nep-ino New Economics Papers
on Innovation
Issue of 2019‒04‒15
eleven papers chosen by
Uwe Cantner
University of Jena

  1. The Enabling Technologies of Industry 4.0: Examining the Seeds of the Fourth Industrial Revolution By Arianna Martinelli; Andrea Mina; Massimo Moggi
  2. The impact of new drug launches on hospitalization in 2015 for 67 medical conditions in 15 OECD countries: a two-way fixed-effects analysis By Frank R. Lichtenberg
  3. FIRM OWNERSHIP AND GREEN PATENTS. DOES FAMILY INVOLVEMENT IN BUSINESS MATTER? By Francesco Aiello; Paola Cardamone; Lidia Mannarino; Valeria Pupo
  4. The Race against the Robots and the Fallacy of the Giant Cheesecake: Immediate and Imagined Impacts of Artificial Intelligence By Naudé, Wim
  5. Network dynamics in collaborative research in the EU, 2003-2017 By Pierre-Alexandre Balland; Ron Boschma; Julien Ravet
  6. Global innovation networks for Chinese high tech small and medium enterprises: the supportive role of highly skilled migrants and returnees By Lin, Jingyi; Plechero, Monica
  7. Taxing Top Incomes in a World of Ideas By Charles I. Jones
  8. A Note on the Behavioral Political Economy of Innovation Policy By Jan Schnellenbach; Christian Schubert
  9. Measuring Entrepreneurship: Do Established Metrics Capture High-Impact Schumpeterian Entrepreneurship? By Henrekson, Magnus; Sanandaji, Tino
  10. Market Power and Innovation in the Intangible Economy By Maarten de Ridder
  11. An inverted-U effect of patents on economic growth in an overlapping generations model By Yuta Nakabo; Ken Tabata

  1. By: Arianna Martinelli; Andrea Mina; Massimo Moggi
    Abstract: Technological revolutions mark profound transformations in socio-economic systems. They are associated with the diffusion of general purpose technologies that display very high degrees of pervasiveness, dynamism and complementarity. This paper provides an in-depth examination of the technologies underpinning the øfactory of the futureù as profiled by the Industry 4.0 paradigm. It contains an exploratory comparative analysis of the technological bases and the emergent patterns of development of Internet of Things (IoT), big data, cloud, robotics, artificial intelligence and additive manufacturing. By qualifying the øenablingù nature of these technologies, it explores to what extent their diffusion and convergence can be configured as the trigger of a fourth industrial revolution, and identifies key themes for future research on this topic from the viewpoint of industrial and corporate change.
    Keywords: Industry 4.0; technological paradigm; enabling technology; general purpose technology; disruptive innovation.
    Date: 2019–04–11
  2. By: Frank R. Lichtenberg
    Abstract: There are two types of prescription drug cost offsets. The first type of cost offset—from prescription drug use—is primarily about the effect of changes in drug quantity (e.g. due to changes in out-of-pocket drug costs) on other medical costs. The second type of cost offset—the cost offset from prescription drug innovation—is primarily about the effect of prescription drug quality on other medical costs. Two previous studies found that pharmaceutical innovation reduced hospitalization, and that the reduction in hospital cost from the use of newer drugs was considerably greater than the innovation-induced increase in pharmaceutical expenditure. In this study, we reexamine the impact that pharmaceutical innovation has had on hospitalization, employing a different type of 2-way fixed effects research design. We estimate the impact that new drug launches that occurred during the period 1982-2015 had on hospitalization in 2015 for 67 diseases in 15 OECD countries. Our models include both country fixed effects and disease fixed effects, which control for the average propensity of people to be hospitalized in each country and from each disease. The number of hospital discharges and days of care in 2015 is significantly inversely related to the number of drugs launched during 1982-2005, but not significantly related to the number of drugs launched after 2005. (Utilization of drugs during the first few years after they are launched is relatively low, and drugs for chronic conditions may have to be consumed for several years to achieve full effectiveness.) The estimates imply that, if no new drugs had been launched after 1981, total days of care in 2015 would have been 163% higher than it actually was. The estimated reduction in 2015 hospital expenditure that may be attributable to post-1981 drug launches was 5.3 times as large as 2015 expenditure on those drugs.
    JEL: I10 L65 O33
    Date: 2019
  3. By: Francesco Aiello (Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF, Università della Calabria); Paola Cardamone (Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF, Università della Calabria); Lidia Mannarino (Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF, Università della Calabria); Valeria Pupo (Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF, Università della Calabria)
    Abstract: This paper investigates how family and non-family firms differ in terms of their capability to introduce environmental innovation, which is measured by green patents. The analysis is carried out using a large patenting data set related to the inventions produced by about 4200 Italian manufacturing firms over the period 2009–2017. The results show that family firms are less likely than non-family firms to implement innovations in green technologies. Moreover, the role played by the stock of knowledge and the environmental management system certification differs across firm type.
    Keywords: eco-innovation, green patent, family firms
    JEL: O31 C23 G34
    Date: 2019–03
  4. By: Naudé, Wim (Maastricht University)
    Abstract: After a number of AI-winters, AI is back with a boom. There are concerns that it will disrupt society. The immediate concern is whether labor can win a 'race against the robots' and the longer-term concern is whether an artificial general intelligence (super-intelligence) can be controlled. This paper describes the nature and context of these concerns, reviews the current state of the empirical and theoretical literature in economics on the impact of AI on jobs and inequality, and discusses the challenge of AI arms races. It is concluded that despite the media hype neither massive jobs losses nor a 'Singularity' are imminent. In part, this is because current AI, based on deep learning, is expensive and difficult for (especially small) businesses to adopt, can create new jobs, and is an unlikely route to the invention of a super-intelligence. Even though AI is unlikely to have either utopian or apocalyptic impacts, it will challenge economists in coming years. The challenges include regulation of data and algorithms; the (mis-) measurement of value added; market failures, anti-competitive behaviour and abuse of market power; surveillance, censorship, cybercrime; labor market discrimination, declining job quality; and AI in emerging economies.
    Keywords: technology, articial intelligence, productivity, labor demand, innovation, inequality
    JEL: O47 O33 J24 E21 E25
    Date: 2019–03
  5. By: Pierre-Alexandre Balland; Ron Boschma; Julien Ravet
    Abstract: A key objective of the EU Framework Programmes for Research and Innovation is the creation of cross-country research networks. We make use of Social Network tools to describe the evolution of the EU research network across countries on the basis of unique data covering collaborative projects launched during the first four years of implementation of Horizon 2020 and its predecessor programmes, the Sixth and Seventh Framework Programme. We describe the positioning of all EU-countries in the collaborative research network, the positioning of the older member EU-15 and the newer member EU-13 countries in particular, and to what extent the network has been subject to change during the period 2003-2017. EU-15 and EU-13 countries have become more integrated, and some organizations fulfil a bridging function in the EU research network. EU-13 countries are more heavily engaged in parts of the programme on lower complexity research activities.
    Keywords: collaborative research network, European Union, Horizon 2020, Framework Programme, social network analysis, bridging, complexity
    JEL: D85 O33 O38
    Date: 2019–04
  6. By: Lin, Jingyi (Lund University); Plechero, Monica (University of Florence)
    Abstract: Literature investigating highly skilled Chinese migrants has so far focused on their role as drivers of new entrepreneurship as well as innovation in firms and regions, although their role in supporting small and medium enterprises (SMEs) engagement in global innovation networks (GINs) is still underexplored. The participation in GINs is key for high tech SMEs, which rely on sophisticated knowledge but may not have the same absorptive capacity of large firms and multinational corporations. Based on primary data from a case study on 19 SMEs in the IT and new media industry in Beijing, this paper investigates the role of returnees and highly skilled migrants in supporting the engagement of Chinese high-tech SMEs in GINs. The results reveal the important role of those individuals in bringing SMEs in former international knowledge networks and establishing new linkages for sourcing key knowledge.
    Keywords: lobal innovation networks; GIN; knowledge sourcing; small and medium enterprises; SMEs; Beijing; China; highly skilled migrants; returnees; IT and new media industry
    JEL: F20 O30
    Date: 2019–04–04
  7. By: Charles I. Jones
    Abstract: This paper considers the taxation of top incomes when the following conditions apply: (i) new ideas drive economic growth, (ii) the reward for creating a successful innovation is a top income, and (iii) innovation cannot be perfectly targeted by a separate research subsidy --- think about the business methods of Walmart, the creation of Uber, or the "idea" of These conditions lead to a new force affecting the optimal top tax rate: by slowing the creation of the new ideas that drive aggregate GDP, top income taxation reduces everyone's income, not just the income at the top. When the creation of ideas is the ultimate source of economic growth, this force sharply constrains both revenue-maximizing and welfare-maximizing top tax rates. For example, for extreme parameter values, maximizing the welfare of the middle class requires a negative top tax rate: the higher income that results from the subsidy to innovation more than makes up for the lost redistribution. More generally, the calibrated model suggests that incorporating ideas as a driver of economic growth cuts the optimal top marginal tax rate substantially relative to the basic Saez calculation.
    JEL: E0 H2 O4
    Date: 2019–04
  8. By: Jan Schnellenbach (Brandenburg University of Technology); Christian Schubert (Faculty of Management Technology, German University in Cairo)
    Abstract: We propose that policy-making in the realm of innovation policy can be fruitfully analyzed from the perspective of Behavioral Political Economy. Citizens, policy-makers and also bureaucrats are prone to biases that have been empirically identified in behavioral economic and psychological research. When applied to innovation policy, it can be shown that under certain conditions, policy-makers are willing to support riskier innovative projects and that this tendency is amplified by public sector incentives, such as soft budget constraints. The same holds for a tendency to support ongoing innovative projects even if their profitability becomes increasingly doubtful. Finally, we also highlight how special-interest policies aimed at distorting risk perceptions can slow down the innovation process.
    Keywords: Biases, Heuristics, Sunk Cost Fallacy, Availability Bias, Overconfidence, Loss Aversion
    JEL: O38 D72 D78 H11
    Date: 2019–02
  9. By: Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Sanandaji, Tino (Institute for Economic and Business History Research (EHFF), Stockholm School of Economics)
    Abstract: Are quantitative measures driven by small business activity also valid proxies for high-impact Schumpeterian entrepreneurship? We compile four hand-collected measures of high-impact Schumpeterian entrepreneurship (VC-funded IPOs, self-made billionaire entrepreneurs, unicorn start-ups, and young top global firms founded by individual entrepreneurs) and six measures dominated by small business activity as well as institutional and economic variables for 64 countries. Factor analysis reveals that much of the variation is accounted for by two distinct factors: one relating to high-impact Schumpeterian entrepreneurship and the other relating to small business activity. Except for the World Bank measure of firm registration of limited liability companies quantity-based measures tend to be inappropriate proxies for high-impact Schumpeterian entrepreneurship.
    Keywords: illionaire entrepreneurs; High-impact entrepreneurship; Innovation; Institutions; Schumpeterian entrepreneurship; Self-employment
    JEL: L50 M13 O31 P14
    Date: 2019–04–03
  10. By: Maarten de Ridder (Centre for Macroeconomics (CFM); University of Cambridge)
    Abstract: Productivity growth has stagnated over the past decade. This paper argues that the rise of intangible inputs (such as information technology) can cause a slowdown of growth through the effect it has on production and competition. I hypothesize that intangibles cause a shift from variable costs to endogenous fixed costs, and use a new measure to show that the share of fixed costs in total costs rises when firms increase ICT and software investments. I then develop a quantitative framework in which intangibles reduce marginal costs and endogenously raise fixed costs, which gives firms with low adoption costs a competitive advantage. This advantage can be used to deter other firms from entering new markets and from developing higher quality products. Paradoxically, the presence of firms with high levels of intangibles can therefore reduce the rate of creative destruction and innovation. I calibrate the model using administrative data on the universe of French firms and find that, after initially boosting productivity, the rise of intangibles causes a 0.6 percentage point decline in long-term productivity growth. The model further predicts a decline in business dynamism, a fall in the labor share and an increase in markups, though markups overstate the increase in firm profits.
    Keywords: Business dynamism, Growth, Intangibles, Productivity, Market power
    Date: 2019–03
  11. By: Yuta Nakabo (Faculty of Social Studies, Nara University); Ken Tabata (School of Economics, Kwansei Gakuin University)
    Abstract: This paper analyzes how patent protection affects economic growth in a continuous-time overlapping generations model with lab-equipment type R&D-based growth. We show that increasing patent breadth may generate an inverted-U effect of patents on economic growth, an effect which is partly consistent with an empirically observed nonmonotonic relationship between patent protection and economic growth. This paper also shows that the combinations of heterogeneous households with finite lifetimes and the lab-equipment type R&D specification are relevant for deriving the inverted-U effect of patent protection on economic growth.
    Keywords: Innovations, Patents, Overlapping Generations
    JEL: O31 O34 O40
    Date: 2019–04

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