nep-ino New Economics Papers
on Innovation
Issue of 2020‒02‒10
fifteen papers chosen by
Uwe Cantner
University of Jena

  1. Demand Shocks, Procurement Policies, and the Nature of Medical Innovation: Evidence from Wartime Prosthetic Device Patents By Jeffrey Clemens; Parker Rogers
  2. Debt, Innovation, and Growth By Thomas Geelen; Jakub Hajda; Erwan Morellec
  3. The digital layer: How innovative firms relate on the web By Krüger, Miriam; Kinne, Jan; Lenz, David; Resch, Bernd
  4. Effects of the institutional change based on democratization on origin and diffusion of technological innovation By Mario Coccia
  5. Labor-Augmenting Technical Change and the Labor Share: New Microeconomic Foundations By Daniele Tavani; Luca Zamparelli
  6. Migration and Imitation By Olena Ivus; Alireza Naghavi; Larry D. Qiu
  7. The techno-economic segment analysis of the Earth observation ecosystem: The TES approach applied to the EO worldwide ecosystem By Katarzyna Pogorzelska; Riccardo Righi; Melisande Cardona; Montserrat Lopez-Cobo; Lukasz Ziemba; Miguel Vazquez-Prada Baillet; Sofia Samoili; Giuditta De Prato
  8. Public Service Innovation Networks (PSINs): Collaborating for Innovation and Value Creation By Benoît Desmarchelier; Faridah Djellal; Faïz Gallouj
  9. Unpacking Skill Bias: Automation and New Tasks By Daron Acemoglu; Pascual Restrepo
  10. How Will Emerging Computers Affect Older Workers by 2040? By Anek Belbase; Andrew D. Eschtruth
  11. The Italian Startup Act: Empirical evidence of policy effects By Francesco Biancalani; Dirk Czarnitzki; Massimo Riccaboni
  12. Web-based innovation indicators: Which firm website characteristics relate to firm-level innovation activity? By Axenbeck, Janna; Breithaupt, Patrick
  13. Exit, voice and loyalty : Strategic behavior in standards development organizations By Delimatsis, Panagiotis; Kanevskaia, Olia; Verghese, Zuno George
  14. European Institute of Innovation and Technology (EIT) Knowledge and Innovation Communities (KICs): Collaboration in a RIS3 Context By Nida Kamil Ozbolat; Karel Herman Haegeman; Katerina Sereti
  15. Managing Open-Innovation between Competitors: A Project-Level Approach By Thuy Seran; Sea Matilda Bez

  1. By: Jeffrey Clemens; Parker Rogers
    Abstract: We analyze wartime prosthetic device patents to investigate how procurement policy affects the cost, quality, and quantity of medical innovation. Analyzing whether inventions emphasize cost and/or quality requires generating new data. We do this by first hand-coding the economic traits emphasized in 1,200 patent documents. We then train a machine learning algorithm and apply the trained models to a century's worth of medical and mechanical patents that form our analysis sample. In our analysis of these new data, we find that the relatively stingy, fixed-price contracts of the Civil War era led inventors to focus broadly on reducing costs, while the less cost-conscious procurement contracts of World War I did not. We provide a conceptual framework that highlights the economic forces that drive this key finding. We also find that inventors emphasized dimensions of product quality (e.g., a prosthetic's appearance or comfort) that aligned with differences in buyers' preferences across wars. Finally, we find that the Civil War and World War I procurement shocks led to substantial increases in the quantity of prosthetic device patenting relative to patenting in other medical and mechanical technology classes. We conclude that procurement environments can significantly shape the scientific problems with which inventors engage, including the choice to innovate on quality or cost.
    JEL: H57 I1 O31
    Date: 2020–01
  2. By: Thomas Geelen (Copenhagen Business School - Department of Finance; Danish Finance Institute); Jakub Hajda (University of Lausanne; Swiss Finance Institute); Erwan Morellec (Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute)
    Abstract: Recent empirical studies show that innovative firms heavily rely on debt financing. This paper investigates the relation between debt financing, innovation, and growth in a Schumpeterian growth model in which firms' dynamic R&D and financing choices are jointly and endogenously determined. The paper demonstrates that while debt hampers innovation by incumbents due to debt overhang, it also stimulates entry, thereby fostering innovation and growth at the aggregate level. The paper also shows that debt financing has large effects on firm entry, firm turnover, and industry structure and evolution. Lastly, it predicts substantial intra-industry variation in leverage and innovation, in line with the empirical evidence..
    Keywords: debt, innovation, industry dynamics, growth
    JEL: G32 O30
    Date: 2019–07
  3. By: Krüger, Miriam; Kinne, Jan; Lenz, David; Resch, Bernd
    Abstract: In this paper, we introduce the concept of a Digital Layer to empirically investigate inter-firm relations at any geographical scale of analysis. The Digital Layer is created from large-scale, structured web scraping of firm websites, their textual content and the hyperlinks among them. Using text-based machine learning models, we show that this Digital Layer can be used to derive meaningful characteristics for the over seven million firm-to-firm relations, which we analyze in this case study of 500,000 firms based in Germany. Among others, we explore three dimensions of relational proximity: (1) Cognitive proximity is measured by the similarity between firms' website texts. (2) Organizational proximity is measured by classifying the nature of the firms' relationships (business vs. non-business) using a text-based machine learning classification model. (3) Geographical proximity is calculated using the exact geographic location of the firms. Finally, we use these variables to explore the differences between innovative and non-innovative firms with regard to their location and relations within the Digital Layer. The firm-level innovation indicators in this study come from traditional sources (survey and patent data) and from a novel deep learning-based approach that harnesses firm website texts. We find that, after controlling for a range of firm-level characteristics, innovative firms compared to non-innovative firms maintain more numerous relationships and that their partners are more innovative than partners of non-innovative firms. Innovative firms are located in dense areas and still maintain relationships that are geographically farther away. Their partners share a common knowledge base and their relationships are business-focused. We conclude that the Digital Layer is a suitable and highly cost-efficient method to conduct large-scale analyses of firm networks that are not constrained to specific sectors, regions, or a particular geographical level of analysis. As such, our approach complements other relational datasets like patents or survey data nicely.
    Keywords: Web Mining,Innovation,Proximity,Network,Natural Language Processing
    JEL: O30 R10 C80
    Date: 2020
  4. By: Mario Coccia
    Abstract: Political systems shape institutions and govern institutional change supporting economic performance, production and diffusion of technological innovation. This study shows, using global data of countries, that institutional change, based on a progressive democratization of countries, is a driving force of inventions, adoption and diffusion of innovations in society. The relation between technological innovation and level of democracy can be explained with following factors: higher economic freedom in society, effective regulation, higher economic and political stability, higher investments in R&D and higher education, good economic governance and higher level of education system for training high-skilled human resources. Overall, then, the positive associations between institutional change, based on a process of democratization, and paths of technological innovation can sustain best practices of political economy for the development of economies in the presence of globalization and geographical expansion of markets.
    Date: 2020–01
  5. By: Daniele Tavani (Department of Economics, Colorado State University); Luca Zamparelli (Department of Economics and Law, Sapienza University of Rome)
    Abstract: An important question in alternative economic theories has to do with the relationship between the functional income distribution and the growth rate of labor productivity. According to both the induced innovation hypothesis and Marx-biased technical change, labor productivity growth should be an increasing function of the labor share. In this paper, we first discuss the shortcomings of both theories and then provide a novel microeconomic foundation for a direct relationship between the labor share and labor productivity growth. The result arises because of profit-seeking behavior by capitalist firms that face a trade-off between investing in new capital stock and innovating to save on labor costs. Embedding this finding in the Goodwin (1967) growth cycle model, we show that: i) the resulting steady state is locally stable; ii) unlike in the original Goodwin model, the long-run employment rate is sensitive to investment decisions; finally, iii) we numerically identify parametric configurations that establish whether convergence to the long-run growth path is cyclical or monotonic.
    Keywords: Endogenous Technical Change, Income Shares, Labor Productivity, Employment
    JEL: E32 O33
    Date: 2020–01
  6. By: Olena Ivus (Queen's University); Alireza Naghavi (University of Bologna); Larry D. Qiu (University of Hong-Kong)
    Abstract: This paper develops a North-South trade model with heterogeneous labour and horizontally differentiated products and compares the implications of two policies: Southern intellectual property rights (IPRs) and Northern immigration policy that aims to attract Southern talent as means of preempting imitation. Individuals self-select into becoming entrepreneurs and innovate (imitate) in the North (South). The likelihood of imitation depends on product quality, imitator’s ability, and strength of IPRs. Several interrelated channels of competition are identified. Allowing high-ability migration when IPRs protection in the South is weak shifts imitation to low-quality and innovation to high-quality products. The outcome is in stark contrast to the policy of strengthening IPRs, which limits low-quality imitation and encourages low-quality innovation. High-ability migration also increases the income of lowability entrepreneurs, as well as the average quality of products in the high-ability imitation sector in the South.
    Keywords: Intellectual propert yrights; High-skilled migration; Imitation; Innovation; Product quality; Entrepreneurability
    JEL: F22 O31 O34 J24 K37 O38
    Date: 2019–12–20
  7. By: Katarzyna Pogorzelska (European Commission - JRC); Riccardo Righi (European Commission - JRC); Melisande Cardona (European Commission - JRC); Montserrat Lopez-Cobo (European Commission - JRC); Lukasz Ziemba (European Commission - JRC); Miguel Vazquez-Prada Baillet (European Commission - JRC); Sofia Samoili (European Commission - JRC); Giuditta De Prato (European Commission - JRC)
    Abstract: This report analyses the worldwide landscape of the Earth observation ecosystem to identify opportunities, synergies, and obstacles that need to be addressed to foster the development of a vibrant space data economy in Europe. The report uses the Techno-Economic Segment (TES) analytical approach to provide a holistic view of the EO and geospatial ecosystem in Europe and worldwide through the identification of players and key clusters of activities. It also takes into consideration the potential flows of knowledge resulting from shared activities, locations and technological fields. The approach adopts a micro-based perspective considering a wide range of both horizontal and segment specific data sources. The outcome is a compelling characterisation of the key features of this very dynamic ecosystem. The TES EO ecosystem shows a very diverse global landscape with three distinguished global hubs, namely EU28, China and the US, as possible incubators for EO-linked innovation. Those hubs have the largest number of players in case of R&D and well as in case of industry. Nevertheless, the distribution of EO activities and concentration of those activities look quite different in the three leading macro areas. As far as the R&D activities are considered, the EU28 has the highest overall number of players involved in the all types of R&D activities, but scores quite low if only the patents are taken into account. Out of the three big players, the US has the smallest number of players involved in the overall EO R&D and stable position in number of patenting. In case of China, the largest number of R&D activities is concentrated in hands of relatively few players. In conclusion, the findings of this report confirm a general expectation about the growth in the EO downstream segment. However, up to 2017 the growth has not been staggering. Since 2017, there have been continuous policy efforts to increase the uptake of EO data in order to enable market growth.
    Keywords: EO value, geospatial market, Copernicus, TES, Earth observation
    Date: 2019–12
  8. By: Benoît Desmarchelier (CLERSE - Centre Lillois d’Études et de Recherches Sociologiques et Économiques - UMR 8019 - Université de Lille - ULCO - Université du Littoral Côte d'Opale - CNRS - Centre National de la Recherche Scientifique); Faridah Djellal (CLERSE - Centre Lillois d’Études et de Recherches Sociologiques et Économiques - UMR 8019 - Université de Lille - ULCO - Université du Littoral Côte d'Opale - CNRS - Centre National de la Recherche Scientifique); Faïz Gallouj (CLERSE - Centre Lillois d’Études et de Recherches Sociologiques et Économiques - UMR 8019 - Université de Lille - ULCO - Université du Littoral Côte d'Opale - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This deliverable is given over to "Public Service Innovation Networks" (PSINs). It seeks to define and characterize PSINs, from a structural point of view (sectors, actors, interaction, innovation) and a dynamic point of view (emergence, functioning, life cycle, performance) and to understand what distinguishes them from other types of innovation networks.
    Date: 2019–10–14
  9. By: Daron Acemoglu; Pascual Restrepo
    Abstract: The standard approach to modeling inequality, building on Tinbergen's seminal work, assumes factor-augmenting technologies and technological change biased in favor of skilled workers. Though this approach has been successful in conceptualizing and documenting the race between technology and education, it is restrictive in a number of crucial respects. First, it predicts that technological improvements should increase the real wages of all workers. Second, it requires sizable productivity growth to account for realistic changes in relative wages. Third, it is silent on changes in job and task composition. We extend this framework by modeling the allocation of tasks to factors and allowing richer forms of technological changes in particular, automation that displaces workers from tasks they used to perform, and the creation of new tasks that reinstate workers into the production process. We show that factor prices depend on the set of tasks that factors perform, and that automation: (i) powerfully impacts inequality; (ii) can reduce real wages; and (iii) can generate realistic changes in inequality with small changes in productivity. New tasks, on the other hand, can increase or reduce inequality depending on whether it is skilled or unskilled workers that have a comparative advantage in these new activities. Using industry-level estimates of displacement driven by automation and reinstatement due to new tasks, we show that displacement is associated with significant increases in industry demand for skills both before 1987 and after 1987, while reinstatement reduced the demand for skills before 1987, but generated higher demand for skills after 1987. The combined effects of displacement and reinstatement after 1987 explain a significant part of the shift towards greater demand for skills in the US economy.
    JEL: J23 J24 J31 O33
    Date: 2020–01
  10. By: Anek Belbase; Andrew D. Eschtruth
    Abstract: Technological change is not new, particularly to the United States. Founded during the dawn of the Industrial Revolution, the country has been a leader in new technologies – from the cotton gin and the lightbulb to the personal computer and the internet. These advances have enabled people to lead lifestyles today that would have been unimaginable a century ago. But progress has not been painless for workers, as each wave of innovation has created laborsaving machines that have disrupted jobs. Each time, workers replaced by machines have faced difficult short-term transitions, but, through retraining and career changes, have eventually found jobs in rising industries. Today, as computer-powered machines perform tasks that would have seemed impossible only a decade ago, policymakers and workers alike are beginning to wonder – will workers continue to be able to adapt or is this time fundamentally different? The effect of new machines on older workers is of particular concern, because older workers make up a growing share of the workforce and increasingly need to work until their late 60s to attain a secure retirement. This brief wraps up a three-part series on the effects of laborsaving machines on older workers. The first brief reviewed the impact of machines over the past two centuries, and the second brief examined how the recent rise of computers has affected older workers so far. The current brief turns to the near future and explores how emerging computers, with expanding capabilities that rely on artificial intelligence, might affect the job prospects of older workers over the next two decades. The brief proceeds as follows. The first section describes the unique features of emerging computer technology. The second section explains how the new computers might affect demand for workers based on occupation and education. The third section examines whether older workers might be uniquely affected. The final section concludes that age is unlikely to determine how workers will be impacted. Instead, workers’ education levels – which are now roughly similar by age group – and social skills – which tend to get better with age – will play important roles in how they fare.
    Date: 2020–01
  11. By: Francesco Biancalani; Dirk Czarnitzki; Massimo Riccaboni
    Abstract: Using a difference-in-difference approach this paper analyses the impact of the Italian Startup Act entered into force in December 2012. This law provides special benefits (e.g. tax incentives, public loan guarantees, tailor-made labor law, cuts to red tape and fees) for firms registered as “innovative startups” in Italy. This special legislation has been implemented by the Italian government to increase innovativeness of small and young enterprises by facilitating improved access to external capital and (high-skilled) labor. Consequently, our goal is to assess the impact of the policy on equity, debt and employment. Overall, we find that the Italian startup policy has met its primary objectives. The treated firms operating under this program show more capacity to collect equity and debt, and also achieve higher levels of employment than untreated, comparable firms.
    Keywords: start up, innovation policy, firm subsidies, small firms
    Date: 2020–01–17
  12. By: Axenbeck, Janna; Breithaupt, Patrick
    Abstract: Web-based innovation indicators may provide new insights into firm-level innovation activities. However, little is known yet about the accuracy and relevance of web-based information. In this study, we use 4,485 German firms from the Mannheim Innovation Panel (MIP) 2019 to analyze which website characteristics are related to innovation activities at the firm level. Website characteristics are measured by several text mining methods and are used as features in different Random Forest classification models that are compared against each other. Our results show that the most relevant website characteristics are the website's language, the number of subpages, and the total text length. Moreover, our website characteristics show a better performance for the prediction of product innovations and innovation expenditures than for the prediction of process innovations.
    Keywords: text as data,innovation indicators,machine learning
    JEL: C53 C81 C83 O30
    Date: 2019
  13. By: Delimatsis, Panagiotis (Tilburg University, TILEC); Kanevskaia, Olia (Tilburg University, TILEC); Verghese, Zuno George (Tilburg University, TILEC)
    Abstract: The protection of intellectual property rights and its limits has spurred controversy in the standardization ecosystem in recent times. While conflicting interests in standard-setting abound over a wide range of pertinent aspects, considerations regarding the inclusion and subsequent treatment of proprietary elements in a technical standard hold the lion’s share of concerns that Standards Development Organizations (SDOs) have to deal with. These concerns revolve around the balance between the interests of innovators and implementers of new technologies. In this respect, SDOs adopt patent policies, which members have to observe in order to participate in SDOs’ activities. Similarly to other rules governing the work of SDOs, patent policies may be modified following the prescribed procedures. However, any subsequent changes to an organization’s operational framework, including its intellectual property rules, may distort prior expectations and lock in members to rules that they never intended to abide by. Against this backdrop, this Article seeks to explore how SDOs’ members respond to the amendments of intellectual property rules by offering a taxonomy of strategies that may be adopted by members opposing modifications based on the exit and voice theory by Hirschman (1970). Drawing upon the example of the Institute of Electrical and Electronics Engineers (IEEE) revised Patent Policy, which took effect in 2015, the Article explores how SDO members respond to instances of organizational distress such as an update of intellectual property policies within an SDO, using as proxies stakeholders’ willingness to commit to the new licensing rules and previous examples of strategies when misunderstandings around intellectual property arose. At a normative level, this Article further studies the effect that such changes may have on the nature and structure of a given industry and offers a novel classification of reactions to turning points in the standards development realm, thereby contributing to the currently underdeveloped body of literature on strategic behavior in technological standardization.
    Keywords: standards development organizations (SDOs)); patent policy; strategic behavior; technical standards; organizational distress; intellectual property rights; exit and voice strategies
    Date: 2019
  14. By: Nida Kamil Ozbolat (European Commission - JRC); Karel Herman Haegeman (European Commission - JRC); Katerina Sereti (European Institute of Innovation and Technology (EIT))
    Abstract: Innovation in the European Union is called upon to increase competitiveness, to improve territorial cohesion, and also to address societal challenges. This challenge-driven innovation is also high on the global agenda, and calls for building sufficient critical mass by taking full advantage of synergies and complementarities between innovation initiatives, in particular between cohesion-based innovation and excellence-based innovation. This report investigates in particular the motivations, practices and opportunities for strengthening collaborations between EIT Knowledge and Innovation Communities (EIT KICs) (focusing on excellence-based innovation) and the Managing Authorities of national and regional ESI Funds (focusing on cohesion-based innovation), within the context of Research and Innovation Strategies for Smart Specialisation (RIS3). Closer collaboration between RIS3 actors and the EIT KICs’ actors across Europe seems natural, as both communities aim at building Europe-wide value chains, encompass similar sets of stakeholders, and tackle similar societal challenges through innovation. However collaboration does not seem to come naturally, given the limited practices to date. Detailed analysis of both conceptual and practical similarities and differences between both approaches and the related communities identifies arguments, opportunities and bottlenecks for increased collaboration. Different modes of collaboration are considered, as well as proposals to scale up current collaboration practices and unlock existing collaboration potential. The report aims to make an important practical contribution to optimising the efficiency of research and innovation spending, to combining the objectives of increased competitiveness and cohesion, and to better addressing the big challenges our society is facing on the eve of the launch of the new Multi-Financial Framework.
    Keywords: Smart Specialisation, RIS3, EIT, KICs, Cohesion Policy, Territorial Development, Collaboration, Innovation, Research Excellence, Synergies, ESIF, Horizon 2020, Horizon Europe, Stairway to Excellence, S2E
    Date: 2019–12
  15. By: Thuy Seran (MRM - Montpellier Research in Management - UM1 - Université Montpellier 1 - UM3 - Université Paul-Valéry - Montpellier 3 - UM2 - Université Montpellier 2 - Sciences et Techniques - UPVD - Université de Perpignan Via Domitia - Groupe Sup de Co Montpellier (GSCM) - Montpellier Business School - UM - Université de Montpellier); Sea Matilda Bez (MRM - Montpellier Research in Management - UM1 - Université Montpellier 1 - UM3 - Université Paul-Valéry - Montpellier 3 - UM2 - Université Montpellier 2 - Sciences et Techniques - UPVD - Université de Perpignan Via Domitia - Groupe Sup de Co Montpellier (GSCM) - Montpellier Business School - UM - Université de Montpellier, Labex Entreprendre - UM - Université de Montpellier)
    Abstract: Past research on Business-to-Business (B2B) Open innovation is mainly on firm decisions to open their boundaries to allow knowledge to flow in and out at the firm level. An emerging group of studies seeks to switch the unit of analysis from the firm level to the project level, stressing a deeper understanding of how knowledge is purposely managed. This paper contributes to this latter group by investigating how knowledge is purposely managed in one of the most "high-risk" B2B open-innovation projects: Open Innovation between competitors. Our analysis reveals that (1) knowledge flow is a dynamic process that can gradually involve additional stakeholders; (2) knowledge flow is not purposely managed only outside and inside external boundaries to create value through a project; it must also continue to be managed outside and inside internal boundaries to capture value from the project; and (3) there are two types of knowledge flow that enable middle managers to ensure that their business units capture value from Open Innovation projects (i.e., a shopping list that brings the new innovation from the project to the business unit and a wish list that influences the direction of the innovation toward a firm's business unit needs).
    Keywords: Open innovation,Knowledge flows,Coopetition,Managing Open Innovation,Middle Managers
    Date: 2019–12–13

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