nep-ino New Economics Papers
on Innovation
Issue of 2019‒08‒26
ten papers chosen by
Uwe Cantner
University of Jena

  1. The Impact of State-Level R&D Tax Credits on the Quantity and Quality of Entrepreneurship By Catherine Fazio; Jorge Guzman; Scott Stern
  2. Technology Gaps, Trade and Income By Thomas Sampson
  3. Geopolitical Risk and R&D investment By Wei-Fong Pan
  4. Influential factors of initiating open innovation collaboration between universities and SMEs: Systematic Literature Review By Hezam Haidar; Karine Evrard Samuel; Jean-François Boujut
  5. Killer Technologies: the destructive creation in the technical change By Mario Coccia
  6. The Best versus the Rest: Divergence across Firms During the Global Productivity Slowdown By Dan Andrews; Chiara Criscuolo; Peter N. Gal
  7. Passive Versus Active Growth: Evidence from Founder Choices and Venture Capital Investment By Christian Catalini; Jorge Guzman; Scott Stern
  8. From Local to Global: A Unified Theory of Public Basic Research By Gersbach, Hans; Schetter, Ulrich; Schmassmann, Samuel
  9. Entrepreneurship over the Business Cycle in the United States: A Decomposition By Fossen, Frank M.
  10. Collaborative knowledge creation: Evidence from Japanese patent data By Tomoya Mori; Shosei Sakaguchi

  1. By: Catherine Fazio; Jorge Guzman; Scott Stern
    Abstract: The acceleration of start-up activity is often cited as a rationale for the R&D tax credit, a key innovation policy instrument adopted increasingly by US states over the past quarter century. While there is a strong empirical base linking the R&D tax credit to increased R&D expenditures and innovation, prior work has not provided causal evidence that this policy effects the rate of formation and growth potential of new businesses. This paper combines data from the US Startup Cartography Project with the Panel Database on Incentives and Taxes to implement a difference-in-differences estimate of the impact of the R&D tax credit on the quantity and quality-adjusted quantity of entrepreneurship. Our key finding is that the R&D tax credit is associated with a significant long-term impact on both the overall quantity and quality-adjusted quantity of entrepreneurship, with the bulk of the effect materializing more than five years after the policy is enacted. These findings stand in contrast to an analysis of the adoption of state-level investment tax credits. There, we observe no long-term impact on the quantity of entrepreneurship but a marked decline in the rate of formation of growth-oriented startups over time. Combined with other evidence regarding the efficacy of R&D tax credits in spurring innovative investment, our results shed light on the potential for this fiscal policy to also stimulate the formation of growth-oriented start-ups.
    JEL: H25 L26
    Date: 2019–07
  2. By: Thomas Sampson
    Abstract: This paper studies the origins and consequences of international technology gaps. I develop an endogenous growth model where R&D efficiency varies across countries and productivity differences emerge from firm-level technology investments. The theory characterizes how innovation and learning determine technology gaps, trade and global income inequality. Countries with higher R&D efficiency are richer and have comparative advantage in more innovation-dependent industries where the advantage of backwardness is lower and knowledge spillovers are more localized. I estimate R&D efficiency by country and innovation-dependence by industry from R&D and bilateral trade data. Calibrating the model implies technology gaps, due to cross-country differences in R&D efficiency, account for around one-quarter to one-third of nominal wage variation within the OECD.
    Keywords: technology gaps, trade, technology investment, Ricardian comparative advantage, international wage inequality
    JEL: F11 F43 O14 O41
    Date: 2019
  3. By: Wei-Fong Pan (Department of Economics, University of Reading)
    Abstract: Although most empirical studies conclude that uncertainty delays firms' investments based on real options theory, empirical evidence regarding the impact of uncertainty on innovation is mixed. This study examines the impact of geopolitical risk (GPR) on corporate research and development (R&D) investment using newly developed indices. We find a negative relationship between GPR and R&D investment. The R&D investment rapidly drops and rebounds several quarters after high GPR. The impact of GPR is most significant for high-tech firms, small firms, and firms with high growth options. However, when GPRs are realised, these significant and negative effects disappear. These results are shown to be robust after controlling for firm characteristics, macroeconomic environment, other uncertainty measures, time, and alternative GPR and R&D measures, as well as considering the simultaneity and endogeneity issues. Overall, our study suggests that GPR plays a key role in determining R&D investment.
    Keywords: R&D, Political uncertainty, Geopolitical risk, Innovation
    JEL: D80 H56 O31
    Date: 2019–07
  4. By: Hezam Haidar (G-SCOP - Laboratoire des sciences pour la conception, l'optimisation et la production - UJF - Université Joseph Fourier - Grenoble 1 - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INPG - Institut National Polytechnique de Grenoble - UGA - Université Grenoble Alpes - CNRS - Centre National de la Recherche Scientifique, CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS - Centre National de la Recherche Scientifique - UPMF - Université Pierre Mendès France - Grenoble 2 - UGA - Université Grenoble Alpes); Karine Evrard Samuel (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS - Centre National de la Recherche Scientifique - UPMF - Université Pierre Mendès France - Grenoble 2 - UGA - Université Grenoble Alpes); Jean-François Boujut (GILCO - Gestion Industrielle Logistique et Conception - INPG - Institut National Polytechnique de Grenoble)
    Abstract: Academia-Industry collaboration is increasingly seen as an essential engine of local economic development and the open innovation model is a key element in such collaboration. The aim of this paper is to explore the existing literature in a systematic way to identify the factors that influence decision makers to start an open innovation collaborations between universities and SMEs. The review shows that open innovation' in the context of university-Industry is receiving more and more attention. The majority of the existing research focus on knowledge and technology transfer. We used the Content Analysis method to analyze the final sample, the findings fall into four categories of factors: Organizational Structure, External Resources, Performance Indicators and Proximity. The article concludes with suggestions for future research.
    Keywords: SMEs,open innovation,university-Industry collaboration,early-stage development knowledge and technology transfer,systematic review
    Date: 2019–06–25
  5. By: Mario Coccia
    Abstract: Killer technology is a radical innovation, based on new products and/or processes, that with high technical and/or economic performance destroys the usage value of established techniques previously sold and used. Killer technology is a new concept in economics of innovation that may be useful for bringing a new perspective to explain and generalize the behavior and characteristics of innovations that generate a destructive creation for sustaining technical change. To explore the behavior of killer technologies, a simple model is proposed to analyze and predict how killer technologies destroy and substitute established technologies. Empirical evidence of this theoretical framework is based on historical data on the evolution of some example technologies. Theoretical framework and empirical evidence hint at general properties of the behavior of killer technologies to explain corporate, industrial, economic and social change and to support best practices for technology management of firms and innovation policy of nations. Overall, then, the proposed theoretical framework can lay a foundation for the development of more sophisticated concepts to explain the behavior of vital technologies that generate technological and industrial change in society.
    Date: 2019–07
  6. By: Dan Andrews; Chiara Criscuolo; Peter N. Gal
    Abstract: We are grateful to Daron Acemoglu, Ufuk Akcigit, Martin Baily, Eric Bartelsman, Giuseppe Berlingieri, Olivier Blanchard, Patrick Blanchenay, Nick Bloom, Erik Brynjolffson, Sara Calligaris, Gilbert Cette, Mirko Draca, Luis Garicano, John Fernald, Jonathan Haskel, Remy Lecat, Catherine L. Mann, Giuseppe Nicoletti, Dirk Pilat, Alessandro Saia, Louise Sheiner, Chad Syverson, John Van Reenen and Andrew Wyckoff, Jeromin Zettelmeyer for their valuable comments and suggestions. We would also like to thank seminar participants at the Bank of England, Bank of Canada, the Brookings Institution, the Central Bank of the Netherlands, ESCoE, European Commission, France Strategie, IMF, MIT, NBER Productivity, Innovation and Entrepreneurship Program meeting, OFCE, Peterson Institute for International Economics, Royal Economic Society, UCL, US Census Bureau, and participants at the OECD Global Forum on Productivity Conferences in Mexico City and Lisbon as well as OECD Committee Meetings. The opinions expressed and arguments employed herein are solely those of the authors and do not necessarily reflect the official views of the OECD or its member countries.
    Keywords: firm dynamics, regulation, knowledge diffusion, technological change, productivity
    JEL: O30 O40 M13
    Date: 2019–08
  7. By: Christian Catalini; Jorge Guzman; Scott Stern
    Abstract: This paper develops a novel approach for assessing the role of passive learning versus a proactive growth orientation in the entrepreneurial growth process. We develop a simple model linking early-stage founder choices, venture capital investment and skewed growth outcomes such as the achievement of an IPO or significant acquisition. Using comprehensive business registration data from 34 US states from 1995-2004, we observe that firms that register in Delaware or obtain intellectual property such as a patent or trademark are far more likely to ultimately realize significant equity growth, and these choices also predict early-stage venture capital investment. Moreover, the estimated probability of receiving venture capital as reflected in early-stage founder choices predicts growth even for firms that do not receive venture capital. We use these findings to estimate bounds on the fraction of proactive versus passive firms among firms that ultimately achieve significant equity growth. While nearly half of all firms that achieve modest equity growth (> $10M) are consistent with passive learning (as they neither make early-stage founder choices nor receive venture capital), 78% of firms experiencing an equity growth event greater than $100M are associated with active founder choices and/or venture capital investment, and these firms are concentrated in geographic hubs such as Silicon Valley. Finally, our approach offers a novel approach for estimating the private returns to venture capital, matching on founder choices rather than demographics; consistent with prior studies, venture-backed firms are approximately 5X more likely to grow, with heterogeneity across location and time period.
    JEL: L25 L26
    Date: 2019–07
  8. By: Gersbach, Hans; Schetter, Ulrich; Schmassmann, Samuel
    Abstract: We analyze public investment in basic research in a multi-country, multi-industry environment with international trade. Basic research generates ideas which private firms take up in applied research to develop new varieties. A country's current specialization in international trade thus determines which ideas can be commercialized domestically. We demonstrate that the equilibrium is consistent with key patterns observed from the data. We then compare basic research investments of national governments with optimal investments of a global social planner. We show that national investments are inefficient along three dimensions: (1) There is typically too little total investment in basic research. (2) Basic research is too heavily concentrated in industrialized countries. (3) And basic research is potentially insufficiently directed to support innovation in complex, high-tech industries.
    Keywords: basic research; economic growth; international trade; knowledge spillover; optimal policy
    JEL: F10 F43 H40 O31 O38
    Date: 2019–07
  9. By: Fossen, Frank M. (University of Nevada, Reno)
    Abstract: Entry rates into self-employment increase during recessions and decrease during economic upswings. I show that this is mostly explained by the higher unemployment rate during a recession, together with the fact that at all times, unemployed persons have a relatively high propensity to become entrepreneurs out of necessity because they do not find paid employment. I use econometric decomposition techniques to quantify these effects based on the monthly matched US Current Population Survey before, during and after the Great Recession. I also document that this counter-cyclical pattern of entrepreneurial entry strongly applies to unincorporated entrepreneurship, but only weakly to incorporated entrepreneurship. This highlights the association of unincorporated and incorporated entrepreneurship with necessity and opportunity entrepreneurship, respectively. The results are useful for policy-makers and practitioners to understand, forecast and act on the different types of entrepreneurial activities that are to be expected over the business cycle.
    Keywords: entrepreneurship, business cycle, Great Recession, unemployment, opportunity, necessity, decomposition
    JEL: L26 J22 J23 M13
    Date: 2019–07
  10. By: Tomoya Mori; Shosei Sakaguchi
    Abstract: This paper presents micro-econometric evidence for collaborative knowledge creation at the level of individual researchers. The key determinant for developing new ideas is the exchange of differentiated knowledge among collaborators. To stay creative, inventors seek opportunities to shift their technological expertise to unexplored niches by utilizing the differentiated knowledge of new collaborators. Furthermore, a more active recombination of collaborators by an inventor facilitates the selection of collaborators to raise the amount of differentiated knowledge from their collaborators.
    Date: 2019–08

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