nep-ino New Economics Papers
on Innovation
Issue of 2020‒04‒27
eighteen papers chosen by
Uwe Cantner
University of Jena

  1. Have R&D Spillovers Declined in the 21st Century? By Lucking, Brian; Bloom, Nicholas; Van Reenen, John
  2. Patents to Products: Product Innovation and Firm Dynamics By David Argente; Salomé Baslandze; Douglas Hanley; Sara Moreira
  3. R&D or R vs. D? Firm Innovation Strategy and Equity Ownership By James Driver; Adam Kolasinski; Jared Stanfield
  4. Organization and geography of global R&D and innovation activities: insights from qualitative research on leading corporate R&D investors By Mafini Dosso; Paulina Ramirez
  5. Connecting to Power: Political Connections, Innovation, and Firm Dynamics By Ufuk Akcigit; Salomé Baslandze; Francesca Lotti
  6. Unions, Tripartite Competition and Innovation By Alex Bryson; Harald Dale-Olsen
  7. Technological Innovation and Labor Income Risk By Leonid Kogan; Dimitris Papanikolaou; Lawrence D. W. Schmidt; Jae Song
  8. Opening Up for Managing Business and Societal Challenges By Solomon Darwin; Henry Chesbrough; Sea Matilda Bez; Chiara Eleonora de Marco; Dieudonnee Cobben
  9. Business visits, technology transfer and productivity growth By Mariacristina Piva; Massimiliano Tani; Marco Vivarelli
  10. COVID-19_Insights from Innovation Economists By Younes, George Abi; Ayoubi, Charles; Ballester, Omar; Cristelli, Gabriele; de Rassenfosse, Gaetan; Foray, Dominique; Gaule, Patrick; Pellegrino, Gabriele; van den Heuvel, Matthias; Webster, Beth
  11. Learning in foreign and domestic value chains – The role of opportunities and capabilities By Rene Belderbos; Christoph Grimpe
  12. The value of publicly available, textual and non-textual information for startup performance prediction By Kaiser, Ulrich; Kuhn, Johan M.
  13. Technology Adoption, Impact, and Extension in Developing Countries' Agriculture: A Review of the Recent Literature By Kazushi Takahashi; Rie Muraoka; Keijiro Otsuka
  14. Patent-Based News Shocks By Danilo Cascaldi-Garcia; Marija Vukotić
  15. Institutional and technological innovations to foster agro-industrialization in Uganda: Insights from the dairy value chain By van Campenhout, Bjorn; Nabwire, Leocardia; Minten, Bart; Ariong, Richard M.
  16. R&D investment under financing constraints By Giebel, Marek; Kraft, Kornelius
  17. Complementary Inter-Regional Linkages and Smart Specialization: an Empirical Study on European Regions By Pierre-Alexandre Balland; Ron Boschma
  18. Entrepreneurship and the fight against poverty in US Cities By Lee, Neil; Rodríguez-Pose, Andrés

  1. By: Lucking, Brian; Bloom, Nicholas; Van Reenen, John
    Abstract: Slow growth over the last decade has prompted policy attention towards increasing R&D spending, often via the tax system. We examine the impact of R&D on firm performance, both by the firm's own investments and through positive (and negative) spillovers from other firms. We analyse panel data on US firms over the last three decades, and allow for time-varying spillovers in both technology space (knowledge spillover) and product market space (product market rivalry). We show that the magnitude of R&D spillovers remains as large in the second decade of the 21st century as it was in the mid 1980s. Since the ratio of the social return to the private return to R&D is about four to one, this implies that there remains a strong case for public support of R&D. Positive spillovers appeared to temporarily increase in the 1995–2004 digital technology boom. We also show how these micro estimates relate to estimates from the endogenous growth literature and give some suggestions for future work.
    Keywords: innovation; patents; productivity; R&D; spillovers
    JEL: O31 O32 O33 F23
    Date: 2019–12–01
  2. By: David Argente; Salomé Baslandze; Douglas Hanley; Sara Moreira
    Abstract: We study the relationship between patents and actual product innovation in the market, and how this relationship varies with firms’ market share. We use textual analysis to create a new data set that links patents to products of firms in the consumer goods sector. We find that patent filings are positively associated with subsequent product innovation by firms, but at least half of product innovation and growth comes from firms that never patent. We also find that market leaders use patents differently from followers. Market leaders have lower product innovation rates, though they rely on patents more. Patents of market leaders relate to higher future sales above and beyond their effect on product innovation, and these patents are associated with declining product introduction on the part of competitors, which is consistent with the notion that market leaders use their patents to limit competition. We then use a model to analyze the firms' patenting and product innovation decisions. We show that the private value of a patent is particularly high for large firms as patents protect large market shares of existing products.
    Keywords: patent value; productivity; creative destruction; patents; product innovation; growth
    JEL: O3 O4
    Date: 2020–04–17
  3. By: James Driver; Adam Kolasinski; Jared Stanfield
    Abstract: We analyze a unique dataset that separately reports research and development expenditures for a large panel of public and private firms. Definitions of “research” and “development” in this dataset, respectively, correspond to definitions of knowledge “exploration” and “exploitation” in the innovation theory literature. We can thus test theories of how equity ownership status relates to innovation strategy. We find that public firms have greater research intensity than private firms, inconsistent with theories asserting private ownership is more conducive to exploration. We also find public firms invest more intensely in innovation of all sorts. These results suggest relaxed financing constraints enjoyed by public firms, as well as their diversified shareholder bases, make them more conducive to investing in all types of innovation. Reconciling several seemingly conflicting results in prior research, we find private-equity-owned firms, though not less innovative overall than other private firms, skew their innovation strategies toward development and away from research.
    Date: 2020–04
  4. By: Mafini Dosso (European Commission - JRC); Paulina Ramirez
    Abstract: This study examines the on-going structural changes in the international organisation of corporate R&D and innovative (RDI) activities. Insights are mainly drawn from interviews made to innovation representatives and managers of large R&D-investing companies in 2017 in the frame of the European Commission’s project – Industrial Research and Innovation Monitoring and Analysis –. The research intends to complement the quantitative evidence available in the project on the worldwide leading corporate R&D investors in order to better characterize the on-going fragmentation of R&D and innovation activities. The study suggests directions for mapping innovation value chains beyond research and inventive activities and carries out important conceptual and policy implications for the configurations and sustainability of innovation systems in Europe.
    Keywords: R&D and innovation value chains, MNEs, top R&D investors, interviews, qualitative research
    Date: 2020–04
  5. By: Ufuk Akcigit; Salomé Baslandze; Francesca Lotti
    Abstract: How do political connections affect firm dynamics, innovation, and creative destruction? To answer this question, we build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model generates a number of theoretical testable predictions and highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity. We test the predictions of our model using a brand-new dataset on Italian firms and their workers. Our dataset spans the period from 1993 to 2014, where we merge: (i) firm-level balance sheet data, (ii) social security data on the universe of workers, (iii) patent data from the European Patent Office, (iv) the national registry of local politicians, and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that industries with a larger share of politically connected firms feature worse firm dynamics. We identify a leadership paradox: when compared to their competitors, market leaders are much more likely to be politically connected but much less likely to innovate. In addition, political connections relate to a higher rate of survival, as well as growth in employment and revenue, but not in productivity—a result that we also confirm using a regression discontinuity design.
    Keywords: political connections; productivity; innovation; firm dynamics; creative destruction
    JEL: O30 O43
    Date: 2020–04–17
  6. By: Alex Bryson (University College London); Harald Dale-Olsen (Institute for Social Research)
    Abstract: We present theoretical and empirical evidence challenging results from early studies that found unions were detrimental to workplace innovation. Under our theoretical model, which extends the Cournot duopoly innovation model, local union wage bargaining is more conducive to innovation - particularly product innovation - than competitive pay setting. We test the theory with workplace data for Britain and Norway. Results are consistent with the theory: local union bargaining is positively associated with product innovations in both countries. In Norway, local union bargaining is also positively associated with process innovation.
    Keywords: product innovation; process innovation; trade unions; collective bargaining
    JEL: J28 J51 J81 L23
    Date: 2020–04–01
  7. By: Leonid Kogan; Dimitris Papanikolaou; Lawrence D. W. Schmidt; Jae Song
    Abstract: We examine the relation between technological progress and the riskiness of labor income. Motivated by a simple model of creative destruction, we draw a distinction between technological innovation advanced by the firm, or its competitors. Using administrative data from the United States, we find that own firm innovation is associated with a modest increase in worker earnings growth, while innovation by competing firms is related to lower future worker earnings. Importantly, these earnings changes are asymmetrically distributed across workers: both gains and losses are concentrated on a subset of workers, which implies that the distribution of worker earnings growth rates becomes more right- or left-skewed following innovation by the firm, or its competitors, respectively. These effects are particularly strong for the highest-paid workers. Our results therefore suggest innovation is associated with a substantial increase in the labor income risk, especially for workers at the top of the earnings distribution. Our simulations reveal that the increased disparity in innovation outcomes across firms in the 1990s can account for a significant part of the recent rise in income inequality.
    JEL: E24 G10 G12
    Date: 2020–04
  8. By: Solomon Darwin; Henry Chesbrough; Sea Matilda Bez (Labex Entreprendre - UM - Université de Montpellier); Chiara Eleonora de Marco; Dieudonnee Cobben
    Abstract: Firms submitted corporate challenges relating to digital business models across several industries, and a community of academic experts and open innovation practitioners solve it. Challenge #1: SAP (Conducting "Horizon 3" transformational experiments through learning fast/fail fast approaches) Challenge #2: SALESFORCE (Expanding through the creation of ecosystems in new unchartered markets) Challenge #3: SIEMENS (Creating data-richness through the formation of IoT and digitalization partnerships) Challenge #4: ERICSSON (Creating new business opportunities leveraging emerging 5G technologies) Challenge #5: PNO (Overcoming bottlenecks that block the successful use of open innovation within organizations) The following report details description of the discussions conducted during each industry session and the specific solutions emerged from the audience brainstorming and already briefly presented to the companies at the end of each session. Moreover, we provide a short presentation of more general recommendations that result from a cross-analysis of all the companies presenting their challenges at WOIC 2019, but go beyond them and can be considered by industry at large, and concern: a. Innovation Platform and Ecosystem b. Data and Other Infrastructures c. Understanding the Problems and Contexts d. Company Ambassadors
    Keywords: Open-Innovation,Innovation Platform,Ecosystem,Data Management,Company Ambassadors
    Date: 2020–02–14
  9. By: Mariacristina Piva (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore); Massimiliano Tani (UNSW Canberra, Australia – IZA, Bonn, Germany); Marco Vivarelli (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore – UNU-MERIT, Maastricht, The Netherlands – IZA, Bonn, Germany)
    Abstract: This paper builds on and considerably extends Piva, Tani and Vivarelli (2018), confirming the key role of Business Visits as a productivity enhancing channel of technology transfer. Our analysis is based on a unique database on business visits sourced from the U.S. National Business Travel Association, merged with OECD and World Bank data and resulting in an unbalanced panel covering 33 sectors and 14 countries over the period 1998-2013 (3,574 longitudinal observations). We find evidence that BVs contribute to fostering labour productivity in a significant way. While this is consistent with what found by the previous (scant) empirical literature on the subject, we also find that short-term mobility exhibits decreasing returns, being more crucial in those sectors characterized by less mobility and by lower productivity performances.
    Keywords: Business visits, Labour mobility, Knowledge diffusion, R&D, Productivity
    JEL: J61 O33
    Date: 2020–03
  10. By: Younes, George Abi; Ayoubi, Charles; Ballester, Omar; Cristelli, Gabriele; de Rassenfosse, Gaetan; Foray, Dominique; Gaule, Patrick; Pellegrino, Gabriele; van den Heuvel, Matthias; Webster, Beth
    Abstract: The present document provides the take of innovation economists on the current pandemic. It is addressed to the general public and focuses on questions related to the Science, Technology, and Innovation (STI) ecosystem. It does not present new research findings. Instead, it provides a reading of current real-world developments using economic reasoning and relying on existing economic research. The first part of the report explains the root causes for a general underinvestment in Research and Development (R&D), with a particular focus on vaccines. These causes include an insufficient demand for vaccines in normal times and the very characteristics of R&D. Governments can intervene to mitigate these problems, but government intervention comes with its own set of issues. We discuss three of them, namely free riding, setting research priorities, and acting on scientific knowledge. The second part discusses several aspects related to current STI policy reactions. First, we observe a sizable shift of funds towards research on SARS-CoV-2. Aren’t we wasting money by allocating so much of it on one single scientific problem? Using the concept of the ‘elasticity of science,’ we argue that we are far from a situation where additional funding would represent a waste of money. Second, we also observe an unprecedented level of cooperation among researchers but also an intense competition to find therapeutic solutions and vaccines. We seek to make sense of this apparent antonymy, highlighting how both cooperative and competitive forces might accelerate research. Third, we focus on one policy tool, namely patents, and we discuss whether the existence of patents hampers the search for a solution. We argue that it might, but we provide ways in which patents can be beneficial. They can accelerate research (such as through patent pools) or ensure greater access to innovations (such as with compulsory licensing). Fourth, we notice that the whole STI ecosystem has been rapidly refocusing on SARS-CoV-2 in a way similar to mission-oriented R&D (MOR) programs such as the Manhattan Project in the 1940s. We highlight the fundamental differences between MOR and the present situation. Today’s response is characterized by a proliferation of a wide range of innovative solutions offered by a complex set of institutions and actors with great intellectual freedom and decentralized competition. The third part of the report assesses some potential long-term impacts of the COVID-19 pandemic. We firstly discuss its impact on R&D investment. We explain how innovation might be negatively affected by a prolonged economic downturn and highlight the crucial role of stimulus packages in confronting the recession. We also address the influence of the crisis on ICT, arguing that it has been a formidable catalyst for ICT adoption. Next, we focus on clean technologies, another major societal challenge besides the pandemic. There are strong reasons for why cleantech investment may suffer. However, the crisis also offers significant opportunities to accelerate the green transition. Finally, we focus on open science, in particular on open access and open data. The current crisis could be a catalyst for the adoption of FAIR (Findable, Accessible, Interoperable, and Reusable) Data Practices. The last part of the report offers some concluding thoughts. The STI policy response cannot be limited to the urgent need for ‘technological fixes.’ A second line of response involves the production of new knowledge to prevent outbreaks (ex-ante) or mitigate their effects (ex-post). Furthermore, the current crisis is a reminder that all branches of science matter. The pandemic has many facets, and a significant number of scientific disciplines can contribute to dealing with it. We conclude with a forward-looking note, arguing that the most substantial impact of the pandemic may lie outside of the public health realm or the science system. It offers a unique opportunity to adapt the set of rules that govern our society.
    Date: 2020–04–14
  11. By: Rene Belderbos; Christoph Grimpe
    Abstract: We suggest that the benefits of learning in international value chains for firms’ innovation performance are heterogeneous and depend on the specific source of learning (customers, suppliers, or competitors), whether these sources are based in countries that are technologically advanced or less advanced (learning opportunities), on technology leadership (learning capabilities) on the part of the focal firm, and on the simultaneous learning that occurs from domestic firms. Using direct survey evidence on learning and innovation by German firms, we confirm that technology leaders benefit from advanced foreign customer and supplier learning, that technology laggards benefit from less advanced foreign customer learning and advanced foreign competitor learning, and that both leaders and laggards benefit from domestic customer learning. The findings suggest a tradeoff between the opportunities to learn from foreign or domestic customers.
    Keywords: learning from internationalization, innovation, technology leadership
    Date: 2020–04–16
  12. By: Kaiser, Ulrich; Kuhn, Johan M.
    Abstract: Can publicly available, web-scraped data be used to identify promising business startups at an early stage? To answer this question, we use such textual and non-textual information about the names of Danish firms and their addresses as well as their business purpose statements (BPSs) supplemented by core accounting information along with founder and initial startup characteristics to forecast the performance of newly started enterprises over a five years' time horizon. The performance outcomes we consider are involuntary exit, above{average employment growth, a return on assets of above 20 percent, new patent applications and participation in an innovation subsidy program. Our first key finding is that our models predict startup performance with either high or very high accuracy with the exception of high returns on assets where predictive power remains poor. Our second key finding is that the data requirements for predicting performance outcomes with such accuracy are low. To forecast the two innovation-related performance outcomes well, we only need to include a set of variables derived from the BPS texts while an accurate prediction of startup survival and high employment growth needs the combination of (i) information derived from the names of the startups, (ii) data on elementary founder-related characteristics and (iii) either variables describing the initial characteristics of the startup (to predict startup survival) or business purpose statement information (to predict high employment growth). These sets of variables are easily obtainable since the underlying information is mandatory to report upon business registration. The substantial accuracy of our predictions for survival, employment growth, new patents and participation in innovation subsidy programs indicates ample scope for algorithmic scoring models as an additional pillar of funding and innovation support decisions.
    Keywords: startup,performance,prediction,text as data
    JEL: L26 C53
    Date: 2020
  13. By: Kazushi Takahashi; Rie Muraoka; Keijiro Otsuka
    Abstract: Given the stagnant agricultural productivity and persistent food insecurity in low-income countries - notably in sub-Saharan Africa (SSA) - there has been continued interest in the adoption of new technology and its impact on productivity in these regions. Interestingly, there are signs of Green Revolution in maize and rice in SSA, reflected in sharply increasing yield trends in advanced regions. To increase crop yields and sustain yield gains, recent case studies of technology adoption unanimously recommend the adoption of integrated farm management systems, particularly in SSA. On the other hand, since the 2010s, there have been increasing numbers of studies on social network or farmer-to-farmer technology extension. These studies explore more efficient extension systems than traditional public-sector extension approaches. This article reviews both recent case studies of technology adoption and its productivity impacts as well as studies on agricultural extension to identify common findings, shortcomings, and major remaining issues.
    Keywords: technology adoption, productivity impact, agricultural extension, technological diffusion
    Date: 2019–10
  14. By: Danilo Cascaldi-Garcia; Marija Vukotić
    Abstract: We exploit firm-level data on patent grants and subsequent reactions of stocks to identify technological news shocks. Changes in stock market valuations due to announcements of individual patent grants represent expected future increases in the technology level, which we refer to as patent-based news shocks. Our patentbased news shocks resemble diffusion news, in that they do not affect total factor productivity in the short run but induce a strong permanent effect after five years. These shocks produce positive comovement between consumption, output, investment, and hours. Unlike the existing empirical evidence, patent-based news shocks generate a positive response in inflation and the federal funds rate, in line with a standard New Keynesian model. Patenting activity in electronic and electrical equipment industries, within the manufacturing sector, and computer programming and data processing services, within the services sector, play crucial roles in driving our results.
    Keywords: News Shocks; Patents; Patent-based news shocks
    JEL: E30 E32 L60
    Date: 2020–04–17
  15. By: van Campenhout, Bjorn; Nabwire, Leocardia; Minten, Bart; Ariong, Richard M.
    Abstract: This policy note summarizes findings from a dairy value chain study in Uganda that documented the institutional and technological innovations associated with the transformation of the sub-sector from a USD 2 million industry in 2008 to a USD 150 million industry in 2017. Uganda is now one of the largest exporters of dairy products in Africa. Using primary data obtained from dairy farmers, traders, and processors, we examine the drivers of this transformation of Uganda’s dairy sub-sector. The insights gained can guide policy and investment decisions for upgrading other agricultural value chains that have been prioritized for agro-industrialization in the medium- and long-term national development plans of Uganda.
    Keywords: UGANDA, EAST AFRICA, AFRICA SOUTH OF SAHARA, AFRICA, dairy industry, value chains, milk, technology, innovation, trade, dairy farms, farmers, food consumption, exports, dairy value chain, dairy farmers, dairy consumption, milk sheds
    Date: 2020
  16. By: Giebel, Marek; Kraft, Kornelius
    Abstract: This paper tests for the sensitivity of R&D to financing constraints conditional on restrictions in external financing. Financing constraints of firms are identified by an exogenously calculated rating index. Restrictions in external financing are determined by (i) the specific time period (crisis vs. non-crisis) and (ii) the balance sheet strength of the firm's main bank in terms of bank capital. Results of difference-in-differences estimations utilizing three time periods: 2002-2006 (pre-crisis) 2007-2009 (crisis) and 2010-2012 (post-crisis) support the theoretical prediction that financing constraints affect R&D. Moreover, we find that the effect of firm financing constraints is more intense (i) in times of stress on financial markets and (ii) when the firm faces restrictions in external financing. Additionally, our results indicate that on average the effect does not persist over time.
    Keywords: R&D investment,financing constraints,credit rating,financial crisis,bank capital,external financing of innovation
    JEL: G01 G21 G24 G30 O16 O30 O31 O32
    Date: 2020
  17. By: Pierre-Alexandre Balland; Ron Boschma
    Abstract: Regional capabilities are regarded a pillar of Smart Specialization Strategy (S3). There is yet little focus in S3 policy on the role of inter-regional linkages. Our study on 292 NUTS2 regions in Europe finds that inter-regional linkages have a positive effect on the probability of regions to diversify, especially in peripheral regions. What matters is not being connected to other regions per se but being connected to regions that provide complementary capabilities. Finally, we propose a new indicator that enables regions to identify other regions as strategic partners in their S3 policy, depending on the presence of complementary capabilities in other regions.
    Keywords: Smart Specialization, relatedness, inter-regional linkages, regional diversification, complementary capabilities
    JEL: O25 O38 R11
    Date: 2020–04
  18. By: Lee, Neil; Rodríguez-Pose, Andrés
    Abstract: Entrepreneurship is sometimes portrayed as a cure-all solution for poverty reduction. Proponents argue it leads to job creation, higher incomes, and lower poverty rates in the cities in which it occurs. Others, by contrast, posit that many entrepreneurs are actually creating low-productivity firms serving local markets. Yet, despite this debate, little research has considered the impact of entrepreneurship on poverty in cities. This paper addresses this gap using a panel of US cities for the period between 2005 and 2015. We hypothesise that the impact of entrepreneurship depends on whether it occurs in tradeable sectors – and, therefore, is more likely to have positive local multiplier effects – or non-tradable sectors, which may saturate local markets. We find that entrepreneurship in tradeables reduces poverty and increases incomes for non-entrepreneurs. The result is confirmed using an instrumental variable approach, employing the inheritance of entrepreneurial traits as an instrument. In contrast, while there are some economic benefits from non-tradeable entrepreneurship, we find these are not large enough to reduce poverty.
    Keywords: entrepreneurship; Poverty; Cities; Economic development; USA
    JEL: M13 J31 J21 O18 R11
    Date: 2020–04–09

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