nep-ino New Economics Papers
on Innovation
Issue of 2019‒07‒08
fourteen papers chosen by
Uwe Cantner
University of Jena

  1. The Rise of Global Innovation by US Multinationals Poses Risks and Opportunities By Lee G. Branstetter; Britta Glennon; J. Bradford Jensen
  2. Subsidizing Innovation and Production By Gamal Atallah
  3. R&D FINANCING AND GROWTH By Luca Spinesi; Mario Tirelli
  4. Cooperating in R&D and Advertising By Parisa Pourkarmi; Gamal Atallah
  5. Mapping technological knowledge patterns: evidence from ocean energy technologies By Maïder SAINT-JEAN; Nabila ARFAOUI; Eric BROUILLAT; David VIRAPIN
  6. Using structural diversity to measure the complexity of technologies By Tom Broekel
  8. Innovation and FDI: Does the Target of Intellectual Property Rights Matter? By Chen, Hung-Ju
  9. The emergence of an innovation ecosystem in a low innovation region: Disrupting inertia by a young university By Elisa Villani; Christian Lechner
  10. Incentives for labor-augmenting innovation: The role of wage rate By Luca Sandrini
  11. New(s) data for Entrepreneurship Research? An innovative approach to use Big Data on media coverage By Johannes von Bloh; Tom Broekel; Burcu Oezgun; Rolf Sternberg
  12. Threats and opportunities in the digital era: automation spikes and employment dynamics By Giacomo Domini; Marco Grazzi; Daniele Moschella; Tania Treibich
  13. Time for Growth By Severgnini, Battista; Boerner, Lars
  14. A Time to Print; a Time to Reform By Boerner, Lars; Rubin, Jared; Severgnini, Battista

  1. By: Lee G. Branstetter (Peterson Institute for International Economics); Britta Glennon (Wharton School, University of Pennsylvania); J. Bradford Jensen (Peterson Institute for International Economics)
    Abstract: For decades, US multinational corporations (MNCs) conducted nearly all their research and development (R&D) within the United States. Their focus on R&D at home helped establish the United States as the unrivaled leader of innovation and technology advances in the world economy. Since the late 1990s, however, the amount of R&D conducted overseas by US MNCs has grown nearly fourfold and its geographic distribution has expanded from a few advanced industrial countries to many parts of the developing world, creating an innovation system that spans the globe. Like many aspects of globalization, including the offshoring of manufacturing over recent decades, the globalization of R&D raises concerns about US competitiveness and loss of technological leadership. At the same time, the spreading geographic location of innovation presents opportunities for US-based companies if the right policies are adopted to seize them. The research presented in this Policy Brief demonstrates that US innovators continue to remain involved in important ways in US MNCs' global R&D activities, and fears of a hollowing out of US capacity to innovate—based probably on previous fears about the hollowing out of US-based manufacturing—may be overstated. Indeed, the large and growing pool of highly educated scientists and engineers in the developing world could increase the rate of global productivity growth, to the advantage of US-based companies and the world in general. The authors conclude that a productive way to capitalize on the globalization of MNC R&D is not to oppose it but to combine emerging-market talent with MNC experience so that innovation can flourish to improve global living standards and fuel economic progress.
    Date: 2019–06
  2. By: Gamal Atallah (Department of Economics, University of Ottawa, Ottawa, ON)
    Abstract: This paper studies the interaction between production subsidies and innovation subsidies. We develop a model which allows us to calculate the socially optimal subsidies (and how they vary with changes in the economic environment), and to understand how firms react to each type of subsidy. In a three-stage game, the government chooses production and innovation subsidies in the first stage to maximize welfare in the presence of a shadow cost of public funds; two firms invest in cost-reducing R&D in the second stage; and the two firms compete in quantities in the last stage. We find that production subsidies crowd out innovation, since they reduce the gain for firms from investing in R&D. On the other hand, providing a production subsidy reduces the cost of the innovation subsidy, and vice versa. The optimal production subsidy is U-shaped with respect to spillovers, while the innovation subsidy is increasing in spillovers. The production subsidy is higher for very low spillovers, while the innovation subsidy is higher for moderate/high spillovers. In equilibrium, because of the innovation subsidy, R&D increases with spillovers, and so does welfare. Optimal subsidies increase with research costs and with the slope of inverse demand, and have an inverted-U shape with respect to initial costs and demand height. We also consider the case of a financially constrained government, as well as the case of a uniform subsidy to production and innovation costs.
    Keywords: Production subsidy; Input subsidy; Output subsidy; Innovation subsidy; R&D subsidy; R&D; R&D spillovers; Process innovation.
    JEL: D43 L50 O38
    Date: 2018
  3. By: Luca Spinesi; Mario Tirelli
    Abstract: R&D investment are an important engine of growth and development.Yet economists have often claimed underinvestment, based on the consideration thatthese projects are more costly to finance, especially, due to the asymmetric informa-tion between inside and outside investors. Coherently, a recent empirical evidence hasshown that firms intensively active in R&D are less leveraged and rely more heavilyon internal finance. Motivated by this evidence, we study the e↵ects of asymmetricinformation and financial frictions within a GE economy of Schumpeterian tradition.The model and equilibrium concept are rich enough to represent investment and in-novation decisions, technology adoption/di↵usion through patent licensing and, mostimportantly, firms’ financial decisions. In this representation, R&D-intensive firmsmight e↵ectively rely more on internal sources and equity than on debt financing, rel-ative to what would happen in frictionless markets. Further, financial decisions a↵ectaggregate investment and income dynamics.
    Keywords: Innovation; R&D; Schumpeterian growth; financial equilibrium; asym-metric information; firm financial structure
    JEL: O33 O34 O41 D53 G32
    Date: 2019–07
  4. By: Parisa Pourkarmi (Department of Economics, Carleton University, Ottawa, ON); Gamal Atallah (Department of Economics, University of Ottawa, Ottawa, ON)
    Abstract: This paper studies the impact of cooperative R&D and advertising on innovation and welfare in a duopolistic industry. The model incorporates two symmetric firms producing differentiated products. Firms invest in R&D and advertising in the presence of R&D spillovers and advertising spillovers. Advertising spillovers may be positive or negative. Four cooperative structures are studied: no cooperation, R&D cooperation, advertising cooperation, R&D and advertising cooperation. R&D spillovers and advertising spillovers always increase innovation and welfare if products are highly differentiated and/or spillovers are sufficiently high. The ranking of cooperation settings in terms of R&D, profits and welfare depends on product differentiation, R&D spillovers and advertising externalities. Firms always prefer cooperation on both dimensions, which is socially beneficial only when advertising and R&D spillovers are sufficiently high.
    Keywords: R&D, Advertising, Cooperation, Spillovers, Product differentiation, Innovation, Marketing.
    JEL: D43 L13 O32
    Date: 2019
    Abstract: This article investigates the technological knowledge pattern underlying the recent evolution in ocean energy technology (OET) trajectories, especially tidal and wave energy, ocean thermal energy, salinity gradient energy and offshore wind energy. Examination of the relational properties among the knowledge elements in the OET knowledge base, in particular, their substitutability and complementarity, allows a better understanding of the coherence of this knowledge base and the technological trajectories within the sector. We use patent data extracted from the Questel ORBIT database. The various technical options related to OETs are identified by Cooperative Patent Classification (CPC) codes and enable the construction of a dataset of OET patents granted between 2000 and 2015. We analyze the main trends emerging from the patent statistics and we construct a network of citations among OET patents and apply to it a main path algorithm. This allows a mapping of all possible streams of cumulative growth of technological knowledge and identification of the most important ones. We show that the knowledge base of OETs is split into two main families and technology patterns depending on whether the harnessing of ocean power and its conversion to renewable low-carbon electricity derive from physical or chemical science. OET trajectories are somewhat compartmentalized with few connections amongst them; however, there are links between some pivotal tidal and wave energy and offshore wind energy patents which have become the foundations to an OET knowledge base. By focusing specifically on the physics-based family of OETs, we can investigate the structural aspects of this knowledge base and analyze the aggregate level of complementarity and substitutability of its knowledge constituent. Our analysis partly confirms the increased coherence of the OET knowledge base over time but also highlights its fluctuating nature which in some ways mirrors the intermittent nature of ocean energy funding, further slowing consensus over designs which is key to commercialization.
    Keywords: Ocean energy technology, citation network analysis, knowledge base, complementarity, substitutability, dominant design
    JEL: O33 Q42 Q55
    Date: 2019
  6. By: Tom Broekel
    Abstract: The paper introduces structural diversity as a new approach to quantify the complexity of technologies. By modeling technologies as combinatorial networks, a measure of technological complexity is derived that represents the diversity of (sub-)network topologies in these networks. It is further argued that this measure can be empirically approximated with the Network Diversity Score (NDS). The paper also presents an application of this approach to European patent data from 1980 to 2015. On this basis, the measure of structural diversity is shown to replicate a number of stylized facts commonly associated with technological complexity: Complexity increases over time and younger technologies are more complex than older technologies. Complex technologies are also associated to larger R&D efforts and require more collaborative R&D activities. Lastly, when controlling for technologies? size, technologies scoring high on structural diversity are also shown to concentrate in space.
    Keywords: Complexity, technology, patents, technological complexity, network, diversity
    JEL: O11 O31 N70
    Date: 2019–05
  7. By: Matteo Deleidi; Mariana Mazzucato
    Abstract: The paper investigates the determinants of economic growth from both a theoretical and an empirical perspective. The paper combines the Sraffian supermultiplier model of growth with the Neo-Schumpeterian framework that emphasizes the entrepreneurial role of the state. We aim to detect the macroeconomic effect generated by alternative fiscal policies: generic ones and “mission-oriented” ones. Using a SVAR model for the US economy for the 1947–2018 period, we show that mission-oriented policies produce a larger positive effect on GDP (fiscal multiplier) and on private investment in R&D (crowd-in effect) than the effect produced by generic public expenditures.
    Keywords: Mission-oriented innovation policies, Sraffian supermultiplier, SVAR, fiscal multiplier, crowding-in effect.
    JEL: C32 E22 E62 O25 O30
    Date: 2019–06
  8. By: Chen, Hung-Ju
    Abstract: This paper develops a North-South product-cycle model with innovation and foreign direct investment (FDI) to analyze the influences from strengthening intellectual property rights (IPR) protection. Innovation occurs in the North while imitation happens in the South. Southern firms can imitate either goods produced in the North or goods produced by multinationals in the South. We find that if the target of strengthening IPR protection is Northern-produced goods, then such a policy change reduces the innovation rate and raises the North-South relative wage in the long run. However, the effects on the long-run innovation rate and the North-South relative wage reverse if its target is Southern-produced goods by multinationals. As for the pattern of production, strengthening IPR protection raises the long-run extents of FDI and Southern production imitating goods produced by multinationals while reducing the long-run extents of Northern production and Southern production imitating goods produced in the North, regardless of the target of stronger IPR protection. In addition to examining the long-run effects of strengthening IPR protection, we also analyze its effects during the transitional dynamics. The quantitative analysis indicates that the two strengthening-IPR-protection policies cause welfare losses for both Northern and Southern consumers if we consider the accumulated effects during the transitional dynamics.
    Keywords: FDI; Imitation; Innovation; IPR; R&D.
    JEL: E52 F23 O31
    Date: 2019–06–25
  9. By: Elisa Villani (University of Bologna, Italy); Christian Lechner (Free University of Bolzano, Italy)
    Abstract: Innovation ecosystems are characterised by a variety of complementary actors and relationships among them. Universities are considered a key player in innovation ecosystems for their ability of generating knowledge and qualified expertise for entrepreneurial innovation. While much attention has been paid to mature ecosystems characterised by cutting-edge technologies, the role of less established universities in less innovative regions, characterised by a lack of relationships, familyowned firms, difficult university-industry collaborations, but great potential, has remained very much underexplored. Based on a longitudinal case study of a young university in Italy, this paper aims at contributing to existing literature by looking at the role of the university in defining actors’ positions and relationships in establishing an innovation ecosystem. In doing so, we contribute to existing literature in several ways. First, we highlight that the formation of an innovation ecosystem in a small area highly depends on the university’s potential of disrupting established relationships, creating new ones and, thus, playing an active role in designing the ecosystem. Second, we provide a process-based view for understanding the establishment of an innovation ecosystem through the evolution of interactions, roles and activities. Finally, we describe the micro-dynamics characterising innovation ecosystem emergence and institutionalisation and we show that bottomup approaches are possible as well.
    Keywords: Ecosystems, university, university-industry collaboration, innovation, longitudinal case study
    JEL: M10
    Date: 2019–06
  10. By: Luca Sandrini (Department of Economics and Management, University of Padova)
    Abstract: This paper analyzes how the incentives to produce and to adopt labor-augmenting innovation are linked to the wage rate. I design a model of a vertically related industry, where downstream manufacturers can choose between a standard low-quality capital input or a superior one produced by an upstream innovator. High-quality capital input allows adopting firms to have a higher labor productivity. I show that there is an inverted-U shaped relationship between the wage rate and the incentive to invest in innovation based on two opposite forces: a positive cost-reducing effect and a negative output contraction effect. Finally, this paper provides some support for the introduction of a minimum wage, which is found able to increase both the investments in innovative activities and the social welfare.
    Keywords: labor-augmenting innovation, vertical relation, oligopoly, minimum wage
    JEL: J31 L13 O31
    Date: 2019–06
  11. By: Johannes von Bloh; Tom Broekel; Burcu Oezgun; Rolf Sternberg
    Abstract: Although conventional register and survey data on entrepreneurship have enabled remarkable insights into the phenomenon, the added value has slowed down noticeably over the last decade. There is a need for fresh approaches utilising modern data sources such as Big Data. Until now, it has been quite unknown whether Big Data actually embodies valuable contributions for entrepreneurship research and where it can perform better or worse than conventional approaches. To contribute towards the exploration of Big Data in entrepreneurship research, we use a newly developed dataset based on publications of the German Press Agency (dpa) to explore the relationship between news coverage of entrepreneurship and regional entrepreneurial activity. Furthermore, we apply sentiment analysis to investigate the impact on sentiment of entrepreneurial press releases. Our results show mixed outcomes regarding the relationship between reporting of entrepreneurial events, i.e., media coverage, and entrepreneurial activity in German planning regions. At this stage, our empirical results reject the idea of a strong relationship between actual entrepreneurial activities in regions and the intensity of it being reported. However, the results also imply much potential of Big Data approaches for further research with more sophisticated methodology approaches. Our paper provides an entry point into Big Data usage in entrepreneurship research and we suggest a number of relevant research opportunities based on our results.
    Keywords: entrepreneurship, media coverage, mass media, Big Data, sentiment analysis, GEM, entrepreneurial ecosystem, region, news data
    JEL: C8 L26 R12
    Date: 2019–06
  12. By: Giacomo Domini; Marco Grazzi; Daniele Moschella; Tania Treibich
    Abstract: This paper investigates how investment in automation-intensive goods impacts on worker flows at the firm level and, within firms, across occupational categories. Resorting to an integrated dataset encompassing detailed information on firms, their imports, and employer-employee data for French manufacturing employers over 2002-2015, we identify 'automation spikes' using imports of intermediates embedding automation technologies and then test their impact on employment dynamics. We find that automation spikes are positively correlated with preceding and contemporaneous growth in employment, mainly due to lower separation rates of investing firms. These differential patterns of net and gross worker flows do not appear to change significantly across different types of workers (occupational categories, 'techies', routine-intensive vs. non routine-intensive jobs).
    Keywords: Automation; Skills; Technological Change; Gross Worker Flows..
    Date: 2019–07–01
  13. By: Severgnini, Battista (Department of Economics, Copenhagen Business School); Boerner, Lars
    Abstract: This paper studies the impact of the early adoption of one of the most important high-technology machines in history, the public mechanical clock, on long-run growth in Europe. We avoid endogeneity by considering the relationship between the adoption of clocks with an instrument based on the appearance of repeated solar eclipses. This is motivated by the predecessor technologies of mechanical clocks, astronomic instruments that measured the course of heavenly bodies. We find a significant increase in growth rates between 1500 and 1700 in the range of 30 percentage points in early adopter cities and areas. Finally, additional quantitative analysis suggests a positive relationship between mechanical clocks and contemporary long-term orientation nowadays.
    Keywords: technological adoption; cities; mechanical clocks; information technology; long-term orientation
    JEL: N13 N93 O33
    Date: 2019–03–28
  14. By: Boerner, Lars; Rubin, Jared; Severgnini, Battista (Department of Economics, Copenhagen Business School)
    Abstract: The public mechanical clock and the movable type printing press were two of the most important and complex general purpose technologies of the late medieval period. We document two of their most important, yet unforeseeable, consequences. First, an instrumental variables analysis indicates that towns that were early adopters of clocks were more likely to also be early adopters of presses. We posit that towns with clocks became upper-tail human capital hubs—both technologies required extensive technical know-how that had many points of overlap. Second, a three-stage instrumental variables analysis indicates that the press influenced the adoption of Lutheranism and Calvinism, while the clock’s effect on the Reformation was indirect (via the press).
    Keywords: mechanical clock; printing press; technology; Reformation; human capital; Calvinism; Lutheranism; instrumental variables
    JEL: N33 N73 O33 O34 P48 Z12
    Date: 2019–03–01

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