 - Université Panthéon-Sorbonne - UP8 - Université Paris 8 Vincennes-Saint-Denis - UPN - Université Paris Nanterre - UEVE - Université d'Évry-Val-d'Essonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Today, the patent system is facing a paradox. It has never been so successful, yet at the same time it has attracted severe criticism, such as the call to return to the "commons". This article argues that the success of the patent at the 'macro' level is linked to the proliferation of the ways it is used at the ‘micro' level: as a tool for the protection and diffusion of innovations, as an instrument of market power and technological valorisation, as a signal and instrument of negotiation, as a valuable corporate asset. These uses would somehow be superimposed since the genesis of the patent system, without cancelling the previous ones. This article proposes an analysis of the contemporary evolution of this legal institution by distinguishing different conventions for patent use as well as legal intermediaries which contribute to their definition, diffusion, and transformation, in particular patent attorneys. Although this explanatory outline draws mainly on the case of France, it can be extended to other countries.
    Keywords: K49-Legal procedure (other),L15-Information and product quality,O34-Intellectual property rights,JEL: O31-Innovation and invention: processes and incentives
    Date: 2019–01–22
  6. By: Athreye, Suma (Essex Business School); Fassio, Claudio (CIRCLE, Lund University)
    Abstract: This paper analyses the underlying reasons why innovators do not apply for trademarks for all of their valuable inventions. Using a unique database of UK innovations linked to innovative firms, the empirical analysis highlights the many ways that firms can alleviate information asymmetries and the constraints imposed by collaborative innovation without taking recourse to trademarks. When information asymmetries are not at stake, i.e. when firms use an already existing trademark for their innovations or when they use intermediaries for its distribution, trademarks no longer serve their purpose, leading firms to avoid using it for their innovations. Open innovation also decreases the incentive to trademark, especially when the innovative process involves users, mainly because of property rights issues or because the innovator prefers to use the clients’ own distribution channels.
    Keywords: rademarks; innovation; intellectual property; open innovation
    JEL: O31 O34
    Date: 2019–02–04
  7. By: Joelle Noailly; Roger Smeets
    Abstract: The objective of this study is to examine the impact of firms’ financing constraints on innovation activities in renewable (REN) versus fossil-fuel (FF) technologies. Our empirical methodology relies on the construction of a firm-level dataset for 1,300 European firms over the 1995-2009 period combining balance-sheet information linked with patenting activities in REN and FF technologies. We estimate the importance of the different types of financing (e.g. cash flow, long-term debt, and stock issues) on firms’ patenting activities for the different samples of firms. We use count estimation techniques commonly used for models with patent data and control for a large set of firm-specific controls and market developments in REN and FF technologies. We find evidence for a positive impact of internal finance on patenting activities for the sample of firms specialized in REN innovation, while we find no evidence of this link for other firms, such as firms conducting FF innovation or large mixed firms conducting both REN and FF innovation. Hence, financing constraints matter for firms specialized in REN innovation but not for other firms. Our results have important implications for policymaking as the results emphasize that small innovative newcomers in the field of renewable energy are particularly vulnerable to financing constraints.
    Keywords: R&D;.; Financing constraints; renewable energy
    JEL: O14 O33 Q41 Q42
    Date: 2019–01–31
  8. By: Francesca Barigozzi (UNIBO - Università di Bologna [Bologna]); Izabela Jelovac (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Pharmaceutical innovations result from the successful achievement of basic research, produced by an upstream lab, and applied research, produced by a downstream lab. We focus on the negotiation process to finance basic research by setting public and private grants and to agree on the final price of a new drug. We show that exclusive funding of basic research is desirable. To increase consumers' surplus and reduce negotiated prices for new drugs, basic and applied research should be integrated if the lab producing applied research has a relatively large bargaining power. When instead the health authority has the larger bargaining power, integration with the producer of basic research increases negotiated prices for new drugs and should be avoided, unless the gain in bargaining power after the integration is extremely high. Abstract. Pharmaceutical innovations result from the successful achievement of basic research, produced by an upstream lab, and applied research, produced by a downstream lab. We focus on the negotiation process to finance basic research by setting public and private grants and to agree on the final price of a new drug. We show that exclusive funding of basic research is desirable. To increase consumers' surplus and reduce negotiated prices for new drugs, basic and applied research should be integrated if the lab producing applied research has a relatively large bargaining power. When instead the health authority has the larger bargaining power, integration with the producer of basic research increases negotiated prices for new drugs and should be avoided, unless the gain in bargaining power after the integration is extremely high.
    Keywords: Pharmaceutical innovation,drug prices,negotiation,basic research,applied research
    Date: 2019–01–21
  9. By: Malo Mofakhami (CEET - Centre d'études de l'emploi et du travail - CNAM - Conservatoire National des Arts et Métiers [CNAM] - M.E.N.E.S.R. - Ministère de l'Éducation nationale, de l’Enseignement supérieur et de la Recherche - Ministère du Travail, de l'Emploi et de la Santé, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Our paper contributes to better understanding the relations between innovation diffusion by adoption and the evolution of work practices and institutions. Most studies on employment and innovation focus on the impacts of innovation on employment variation and turnover. These studies tend to analyze the differentiated effects of technological change on the labor structure with the well-known skilled-biased technological change (SBTC) and routine-biased technological change (RBTC) hypotheses. However, few empirical studies focus explicitly on the transformative role of new technology adoption in the qualitative dimension of jobs. A new technology adoption in the workplace does not induce a total replacement of the workforce. In that respect, understanding the effect of a new technology adoption on job quality and working conditions, among other job characteristics, is a key element in capturing the reality of technological change with regard to employment. By combining the literature on innovation, workplace practices (especially human resource management (HRM) practices), and job quality, we build an empirical model that highlights various interdependencies. The literature provides us with fragmented hypotheses about these interactions, but the main limit is the very different approaches, which lead to ambiguous effects. Starting from the European Working Conditions Survey (EWCS) (2010), we try to identify the effect of innovation combined with work organization practices on job quality. We observe that new technology adoption is generally associated with better employment quality in some ways but, simultaneously, leads to higher workplace risk and work-time intensity. Furthermore, our study highlights the need to associate innovation with different forms of work practices. Analyzing new technology adoption coupled with new information and communication technology (ICT) use or some work organization practices, we observe dissociated effects, and the same occurs when we separately analyze the new technology adoption effect by type of employee. Our paper is a first step not only in answering the calls for more in-depth research on the links between employment variation and work transformations due to technological change but also in studying that which more clearly distinguishes the effect according to the type of innovation. Finally, our study shows the weakness of the available and adopted database for testing and evaluating these interrelations.
    Keywords: Labor economics,Labor management,labor economics poli,Technological innovation
    Date: 2018
  10. By: Fornaro, Paolo; Maliranta, Mika; Rouvinen, Petri
    Abstract: Abstract We study immigrants’ effects on firm-level innovativeness. Managers, innovators, and other employees are considered as separate groups both in firm employment and in local areas. For each, we estimate the effects of foreignness, the share of immigrants in each group, and diversity, while controlling for an extensive set of employment and other firm characteristics. Pooled cross-section estimates suggest that a higher initial share of immigrant innovators is associated with a subsequently higher probability of a product innovation; the reverse holds for process innovation. In other words, product innovation benefits from a wider spectrum of innovator perspectives brought about by foreign influence, while process innovation suffers from it. The estimated effect for product innovation is modestly large but nevertheless indicates that a host of other covariates besides immigration are important for innovation. When measured by a fractionalization index, diversity among innovators does not promote product innovation. However, culturally the closest groups of migrants have a positive effect, when considered independently. Thus, in our interpretation, diversity does offer some benefits, provided that enough cultural homogeneity of the group is retained.
    Keywords: Immigration, Ethnicity, Diversity, Innovation, Knowledge production function, Finland
    JEL: D22 F22 J61 O31
    Date: 2019–02–01
  11. By: Sari Pekkala Kerr; William R. Kerr
    Abstract: Networking and the giving and receiving of advice outside of one's own firm are important features of entrepreneurship and innovation. We study how immigrants and natives utilize the potential networking opportunities provided by CIC, formerly known as the Cambridge Innovation Center. CIC is widely considered the center of the Boston entrepreneurial ecosystem. We surveyed 1,334 people working at CIC in three locations spread across the Boston area and CIC's first expansion facility in St. Louis, MO. Survey responses show that immigrants value networking capabilities in CIC more than natives, and the networks developed by immigrants at CIC tend to be larger. Immigrants report substantially greater rates of giving and receiving advice than natives for six surveyed factors: business operations, venture financing, technology, suppliers, people to recruit, and customers. The structure and composition of CIC floors has only a modest influence on these immigrant versus native differences.
    JEL: D85 F22 M13 O30
    Date: 2019–01
  12. By: Lorena M. D’Agostino (Department of Economics and Management, University of Trento, via Inama, 5 - 38122 Trento (Italy). Tel. +390461283197 – Fax +390461882241.); Rosina Moreno (AQR-IREA Research Group, University of Barcelona. Av. Diagonal 690 - 08034 Barcelona (Spain). Tel. +34934021823 - Fax +34934021821.)
    Abstract: Technological innovation is essential to achieve simultaneously economic, environmental and social goals (i.e. the green growth). Indeed, many studies found that environmental innovation spurs overall innovation. However, this topic has not been investigated by taking into account the geographical context. Therefore, our paper seeks to investigate whether ‘green regions’, with an increased public and private commitment in environmental issues, are related to innovation of local firms. Using data on Spanish manufacturing firms and regions, we find that environmental technologies (especially in green energy), environmental investments, and environmental management at the level of regions are positively associated to local firms’ innovation.
    Keywords: innovation, region, firm, green patents, environment. JEL classification:R11, O31, O44.
    Date: 2019–02
  13. By: Mario Coccia
    Abstract: Technological parasitism is a new theory to explain the evolution of technology in society. In this context, this study proposes a model to analyze the interaction between a host technology (system) and a parasitic technology (subsystem) to explain evolutionary pathways of technologies as complex systems. The coefficient of evolutionary growth of the model here indicates the typology of evolution of parasitic technology in relation to host technology: i.e., underdevelopment, growth and development. This approach is illustrated with realistic examples using empirical data of product and process technologies. Overall, then, the theory of technological parasitism can be useful for bringing a new perspective to explain and generalize the evolution of technology and predict which innovations are likely to evolve rapidly in society.
    Date: 2019–01
  14. By: Dosi, Giovanni; Virgillito, Maria Enrica
    Abstract: The reflections which follow build on two interrelated questions, namely, first, whether we are witnessing another “industrial revolution”, and second, what is the impact of technological transformations upon the current dynamics of the socio-economic fabric, especially with respect to employment, income distribution, working conditions and labour relations. We argue that the processes of innovation and diffusion of what we could call “intelligent automation” are likely to change, or more likely reinforce, the patterns of distribution of income and power, which have been there well before the arrival of the technologies we are concerned about: some are indeed intrinsic features of capitalism since its inception, while others are features of the last thirtyforty years. First, we shall offer a fresco of such tendencies which certainly preceded any potential “Fourth Industrial Revolution” but are going to be amplified by the latter. Second, we discuss the features of such possible new techno-economic paradigms. Third, we examine the relationships between technology, productivity and growth, and the ensuing impact on jobs, division of labour, distribution of knowledge, power, and control. Finally, we address some policy implications.
    Keywords: Social fabric,technology,macroeconomic development,division of labour,knowledge,inequality
    JEL: O10 E6 D63
    Date: 2019

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