nep-ino New Economics Papers
on Innovation
Issue of 2019‒03‒11
fourteen papers chosen by
Uwe Cantner
University of Jena

  1. Household Innovation, R&D, and New Measures of Intangible Capital By Daniel Sichel; Eric von Hippel
  2. Heterogeneous Regional Innovation Spillovers of Universities of Applied Sciences By Tobias Schlegel; Curdin Pfister; Dietmar Harhoff; Uschi Backes-Gellner
  3. Intellectual Property Protection Mechanisms and the Characteristics of Founding Teams By Sara Amoroso; Albert N. Link
  4. Monopolistic competition for the market with heterogeneous firms and Schumpeterian growth By Federico Etro
  6. The Structural Dynamics of Income Distribution:Technology, Wages and Profits By Andrea Coveri; Mario Pianta
  7. Highly skilled and well connected: Migrant inventors in cross-border M&As By Diego Useche; Ernest Miguelez; Francesco Lissoni
  8. The Romer Model with Monopolistic Competition and General Technology By Federico Etro
  9. Entrepreneurship, institutional economics, and economic growth: an ecosystem perspective By Acs, Zoltan J.; Estrin, Saul; Mickiewicz, Tomasz; Szerb, László
  10. Do Cross-border Patents Promote Trade? By Brunel, Claire; Zylkin, Thomas
  11. Entrepreneurship, Institutions, and Economic Growth: Does the Level of Development Matter? By Christopher J. Boudreaux
  12. Two-dimensional Constrained Chaos and Time in Innovation: An analysis of industrial revolution cycles By YANO Makoto; FURUKAWA Yuichi
  13. Institutional innovation and pro-poor agricultural growth: cannabis cultivation in the Eastern Cape province of South Africa as fertile opportunity. By Gerwel, H.
  14. Keeping up with Innovation: Designing a European Sandbox for Fintech By Ringe, Wolf-Georg; Ruof, Christopher

  1. By: Daniel Sichel; Eric von Hippel
    Abstract: Household R&D (or household innovation) is an important source of innovation that has to date been largely overlooked in research related to national accounts. Indeed, it is not currently counted as investment in the literatures on household production and human capital. This paper develops time series estimates of nominal investment, real investment, and real capital stocks for household R&D for product innovations in the United States. (We focus on product innovations because survey data on services innovations in the household sector are not yet available.) In the U.S., we find that household product R&D is significant. Our estimate of real investment in 2017 is $41 billion (2012 dollars). This is about half of what producers spend in R&D to develop new products for consumers – a sizable fraction. Our estimate of the real capital stock of household product R&D in 2017 is $233 billion. We conclude that household R&D is an important feature of household activity and, more generally, of the overall landscape of innovation.
    JEL: E01 E21 E22 E24 J24 O3 O31 O33 O34
    Date: 2019–02
  2. By: Tobias Schlegel (University of Zurich); Curdin Pfister (University of Zurich); Dietmar Harhoff (Max Planck Institute for Innovation and Competition); Uschi Backes-Gellner (University of Zurich)
    Abstract: This paper investigates whether differences in regional economic preconditions lead to heterogeneity of innovation spillovers from newly established universities of applied sciences (UASs). Exploiting a quasi-random establishment of UASs in the 1990s in Switzerland, we analyse the heterogeneity of innovation spillovers from these UASs due to differences in regional economic preconditions — i.e. economic strength, industry structure and economic density. Our estimations show that stronger and denser regional economies and regions with high tech intensive industries exhibited significantly more innovation spillovers from new UASs than regions with less favourable economic preconditions. One possible explanation are agglomeration effects favouring innovation spillovers. Our results imply that nearby UASs do not have positive effects on innovation per se, a finding that is of particular interest for policy makers who decide on the location of public applied research institutions.
    Keywords: Research Institutions, Innovation, Regional Economic Activity
    JEL: I23 O38 R12
    Date: 2019–02
  3. By: Sara Amoroso (European Commission – JRC); Albert N. Link (Bryan School of Business and Economics University of North Carolina-Greensboro)
    Abstract: Intellectual property protection mechanisms (IPPMs) are critical to fostering innovation and their relevance has grown enormously with the increased trade in goods and services involving intellectual property. Scholars have investigated what factors facilitate or hinder the use of such IP protection strategies, identifying country, sector, and firm characteristics. However, the extant literature has overlooked the role of founding team characteristics on the choice of IPPMs. Using data from a large sample of European small and young entrepreneurial firms, we show that controlling for size, R&D intensity, and other firms and market effects, the founding team characteristics such as gender and education greatly influence the choice of IPPMs.
    Keywords: IP choice, patents, appropriability, entrepreneurship, knowledge intensive firms, gender, AEGIS survey
    JEL: M13 L26 O34
    Date: 2019–01
  4. By: Federico Etro
    Abstract: I study monopolistic competition in patent races where firms are heterogeneous in R&D costs. Only the most efficient firms invest, and they invest more when the value of innovation is higher, while the endogenous set of active firms depends on the profitability of innovation. In particular, selection effect (increasing R&D productivity) emerge after a reduction of the entry cost or after an increase (a reduction) of the value of innovation if the elasticity of the probability of innovation is increasing (decreasing) in investment. In Schumpeterian models selection effects foster endogenous growth.
    Keywords: Patent races, heterogeneous firms, monopolistic competition, Schumpeterian growth.
    JEL: L1 O3 O4
    Date: 2019
  5. By: Anabela Marques Santos; Michele Cincera
    Abstract: Access to finance is a key driver of business activities. It can help firms to grow and innovate. However, due to market failures innovative firms are usually more financinally constrained. To improve access to financing for risky but excellent R&D and innovation investment projects, a new debt-financing instrument called “Risk Sharing Finance Facility” was created in 2007, by a joint initiative of the European Commission and the European Investment Bank. Based on a macro-economic analysis, the aim of the paper is to assess the effect of this new debt-financing instrument on enhancing private R&D expenditure. The database used covers the 28 Member States of the European Union in the period 2007-2016. Private R&D decision is estimated by a function of output growth and several R&D policy instruments. The methodological approach is based on a fixed effect model with control function method in order to correct for endogenous bias of Risk Sharing Finance. The results reveal a positive and significant effect of the new EU policy financing instrument on Private R&D expenditure and its rate of return seems to be higher than that of grants or subsidies. Furthermore, in countries where government funding for private R&D expenditure is above the average, the effect of Risk Sharing Finance shows a lower marginal effect. No evidence of significant differences concerning the size of the effect of the new debt-financing instrument is found when differentiating the level of R&D tax incentives.
    Keywords: Financing, Innovation, Risk
    Date: 2018–12
  6. By: Andrea Coveri (Department of Economics, Society & Politics, Università di Urbino Carlo Bo); Mario Pianta (Scuola Normale Superiore, Florence)
    Abstract: In the last four decades, an increasingly skewed income distribution has favored capital at the expense of labour and has been coupled with ever growing inequalities. Merging a Neo-Schumpeterian approach to innovation with a Post-Keynesian theoretical framework, this work contributes to the analysis of the structural determinants of functional income distribution. Building on Pianta and Tancioni (2008), we propose a simultaneous model on wage and profit dynamics identifying technological change, offshoring strategies and role of trade unions as key factors which shape the power relations between capital and labour. On the empirical ground, we perform an industry-level analysis extending and improving the Sectoral Innovation Database (SID), which accounts for 38 manufacturing and service sectors for six major European countries (France, Germany, Italy,Netherlands, Spain and United Kindgom) from 1994 to 2014. We find that, despite the structural asymmetries between industries’ patterns of evolution, labour productivity growth and product innovation have a positive impact on both distributive components, while a rather negative effect of process innovation on wages is detected. Offshoring processes generally emerge as profit-enhancing while represent a reliable firms’ weapon to reduce labour costs, although a remarkable heterogeneity arises when the technological nature of offshoring strategies is accounted for; finally, union density tends to be positively associated with wage dynamics, suggesting the relevance of labour market institutions in conditioning the patterns of income distribution.
    Keywords: Distribution, innovation, offshoring, union density, Europe, industries.
    JEL: F12 F15 J31 J51 L16 L6 L8 O33 O52
    Date: 2019
  7. By: Diego Useche (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique); Ernest Miguelez (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique, University of Barcelona, AQR-IREA); Francesco Lissoni (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique, Universita Bocconi - Università Bocconi)
    Abstract: Based on a relational view of international business, we investigate the role of migrant inventors in cross-border mergers and acquisitions undertaken by R&D-active firms. We hypothesize that the migrant inventors' international social networks can be leveraged by their employers in order to identify and/or integrate relevant knowledge bases of acquisition targets in the inventors' home country. We nuance our hypothesis by means of several conditional logistic regressions on a large matched sample of deals and control cases. The impact of migrant inventors increases with the distance between countries and for targets located in countries with weak administrative/legal systems, as well as when targets are either innovative or belong to high-tech sectors or to the same sector as the acquirer, and for full versus partial acquisitions.
    Keywords: cross-border mergers and acquisitions,migration,inventors,PCT patents
    Date: 2019–01
  8. By: Federico Etro
    Abstract: I augment the Romer model of endogenous technological progress with a general CRS production function in labor and intermediate inputs. This determines markups and profits of the innovators in function of the number of inputs. Under imperfect substitutability the economy can converge to a steady state (as under a nested CES technology), replicating the properties of neoclassical growth due to a decreasing marginal profitability of innovation, or to contant growth linear in population growth as in semi-endogenous growth models.
    Keywords: Endogenous growth, technological progress, monopolistic competition, variable markups, Solow model
    JEL: E2 L1 O3 O4
    Date: 2019
  9. By: Acs, Zoltan J.; Estrin, Saul; Mickiewicz, Tomasz; Szerb, László
    Abstract: We analyze conceptually and in an empirical counterpart the relationship between economic growth, factor inputs, institutions, and entrepreneurship. In particular, we investigate whether entrepreneurship and institutions, in combination in an ecosystem, can be viewed as a “missing link” in an aggregate production function analysis of cross-country differences in economic growth. To do this, we build on the concept of National Systems of Entrepreneurship (NSE) as resource allocation systems that combine institutions and human agency into an interdependent system of complementarities. We explore the empirical relevance of these ideas using data from a representative global survey and institutional sources for 46 countries over the period 2002–2011. We find support for the role of the entrepreneurial ecosystem in economic growth
    Keywords: economic growth; entrepreneurship; ecosystem; efficiency; technology; Solow residual; GEM; GEI
    JEL: D02 O38 P11
    Date: 2018–08–01
  10. By: Brunel, Claire; Zylkin, Thomas
    Abstract: While we would expect that cross-border patents are used to protect a technology that is made available in another country, that technology could either be produced locally or imported. International patent filings could therefore be either complements or substitutes to international trade. This study combines data on patenting and trade for 149 countries and 249 industries between 1974 and 2006 with a "three-way" PPML panel data model that addresses several biases emphasized in the trade literature in order to provide a systematic analysis of how bilateral trade responds to cross-border patent filings. We find that cross-border patents have a positive (complementary) overall effect on the patent-filing country's exports to the patent-granting country and no effect overall on imports flowing in the opposite direction. These effects vary substantially across industries and destination markets. Patents promote significantly more bilateral export growth--and significantly less bilateral import growth--in less-differentiated industries and are found to have stronger effects on exports to more distant destinations. These findings support the interpretation that cross-border patents are mainly used to protect cost and/or quality innovations from being adopted by producers of competing products in the patent-granting country.
    Keywords: F10; F13; F14; O34; K33
    JEL: F10 F13 F14 K33 O34
    Date: 2019–03–03
  11. By: Christopher J. Boudreaux
    Abstract: Entrepreneurship is often touted for its ability to generate economic growth. Through the creative-destructive process, entrepreneurs are often able to innovate and outperform incumbent organizations, all of which is supposed to lead to higher employment and economic growth. Although some empirical evidence supports this logic, it has also been the subject of recent criticisms. Specifically, entrepreneurship does not lead to growth in developing countries; it only does in more developed countries with higher income levels. Using Global Entrepreneurship Monitor data for a panel of 83 countries from 2002 to 2014, we examine the contribution of entrepreneurship towards economic growth. Our evidence validates earlier studies findings but also exposes previously undiscovered findings. That is, we find that entrepreneurship encourages economic growth but not in developing countries. In addition, our evidence finds that the institutional environment of the country, as measured by GEM Entrepreneurial Framework Conditions, only contributes to economic growth in more developed countries but not in developing countries. These findings have important policy implications. Namely, our evidence contradicts policy proposals that suggest entrepreneurship and the adoption of pro-market institutions that support it to encourage economic growth in developing countries. Our evidence suggests these policy proposals will be unlikely to generate the economic growth desired.
    Date: 2019–03
  12. By: YANO Makoto; FURUKAWA Yuichi
    Abstract: Many issues in cycles and fluctuations cannot be explained without multiple state variables. Time needed for innovation is one such issue. This study uncovers, and provides a new characterization for, ergodic chaos with two state variables and builds a model of innovation highlighting time in innovation and intellectual property protection. We demonstrate that the explosive industrial takeoffs and Kondratieff's long waves over the past two centuries and a half may be explained as a single equilibrium phenomenon. Time in innovation tends to stabilize chaotic innovation dynamics. Intellectual property protection is a necessary condition for chaotic takeoffs from the no-innovation phase.
    Date: 2019–02
  13. By: Gerwel, H.
    Abstract: South Africa has a high share of its poor population living in rural areas of the country, and especially the former homelands of Transkei and Ciskei, now part of the Eastern Cape. The challenge of mitigating and eventually ending the economic and social marginalisation of the rural poor in South Africa is clear. Agriculture plays a key role here. The sector is labour intensive with a potential for unskilled and semi-skilled job creation. It also has strong linkages to non-farm, rural economic activity. South Africa also has a highly unequal and dualistic economy with a history of support to traditional crops and markets in agriculture. It must innovatively seek to promote certain �emerging� industries that could be managed within a more inclusive and equitable manner. Hayami and Ruttan�s Theory of induced innovation interprets technical as well as institutional change as endogenous to the prevailing economic system (Hayami and Ruttan, 1971, 1984, 1985; Ruttan, 1984). With the global cannabis market opening up, and South Africa�s land locked neighbour Lesotho already having granted a number of licenses for the cultivation and exporting of medical cannabis. The lack of poverty focused social scientific research on the potential of cannabis cultivation to promote inclusive growth compared to the wealth of natural science research on the impacts of cannabis highlights a gap in the literature that should be exploited towards the goals of creating conditions of improved social justice and economic emancipation. JEL Codes: O13; O43; Q17
    Keywords: Crop Production/Industries
    Date: 2018–09–25
  14. By: Ringe, Wolf-Georg; Ruof, Christopher
    Abstract: In the aftermath of the 2007-09 global financial crisis, regulators in all major jurisdictions introduced significant new requirements for financial firms. Certainly justified in purpose, these regulations have increased market barriers, both directly through specific obligations, and indirectly through the sheer magnitude and complexity they involve. Regulators primarily focused on bolstering financial stability and consumer protection, while frequently disregarding their objective of promoting financial innovation. Ten years after the crisis, it is time to reconsider the appropriate balance between those objectives. In this commentary, the authors show how EU financial regulation may stifle the innovation of financial services. Using the example of automated investment advice, so-called ‘robo-advisors’, they show how a proper balance between regulatory objectives could be achieved through establishing a ‘guided’ regulatory sandbox.
    Date: 2019–01

This nep-ino issue is ©2019 by Uwe Cantner. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.