nep-ino New Economics Papers
on Innovation
Issue of 2019‒08‒19
twelve papers chosen by
Uwe Cantner
University of Jena

  1. The impact of public R&D support on firms' patenting By Marit Klemetsen; Brita Bye; Arvid Raknerud
  2. Does Import Competition Reduce Domestic Innovation? Evidence from the 'China Stock' and Firm-Level Data on Canadian Manufacturing By Myeongwan Kim
  3. Technological Learning and Innovation Gestation Lags at the Frontier of Science: from CERN Procurement to Patents By Andrea, Bastianin; Paolo, Castelnuovo; Massimo, Florio; Anna, Giunta
  4. Diminishing Role of Young Manufacturing Plants as Drivers of Growth By Kim, Minho
  5. The Effect of Fiscal Incentives on Business R&D By Bucci, Valeria
  6. Biofuels Policy and Innovation Impacts: Evidence from Biofuels and Agricultural Patent Indicators By Nelson, Kelly; Brown, Zachary S.; Parton, Lee
  7. Inventions and Scientific Discoveries: Impact of Designers’ Collaborations on Creativity. An Analysis Towards Fixation Effects By Quentin Plantec; Pascal Le Masson; Benoit Weil
  8. R&D Spillovers in Canadian Industry: Results from a New Micro Database By Myeongwan Kim, John Lester
  9. Government R&D Support for SMEs: Policy Effects and Improvement Measures By Lee, Sungho
  10. Innovation and Self-Employment By Tommaso Ciarli; Mattia Di Ubaldo; Maria Savona
  11. On the Decline of R&D Efficiency By MIYAGAWA Tsutomu; ISHIKAWA Takayuki
  12. The Strong Porter Hypothesis in an Endogenous Growth Model with Satisficing Managers By Dominique Bianco; Evens Salies

  1. By: Marit Klemetsen; Brita Bye (Statistics Norway); Arvid Raknerud (Statistics Norway)
    Abstract: We examine the impact of both R&D tax credits and direct R&D subsidies on Norwegian firms' patenting. Whereas direct subsidies are aimed at projects with low private and high social return, tax credits do not discriminate between projects or technologies. We find that both direct subsidies and tax credits have significant positive effects on patenting. However, the magnitude of the effects depend critically on the firms' pre-treatment characteristics. In particular, the statistically significant estimates are all related to firms with no patent applications prior to obtaining support. Moreover, we estimate that direct subsidies have triggered at least three times as many granted patents per NOK million of support compared to tax credits. Our results suggest that R&D support should be directed to promote innovations at the extensive margin, i.e. to firms with a high potential of becoming innovative rather than to firms with a record of being innovative. Moreover, as targeted subsidies generate more innovations, society would benefit from distributing more of the subsidies to priority areas.
    Keywords: Patenting; R&D policy; Treatment effects; Stratification; Matching; Poisson regression
    JEL: C33 C52 D24 O38
    Date: 2019–07
  2. By: Myeongwan Kim
    Abstract: A key economic issue in Canada is the declining Business Enterprise Research and Development in manufacturing since the early 2000s. Accompanying this, the total factor productivity (TFP) growth in manufacturing slowed after 2000. However, there has not been a definitive explanation for these trends. To deepen our understanding of this phenomenon, we focus on the increasing Chinese import share in the total domestic absorption in Canadian manufacturing since the early 2000s, which appears to be driven by positive supply shocks within Chinese manufacturing. Based on a firm-level database covering all incorporated firms in Canadian manufacturing, we find that rising Chinese import competition led to declines in R&D expenditure and TFP growth within firms but reallocated employment towards more productive firms and induced less productive firms to exit. The negative within-effects were pronounced for firms that were initially smaller, less profitable, and less productive. These firms also experienced declines in their profit margins due to rising Chinese import competition while larger and better-performing firms did not. Our estimates imply that rising Chinese import competition can explain about 7 per cent of the total decline of $1.36 billion (2007 CAD) in R&D expenditure in Canadian manufacturing between 2005 and 2010. Although it led to declines in TFP within firms, the positive reallocation effects more than offset the negative within-effect. Had there been no increase in Chinese import competition between 2005 and 2010, TFP in Canadian manufacturing would have declined by 1.26 per cent per year instead of the actual 1.09 per cent per year over this period.
    Keywords: China Shock, Canada, Imports, Productivity, Innovation
    JEL: O32 O51 O53 L60
    Date: 2019–08
  3. By: Andrea, Bastianin; Paolo, Castelnuovo; Massimo, Florio; Anna, Giunta
    Abstract: This paper contributes to the literature on the impact of Big Science Centres on technological innovation. We exploit a unique dataset with information on CERN’s procurement orders to study the collaborative innovation process between CERN and its industrial partners, mostly European firms. Since 19 out of the 23 Member Countries of CERN belong to the EU, public procurement for innovation through CERN can be seen as factor contributing to European innovation policies. After a qualitative discussion of case studies, survival and count data models are estimated; the impact of CERN procurement on suppliers’ innovation is captured by the number of patent applications. The fact that firms in our sample received their first order over a long time span (1995-2008) delivers a natural partition of industrial partners into “suppliers” and “not yet suppliers”. This allows estimating the impact of CERN on the hazard to file a patent for the first time and on the number of patent applications, as well as the time needed for these effects to show up. We find that a “CERN effect” does exist: being an industrial partner of CERN is associated with an increase in the hazard to file a patent for the first time and in the number of patent applications. These effects require a significant “gestation lag” in the range of five to eight years, pointing to a relatively slow process of absorption of new ideas.
    Keywords: Big Science; CERN; innovation; public procurement; patents; gestation lags.
    JEL: C21 C23 H57 L39 O31
    Date: 2019–04
  4. By: Kim, Minho
    Abstract: Korea's aggregate productivity growth in the manufacturing industry is on the decline, considerably influenced by the slowing productivity growth of young plants. A particularly sharp decline has been observed in the high-tech industry over the past three years. As such, government support programs need to aim at promoting growth and driving innovation and the numerous targets for support programs should be streamlined towards young innovative firms. The criteria for such firms should involve private sector investment in order to enhance the effectiveness of the programs. - Advanced countries are making renewed efforts to enhance innovation and competitiveness in manufacturing while concerns are growing in Korea over the industry's waning competitiveness. - This study analyzed the changes in the productivity growth of young manufacturing plants and proposed measures to improve the government's entrepreneurship support policy. - Young firms serve as a driving force for job creation and economic growth. - The share of young plants in the manufacturing industry has continued to decline, pointing to a weakening of Korea's economic dynamism. - The manufacturing industry's aggregate productivity growth has declined, particularly over the past three years. - Young plants account for nearly half of the aggregate productivity growth on average in manufacturing while their value-added share is only 13%. - The productivity growth of young plants has decreased over the past decade, diminishing its role as a growth engine. - The stagnating growth of young plants is a bigger factor to their declining productivity growth than the falling number of new entries. - The productivity growth of young plants in the high-tech industry, which has the highest R&D intensity, posted sharp decreases. - Industries with high R&D intensity have been the driving force behind the productivity growth of the manufacturing industry for two decades. But, the last three years have seen a steep decline in the productivity growth of the high-tech industry. - Although the average productivity of young plants is high, their contribution to aggregate productivity growth has declined due to their shrinking share of the industry. - While streamling the targets for the support programs towards innovative firms, the government should refrain from selecting and supporting firms directly and reform regulations that hinder entrepreneurship and the growth of innovative firms. - The government's verification process should be abolished and innovative firms should be defined as young venture capital firms or R&D firms. - Restructuring government programs should be based on objective project evaluations.
    Date: 2018
  5. By: Bucci, Valeria
    Abstract: This paper analyses the determinants of business R&D choices. In particular, it provides new empirical evidence on the effectiveness of fiscal policies aimed at driving companies to invest in R&D activity. By computing two very accurate proxies for firm-specific tax savings achievable when investing in R&D, and by exploiting exogenous changes in fiscal legislation in Italy, this study investigates if fiscal considerations affect companies’ choice to invest in R&D and how much to spend in such activity. The empirical analysis is based on an unbalanced panel data set composed of 163 Italian companies, covering the years 2004-2010. A two-step approach has been implemented, by combining a probit and a tobit estimation model. The results deliver strong empirical evidence that fiscal incentives significantly affect business R&D choices, by one side, increasing companies’ likelihood to invest in R&D, and, by the other, fostering companies’ R&D expenditure.
    Keywords: Innovation, R&D, Fiscal Incentives, Marginal Tax Savings
    JEL: H25 H32 O32 O38
    Date: 2019–04–18
  6. By: Nelson, Kelly; Brown, Zachary S.; Parton, Lee
    Keywords: Resource/ Energy Economics and Policy
    Date: 2019–06–25
  7. By: Quentin Plantec (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique, Institut National de la Propriété Industrielle (INPI)); Pascal Le Masson (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique); Benoit Weil (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Scientific discoveries and inventions have long been established as two distinct and sequential activities. It has nonetheless been showed that projects aiming at producing both scientific discoveries and inventions could record impressive results. Our investigations are focusing on the creativity of collaborations outputs: a first agent is entailed to design a scientific discovery and another one invention. We use fixation effects as a performance measurement indicator for creativity based on Design Theory. We propose a first set of elements that can be suffering from fixation effects in both invention and scientific models designers reasoning. We propose a series of defixed inputs that could be shared between both designers to overcome their fixation effects. We highlight that if partners are engaged in one-way knowledge transfer it can conduct to "fixation traps". We define a set of restrictive conditions that could conduct to a "cross-defixation process": both actors would be able to create conjoint new inventions and scientific models in the non-fixed design path. In particular this process does not required designers to be defixed before starting the collaboration.
    Keywords: Innovation,Creativity,Human behaviour in design,Science,C-K design theory
    Date: 2019–08–05
  8. By: Myeongwan Kim, John Lester
    Abstract: Business investment in research and development (R&D) makes a key contribution to rising living standards. Firms undertaking the R&D can reduce production costs and introduce new products that provide benefits to consumers that are not fully captured in selling prices. Further, it is very difficult for R&D-performing firms to prevent some of the knowledge created from leaking out or spilling over to other firms. Since firms do not take these positive spillover benefits into consideration when making investment decisions, most governments subsidize business investment in R&D with the expectation that economic performance will improve as a result. Our study confirms the existence of substantial spillover benefits from R&D performed in Canada, so government support for R&D is justified. However, we do not find any empirical evidence to support the current policy of subsidizing R&D at a higher rate when it is performed by small firms than when it is performed by large firms. We also find much lower private rate of return on R&D performed by small firms than by large firms. Subsidies appear to be playing a key role in this result
    JEL: O32 D22 D24
    Date: 2019–08
  9. By: Lee, Sungho
    Abstract: The government's R&D grant for SMEs has risen to 3 trillion won a year, placing Korea second among OECD nations. Indeed, analysis revealed that government support has not only expanded corporate R&D investment and registration of intellectual property rights but has also increased investment in tangible and human assets and marketing. However, there has been a lack of improvements found in the value added, sales and operating profit because the recipient selection system, which relies solely on the qualitative assessments of technology experts was ineffective. Nevertheless, if a predictive model was properly applied to the system, the causal effect on the value added could increase by more than two fold. Accordingly, to develop such a model, it is important to focus on the economic performance rather than the technical achievements. Also, more policy experiments should be conducted on small firms and a phased approach for R&D financing should to be adopted (① grant → ② equity investment → ③ loan). - Korea's R&D subsidy for SMEs has risen to approx. 3 trillion won a year, making Korea the second largest spender among OECD nations. - The SBIR, the main R&D support program for SMEs in the US, is structured in three phases. - The US case shows that the small lump sum grants for a large number of small firms is more effective than large funds for a few mid-sized firms. - The Korean government's corporate R&D support mostly targets medium-sized development activities, not small-scaled exploratory research. - Current corporate R&D support which is evaluated by the number of registered patents and publications must be reformed. - The scalability of intangible assets is as important as the economies of scale of tangible assets. - In all indicators, recipients exhibited much better performance than nonrecipients at the time of support. - In most performance indicators, recipients stand lower than non-recipients in terms of growth. The former even posted negative growth in operating profit and R&D investment. - This study estimated the causal effects using the two-step approach which integrates the nonparametric matching method and parametric regression model. - The government's R&D support contributed to SMEs' debt and equity financing, and firms expanded their investment in capabilities/ assets such as intellectual properties, relational assets, tangible assets and human capital. - Using the funding, firms invested more in capabilities/ assets, but it did not lead to improving the value added, operating profit and sales growth. - Firms with high growth prospects were selected as recipients in a smaller proportion while those with low growth prospects were selected as recipients in a larger proportion, making the value added growth of recipients lower than the average. - Estimation of the heterogenous causal effects on the value added increments found a positive effect only in the top four deciles. - If the support given to those with negative treatment effect was redistributed, this could double the positive effect. - In keeping pace with the flexibility in corporate R&D practices, the government needs to explore an operating system in which an active exchange of feedback takes place between R&D experiments and market verification. - This study suggests reforming the existing recipient selection practice which is solely based on the qualitative evaluation by technology experts, and promoting the use of the predictive model and a phased expansion of policy experiments. - Evaluations should target economic performance, not publications, IP rights and R&D amount, and a selection model should be developed to optimize the evaluation results. - In accordance to risks associated with the respective stages of R&D and commercialization, the government needs to choose the most suitable financing methods among grants, equity investment and loan support. - More free contests should be offered.
    Date: 2018
  10. By: Tommaso Ciarli (SPRU, Science Policy Research Unit, University of Sussex. UK); Mattia Di Ubaldo (Department of Economics, University of Sussex, UK); Maria Savona (SPRU, Science Policy Research Unit, University of Sussex, UK)
    Abstract: The paper adds to the literature on innovation and employment by looking at the relationship between R&D investments and the rise of alternative work arrangements, particularly selfemployment (SE). A literature review on the determinants of the emergence of non-standard work, alternative work arrangements and self-employment if offered first. The contributions that have looked at SE in relation to innovation strategies is surprisingly limited. General trends of SE in Europe are considered. The empirical contribution is focused on the analysis of local labour markets in the UK (Travel-To-Work-Areas, TTWAs), where their initial concentration of routinized and non-routinized jobs is considered. The probability that an individual shifts from paid employment to either unemployment or self-employment over the period 2001-13, as linked to changes in R&D investments in the TTWA is empirically accounted for. Results show that overall R&D has negligible effects on the probability of workers to become selfemployed. R&D increases the probability of moving from unemployment to paid employment, especially in routinized areas, and reduces the permeability between routinised and nonroutinised workers. Also, a non-negligible increase in the probability that a routinized worker becomes SE as a result of R&D increase is found in low routinised local labour markets, but not in highly routinised areas. The paper sheds new lights on the effect of R&D on employment and self-employment in areas with different degrees of routinization, and adds to the discussion on the more general raise of alternative work arrangements in Europe by disentangling the characteristics of self-employment as resulting from R&D investments.
    Keywords: R&D, employment, unemployment, self-employment, routinized local labour markets
    JEL: J6 O3 O32
    Date: 2019–08
  11. By: MIYAGAWA Tsutomu; ISHIKAWA Takayuki
    Abstract: Following Bloom et al. (2019), we measure R&D efficiency at the industry level with a simple knowledge production function. We use not only the latest version of the Japan Industrial Productivity (JIP) database but also the EUKLEMS database. We find that R&D efficiency measured directly remains positive in the Japanese manufacturing sector, as would be expected under a simple endogenous growth theory. When we divide the period for estimation into two decades, we find that the direct measure of R&D efficiency declined in the second decade in many advanced countries. In particular, there is significant decline of R&D efficiency in the Japanese information service industry. However, we are not able to confirm the decline of R&D efficiency in the Japanese manufacturing sector in the econometric studies. From these results, there are two implications. First, the decline of R&D efficiency means decreasing returns with differences in scale in a knowledge production function. Second, the R&D policies that focus on the scale of R&D are insufficient. The government should implement R&D policies that address the decline and R&D efficiency differences between industries.
    Date: 2019–07
  12. By: Dominique Bianco (LEDi - Laboratoire d'Economie de Dijon [Dijon] - UB - Université de Bourgogne - UBFC - Université Bourgogne Franche-Comté [COMUE]); Evens Salies (OFCE - OFCE - Sciences Po - Sciences Po)
    Abstract: Few endogenous growth models have focused attention on the strong Porter hypothesis that stricter environmental policies induce innovations, the benefits of which exceed the costs. A key assumption underlying this hypothesis is that policy strictness pushes firms to overcome some obstacles to profit maximization. This paper incorporates pollution and taxation in the model of Aghion and Griffith (2005) of growth which includes satisficing managers and non-drastic innovation. Our theoretical results predict the strong Porter hypothesis. However, assuming drastic innovation in the model, we predict the weak Porter hypothesis. We also consider several extensions, such as a simultaneous competition policy or a command and control policy.
    Date: 2017–11–19

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