nep-ino New Economics Papers
on Innovation
Issue of 2019‒12‒02
fourteen papers chosen by
Uwe Cantner
University of Jena

  1. Data Markets in Making: The Role of Technology Giants By Koski, Heli; Pantzar, Mika
  2. Innovation, Growth, and Dynamic Gains from Trade By Wen-Tai Hsu; Raymond G. Riezman; Ping Wang
  3. Unintended side effects: stress tests, entrepreneurship, and innovation By Sebastian Doerr
  4. Collaborative Innovation Blocs – A Meso Perspective to Achieve Antifragility By Elert, Niklas; Henrekson, Magnus
  5. Re-evaluating the NSF broader impacts with the Inclusion-Immediacy Criterion: A look at nanotechnology research By Woodson, Thomas; Hoffman, Elina
  6. Upwind sailors. Financial profile of innovative Italian firms during the double-dip recession By Daniele Pianeselli
  7. The Intellectual Spoils of War? Defense R&D, Productivity and International Spillovers By Moretti, Enrico; Steinwender, Claudia; Van Reenen, John
  8. Innovation and Strategic Network Formation By Krishna Dasaratha
  9. Youth Drain Entrepreneurship and Innovation By Massimo Anelli; Gaetano Basso; Giuseppe Ippedico; Giovanni Peri
  10. Linking opportunity types and value creation: A relational analysis of entrepreneurship in war-affected communities. By Castellanza, Luca
  11. Innovations in emerging markets: the case of mobile money By Pelletier, Adeline; Khavul, Susanna; Estrin, Saul
  12. A framework for mission-oriented innovation policy: Alternative pathways through the problem-solution space By Wanzenböck, Iris; Wesseling, Joeri; Frenken, Koen; Hekkert, Marko; Weber, Matthias
  13. Regional policies for Italian innovative start-ups By Giuseppe Albanese; Raffaello Bronzini; Luciano Lavecchia; Giovanni Soggia
  14. The impact of mission-oriented R&D on domestic and foreign private and public R&D, total factor productivity and GDP By Ziesemer, Thomas

  1. By: Koski, Heli; Pantzar, Mika
    Abstract: Abstract This paper focuses on the role of large technology companies’ entry and expansion to the data-intensive market areas via their technological development and strategic acquisitions of companies. We analyze the evolvement of personal data related innovation in various data-intensive domains. We find that the ideas related to personal data are increasingly protected by patents. The growth in the numbers of personal data related patents was relatively modest from 2005 to the early 2010s, but it has intensified since 2011. Large technology companies’ entry to various new market areas is reflected in an exponential increase in patent applications particularly in the artificial intelligence domain. Furthermore, we find that the number of artificial intelligence/data analytics companies acquired by the data giants has escalated during the 2010s. Patent and acquisition data further echo technology giants’ intentions to expand their activities into the financial and personal health services. Overall, the data show the data giants’ buyouts are frequently targeted to companies active in the markets outside their core business. Our analysis illustrates how the divergencies in the data giants’ innovation activities and strategic acquisitions have led them to each conquer their specific areas of dominance in the global markets for data.
    Keywords: Data economy, Innovation, Patents, Acquisitions, Technology giants
    JEL: G34 L12 L25 O33
    Date: 2019–11–19
  2. By: Wen-Tai Hsu; Raymond G. Riezman; Ping Wang
    Abstract: How large are the welfare gains from trade? Would such gains be significantly amplified in the long run when productivity is endogenously enhanced? To address these questions, we focus on the dynamic effect of trade, in particular, how trade affects the incentives for technological advancement. We construct an innovation-based endogenous growth model of North-South trade. There are two types of innovation: one by the North to upgrade the general purpose technology (GPT) and another by all countries to advance entrepreneurial knowledge for developing differentiated products. We find sizable welfare gains from trade, about 5.3% when compared to autarky. The gains in our dynamic model are much higher than the static estimates where the effects of GPT-driven innovation are eliminated. The share of dynamic gains from trade is about 78% of the total gains in our benchmark economy – much higher than comparable figures identified in previous studies. Comparative statics indicate that GPT innovation efficacy, entrepreneurial talent distribution and trade elasticity are crucial for dynamic gains from trade.
    JEL: D92 F10 O30 O41
    Date: 2019–11
  3. By: Sebastian Doerr
    Abstract: Post-crisis stress tests have helped to enhance financial stability and to reduce banks' risk-taking. In order to quantify their overall impact, regulators have turned to evaluating the effects of stress tests on financing and the real economy. Using the U.S. as a laboratory, this paper shows that stress tests have had potentially unintended side effects on entrepreneurship and innovation at young firms. Banks subject to stress tests have strongly cut small business loans secured by home equity, an important source of financing for entrepreneurs. Lower credit supply has led to a relative decline in entrepreneurship during the recovery in counties with higher exposure to stress tested banks. The decline has been steeper in sectors with a higher share of young firms using home equity financing, i.e. where the reduction in credit hit hardest. Counties with higher exposure have also seen a decline in patent applications by young firms. I provide suggestive evidence that the decline in credit has negatively affected labor productivity, reflecting young firms' disproportionate contribution to growth. My results do not imply that stress tests reduce welfare, but highlight a possible trade-off between financial stability and economic dynamism. The effects of stress tests on entrepreneurship should be taken into account when evaluating their effectiveness.
    Keywords: stress tests, small business lending, entrepreneurship, innovation, productivity slowdown
    JEL: G20 G21 L26
    Date: 2019–11
  4. By: Elert, Niklas (Research Institute of Industrial Economics (IFN)); Henrekson, Magnus (Research Institute of Industrial Economics (IFN))
    Abstract: We present the theory of the collaborative innovation bloc (CIB), an evolving system of innovation within which activity takes place over time. We show how the application of the CIB perspective can help make institutional and evolutionary economics more concrete, relevant, and persuasive, especially regarding policy prescriptions. Such policy actions should strive to improve the antifragility of CIBs and the economic system as a whole, thus enabling individual CIBs and the broader economic system to thrive when faced with macroeconomic shocks. With this in mind, we develop diagnostic tools to evaluate antifragility at the micro, meso, and macro levels before identifying a set of institutional areas where reform can be undertaken to improve antifragility.
    Keywords: Evolutionary economics; Entrepreneurship; Innovation; Institutional Economics; Institutions; Schumpeterian entrepreneurship
    JEL: B53 D20 G32 L23 L26 O33
    Date: 2019–11–20
  5. By: Woodson, Thomas; Hoffman, Elina
    Abstract: A major goal of government and non-profit scientific funding agencies is to support research and development (R&D) that has broad impacts, generates responsible innovation, and positively impacts society. This study proposes a new framework, called the Inclusion-Immediacy Criterion (IIC), that better assesses the inclusion and immediacy of research to determine whether the research helps marginalized communities, reduces inequality, and encourages inclusive innovation. To test the framework, the study analyzes NSF sponsored nanotechnology grant abstracts from 2013 to 2017. We find that 109 out of the 300 grants feature research that is inclusive, while 235 out of the 300 grants have broader impacts that either maintain the status quo or predominately help advantage groups. Using the Inclusion-Immediacy Criterion, policy makers and scholars will better understand the potential impact of funded science.
    Date: 2019–02–11
  6. By: Daniele Pianeselli (Bank of Italy)
    Abstract: We examine the issue of patents of Italian non-financial firms over the period 2008– 2012, during which the Italian economy was hit by two almost consecutive recessions. We classify firms according to their patenting activity, taking into consideration their financial characteristics. We find that innovation is concentrated in the manufacturing sector, where very few large firms maintain a persistent level of inventive capacity. Firms increased their average patenting slightly during the crisis compared to the period 2003–2007. Since Italian innovating firms are large and mature, a higher cash flow and a lower indebtedness allow them to fund patent-generating activity using internal resources. Moreover, innovating firms grow faster than non-innovating ones, even during recessions.
    Keywords: innovation, crisis, financial profile, Italian firms
    JEL: G01 G30 O30
    Date: 2019–10
  7. By: Moretti, Enrico (University of California, Berkeley); Steinwender, Claudia (MIT Sloan School of Management); Van Reenen, John (MIT Sloan School of Management)
    Abstract: In the US and many other OECD countries, expenditures for defense-related R&D represent a key policy channel through which governments shape innovation, and dwarf all other public subsidies for innovation. We examine the impact of government funding for R&D - and defense-related R&D in particular – on privately conducted R&D, and its ultimate effect on productivity growth. We estimate models that relate privately funded R&D to lagged government-funded R&D using industry-country level data from OECD countries and firm level data from France. To deal with the potentially endogenous allocation of government R&D funds we use changes in predicted defense R&D as an instrumental variable. In both datasets, we uncover evidence of "crowding in" rather than "crowding out," as increases in government-funded R&D for an industry or a firm result in significant increases in private sector R&D in that industry or firm. A 10% increase in government-financed R&D generates 4.3% additional privately funded R&D. An analysis of wages and employment suggests that the increase in private R&D expenditure reflects actual increases in R&D employment, not just higher labor costs. Our estimates imply that some of the existing cross-country differences in private R&D investment are due to cross-country differences in defense R&D expenditures. We also find evidence of international spillovers, as increases in government-funded R&D in a particular industry and country raise private R&D in the same industry in other countries. Finally, we find that increases in private R&D induced by increases in defense R&D result in significant productivity gains.
    Keywords: agglomeration, spillovers
    JEL: O30
    Date: 2019–11
  8. By: Krishna Dasaratha
    Abstract: We study a model of innovation with a large number of firms that create new technologies by combining several discrete ideas. These ideas can be acquired by private investment or via social learning. Firms face a choice between secrecy, which protects existing intellectual property, and openness, which facilitates social learning. These decisions determine interaction rates between firms, and these interaction rates enter our model as link probabilities in a resulting learning network. Higher interaction rates impose both positive and negative externalities on other firms, as there is more learning but also more competition. We show that the equilibrium learning network is at a critical threshold between sparse and dense networks. A corollary is that at equilibrium, the positive externality from interaction dominates: the innovation rate and even average firm profits would be dramatically higher if the network were denser. So there are large returns to increasing interaction rates above the critical threshold---but equilibrium remains critical even after natural interventions. One policy solution is to introduce informational intermediaries, such as public innovators who do not have incentives to be secretive. These intermediaries can facilitate a high-innovation equilibrium by transmitting ideas from one private firm to another.
    Date: 2019–11
  9. By: Massimo Anelli (Bocconi Univerity); Gaetano Basso (Bank of Italy); Giuseppe Ippedico (University of California, Davis); Giovanni Peri (University of California, Davis)
    Abstract: Migration outflows, especially of young people, may deprive an economy of entrepreneurial energy and innovative ideas. We exploit exogenous variation in emigration from Italian local labor markets to show that between 2008 and 2015 larger emigration flows reduced firm creation. The decline affected firms owned by young people and innovative industries. We estimate that for every 1,000 emigrants, 100 fewer young-owned firms were created cumulatively over the whole period. A simple accounting exercise shows that about 60 percent of the effect is generated simply by the loss of young people; the remaining 40 percent is due to a combination of selection of emigrants among highly entrepreneurial people, negative spillovers on the entrepreneurship rate of locals, and negative local firm multiplier effect.
    Keywords: emigration, demography, brain drain, entrepreneurship, innovation
    JEL: J61 H7 O3 M13
    Date: 2019–10
  10. By: Castellanza, Luca
    Abstract: Are entrepreneurial opportunities objectively discovered or subjectively created? In a relational ontology, the question is moot. Through an ethnography of 104 entrepreneurs operating subsistence, agricultural, and non-farm activities in war-affected African communities, we show that discovery and creation processes are nothing but ideal types differing in the interactions between the entrepreneur and her context. Surprisingly, we find that contextual rigidity determines not only the availability of different opportunity types but also the value-creating potential of each opportunity. The study bridges contrasting perspectives on the nature of entrepreneurial opportunities and introduces contextual dynamics linking opportunity types and value creation.
    Date: 2019–01–23
  11. By: Pelletier, Adeline; Khavul, Susanna; Estrin, Saul
    Abstract: Mobile money is a financial innovation that provides transfers, payments, and other financial services at a low or zero cost to individuals in developing countries where banking and capital markets are deficient and financial inclusion is low. We use transaction costs and institutional theories to explain the growth and impact of mobile money. Having developed a new archival dataset that tracks mobile money deployment across 90 emerging economies during 16 years between 2000 and 2015, we address the question of relative economic impact of the banking and telecoms sectors in the provision of mobile money. We show that telecom groups and not banks are more likely to launch mobile money in countries where legal rights are weaker and credit information less prevalent. However, it is when mobile money is offered via a banking channel that the spillover effects on the economy are greater. Findings have significant implications for policy and strategy.
    JEL: G21 M13 O33
    Date: 2019–09–09
  12. By: Wanzenböck, Iris; Wesseling, Joeri; Frenken, Koen; Hekkert, Marko; Weber, Matthias
    Abstract: We aim for a better conceptualization of Mission-oriented Innovation Policy (MIP). Our starting point is an analytical decomposition of societal problems and innovative solutions based on the degrees of wickedness regarding three aspects: i) contestation, ii) complexity and iii) uncertainty. We argue that both problems and solutions can be diverging (contested, complex, uncertain) or converging (uncontested, well-defined, informed). Based on the resulting problem-solution topology, we suggest a process-oriented view on MIP and discuss three alternative pathways along which convergence between problems and solutions can be achieved to transform wicked problems into legitimate solutions. We illustrate the pathways with the examples of smoking bans, CCTV and wind energy. For policy makers, locating a societal challenge in this problem-solution space, and implementing policy strategies accordingly, is expected to accelerate both the legitimacy of a mission and the resulting solutions.
    Date: 2019–02–13
  13. By: Giuseppe Albanese (Bank of Italy); Raffaello Bronzini (Bank of Italy); Luciano Lavecchia (Bank of Italy); Giovanni Soggia (Bank of Italy)
    Abstract: This paper provides an overview of the regional policies for innovative start-ups implemented in Italy in the years 2012-2018. The data were gathered from a survey carried out by Bank of Italy branches in 2018, which were later updated using several other sources. The findings show that the Regions supported a significant number of projects (101, of which 75 focused only on innovative start-ups) and allocated a large volume of funds (€515 million, of which 340 for start-ups alone). The financial resources were allocated very differently across the Regions, with Lazio, Sardinia and the province of Trento allocating the largest amount of funds in per capita terms. This tends to reflect the policymakers’ preferences rather than differences in the economic structure of the geographical areas.
    Keywords: start-ups, regional policies, innovation policy, innovation
    JEL: H2 L5 R0 R3
    Date: 2019–10
  14. By: Ziesemer, Thomas (UNU-MERIT, and SBE, Maastricht University)
    Abstract: We analyse the dynamic interaction of mission-oriented R&D expenditure stocks with domestic and foreign private and public R&D, total-factor-productivity (TFP) and gross domestic product (GDP) for seven EU countries, for which we have sufficiently long time-series of mission-oriented R&D data. We use the vector-error-correction (VECM) method. Permanent shocks on mission-oriented R&D increase total-factor-productivity and GDP, mostly because for the UK private R&D is increased or, for Belgium and Italy, public R&D is increased or, for Denmark, France, Germany and the Netherlands, both are increased. France has an initial phase where mission-oriented R&D has to be reduced first and expanded later to get good policy results. On average across periods and countries, a 1 percent increase of mission-oriented R&D leads to an additional 0.485% public R&D, 0.705% private R&D, 48.5% for TFP, and 0.56% GDP. We also show years of positive gains, the sums of discounted net present values, and the average yearly gains/GDP ratio. Mission-oriented R&D has high internal rates of return calculated from comparison of baseline and shock scenario comparison using VECM simulations until 2040. Heterogeneity limits the possibility to find a common model of long-term relations. For most countries we find that in steady states mission R&D reacts to foreign and domestic public R&D and increases TFP. TFP, foreign public and domestic private R&D have two-way causality relations.
    Keywords: Total factor productivity, R&D, growth, cointegrating VAR, permanent policy shocks
    JEL: O11 O38 O47 O52
    Date: 2019–11–11

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