nep-ino New Economics Papers
on Innovation
Issue of 2020‒05‒11
nine papers chosen by
Uwe Cantner
University of Jena

  1. The economic impact of public R&D: an international perspective By Soete, Luc; Verspagen, Bart; Ziesemer, Thomas
  2. Going Revolutionary: The Impact of 4IR Technology Development on Firm Performance By Mario Benassi; Elena Grinza; Francesco Rentocchini; Laura Rondi
  3. Exclusionary contracts and incentives to innovate By Ulsaker, Simen A.
  4. The Impact of Emerging Market Competition on Innovation and Business Strategy By Lorenz Kueng; Nicholas Li; Mu-Jeung Yang
  5. Modeling R&D spillovers to productivity. The effects of tax policy By Thomas von Brasch; Ådne Cappelen; Håvard Hungnes; Terje Skjerpen
  6. Revisiting the sustainability-innovation nexus: Lessons learned from the US By Fafaliou, Irene; Giaka, Maria; Konstantios, Dimitrios; Polemis, Michael
  7. Smart Specialization Strategies at National, Regional, or Local Levels? Synergy and Policy-making in German Systems of Innovation By Henriette Ruhrmann; Michael Fritsch; Loet Leydesdorff
  8. Growing through Spinoffs. Corporate Governance, Entry, and Innovation By Maurizio Iacopetta; Raoul Minetti; Pierluigi Murro
  9. Immigration Policy Levers for US Innovation and Startups By Sari Pekkala Kerr; William R. Kerr

  1. By: Soete, Luc (UNU-MERIT, Maastricht University); Verspagen, Bart (UNU-MERIT, Maastricht University); Ziesemer, Thomas (UNU-MERIT, Maastricht University)
    Abstract: Despite the fact that Research and Development (R&D) activities are carried out in most countries in public research institutes such as universities and public research organisations, there have been few studies that attempted to estimate the economic impact of such public investment in R&D. In this paper we analyse the relations between total factor productivity (TFP) and R&D as well as GDP for a set of 17 OECD countries using a vector-error-correction model (VECM). We find that for the period 1975-2014, investment in public R&D has had a clearly positive effect on TFP growth in the majority of countries analysed. In simulations allowing for a permanent positive shock on public R&D, we observe a strong dynamic complementarity between the public and private (domestic) stocks of R&D for a number of countries. In countries where this complementarity is strong, the TFP effect of extra public R&D investments is also strong. We also show that the share of foreign funding of R&D performed in the business sector combined with a high business R&D intensity, tends to be low in countries with high complementarity between private and public R&D. On the other hand, the share of basic R&D in business R&D combined with a higher public R&D intensity, tends to be higher in countries with strong complementarity.
    Keywords: R&D policy, public R&D investment, economic effects of R&D, vector-error-correction model
    JEL: O38 O30 H40
    Date: 2020–04–14
  2. By: Mario Benassi (Department of Economics, Management, and Quantitative Methods, University of Milan); Elena Grinza (Department of Management and Production Engineering, Politecnico di Torino); Francesco Rentocchini (Department of Economics, Management, and Quantitative Methods, University of Milan); Laura Rondi (Department of Management and Production Engineering, Politecnico di Torino)
    Abstract: Drawing on the knowledge-based view of the firm, we investigate whether firm performance is related to the accumulated stock of technological knowledge associated with the Fourth Industrial Revolution (4IR), and what contextual factors affect this relationship. We test our research questions on a longitudinal matched patent-firm data set on medium and large firms filing 4IR patents at the European Patent Office (EPO). Our results show a significant and economically relevant positive association between the development of 4IR technologies and firm productivity, but no relationship with its profitability, thereby suggesting that the returns from costly technological investments are slow to cash in. We also find that late entrants benefit more from the development of 4IR technological capabilities than early entrants and experience a substantial “boost effect”. We provide empirical support to an explanation of these findings in terms of the ability of late entrants to (i) manage the inherent complexity of the bundle of technologies comprising the 4IR and (ii) exploit profitable downstream applications of the 4IR.
    Keywords: Fourth Industrial Revolution (4IR); patenting; technology development; firm performance; longitudinal matched patent-firm data
    JEL: O33 D24 J24
    Date: 2020–07
  3. By: Ulsaker, Simen A. (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: The article considers a situation where several firms have the opportunity to sell an identical product to a set of buyers, and where each seller can invest in R&D to develop a higher quality version of the product in question. I consider the possibility of allowing the sellers to offer exclusionary contracts, prior to deciding how much to invest in R&D. In equilibrium every buyer will sign an exclusionary contract with the same seller. Since all buyers are locked to one seller, only this seller will have an incentive to invest in R&D. Whether or not banning exclusionary contracts increases the aggregate probability of successful innovation depends on the R&D technology. More specifically, banning exclusionary contracts will increase the aggregate probability of innovation and joint surplus of buyers and sellers only when the R&D technology exhibits sufficient diseconomies of scale.
    Keywords: Vertical relations; Exclusive contracts; Innovation
    JEL: L22 L42
    Date: 2020–04–27
  4. By: Lorenz Kueng (University of Lugano - Faculty of Economics; Swiss Finance Institute; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Northwestern University - Kellogg School of Management); Nicholas Li (University of Toronto - Department of Economics); Mu-Jeung Yang (University of Washington - Department of Economics)
    Abstract: How do firms in high-income countries adjust to emerging market competition? We estimate how a representative panel of Canadian firms adjusts innovation activities, business strategies, and exit in response to large increases in Chinese imports. Whether firms invest in process or product innovation matters: on average, the number of process innovations declines more strongly than the number of product innovations. In addition, firms that initially pursue process innovation strategies and survive have higher profits ex-post, but are ex-ante more likely to exit. In contrast, firms that initially pursue product innovation strategies have higher profits if they survive, without significant impact on exit. Both empirical patterns are consistent with our theory, which suggests that innovation strategies do not ensure insulation against competitive shocks, but instead increase risk.
    Keywords: International Competition, Innovation, Management Practices, Firm Performance
    JEL: F14 L2 O3
    Date: 2020–04
  5. By: Thomas von Brasch; Ådne Cappelen; Håvard Hungnes; Terje Skjerpen (Statistics Norway)
    Abstract: We study the role of R&D spillovers when modelling total factor productivity (TFP) by industry. Using Norwegian industry level data, we find that for many industries there are significant spillovers from both domestic sources and from technological change at the international frontier. International spillovers contributed with 38 per cent to the total growth in TFP from 1982 to 2018 while domestic channels contributed with 44 per cent. The remaining 18 per cent is due to interaction effects. We include these channels into a large-scale econometric model of the Norwegian economy to study how R&D policies can promote economic growth. We find that current R&D policies in the form of generous tax deductions have increased growth in productivity and income in the Norwegian economy. The simulation results lend some support to the view that there are fiscal policy instruments that may have very large multipliers, even in the case of a fully financed policy change.
    Keywords: R&D spillovers; total factor productivity; innovation policies
    JEL: C32 C51 D24 E17 O32
    Date: 2020–04
  6. By: Fafaliou, Irene; Giaka, Maria; Konstantios, Dimitrios; Polemis, Michael
    Abstract: The relationship between innovation and corporate sustainability constitutes a long-lasting debate among policymakers and researchers. Despite the significant contributions to this field, extant literature does not provide clear answers. This can be attributed to the fact that prior studies do not incorporate the various aspects of innovation to measure their impact on sustainability performance. This study aims to cover this gap in the emerging literature by using a unique micro-level panel dataset consisting of a large number of firms scattered across the US states over the period 2007-2016. Our findings reveal that the basic mechanism for achieving corporate sustainability is through the innovation channel. We also argue that the quantity and value of innovation enhance the sustainability level, whereas these effects are strengthened in times of recession (global financial crisis). The empirical results survive robustness checks under alternative innovation measures and different econometric techniques dealing with endogeneity and reverse causality. Lastly, policy implications relating to the nature of corporate sustainability performance are also provided.
    Keywords: Innovation; Sustainability; Patents; Trademarks; Corporate Sustainability Performance
    JEL: L20 O31 O34
    Date: 2020–04
  7. By: Henriette Ruhrmann (Technical University of Berlin); Michael Fritsch (Friedrich Schiller University Jena, Faculty of Economics); Loet Leydesdorff (Amsterdam School of Communication Research (ASCoR), University of Amsterdam)
    Abstract: Employing a quantitative, data-driven tool - the Triple Helix Indicator - to microdata of firms in Germany, we develop an evidence base for innovation-policy strategies. We aim to answer the question which level of government (local, regional, national) might be most effective for strategic innovation policy-making based on smart specialization in Germany. The empirical results show that the country is decentralized to the extent that it cannot be considered a "national" innovation system. More than two-thirds of innovation-system synergy is generated at the lower levels of districts (NUTS3) and Governmental Regions (NUTS2). In high-tech and medium-tech manufacturing, former East and West Germany, as well as North and South Germany, can be considered separate sub-national innovation systems. These findings strengthen the case for region- and context-specific innovation policies. The results illustrate the value of the Triple Helix Indicator for systematic regional mapping and serve as evidence for policy-makers to expand RIS3 policy strategies to the regional and local level in Germany.
    Keywords: Innovation systems, Triple Helix, Germany, Redundancy, Synergy
    JEL: O30 R11 O38 O52
    Date: 2020–04–22
  8. By: Maurizio Iacopetta (SKEMA Business School and OFCE Sciences Po); Raoul Minetti (Michigan State University); Pierluigi Murro (LUISS University)
    Abstract: New firms are often based on ideas that the founders developed while working for incumbent firms. We study the macroeconomic effects of spinoffs through a growth model of product variety expansion, driven by firm entry, and product innovation. Spinoffs stem from conflicts of interest between incumbent firms' shareholders and employees. The analysis suggests that incumbents invest more in product innovation when knowledge protection is stronger. An inverted-U shape relationship emerges, however, between the intensity of spinoff activities and the strength of the rule of law. A calibration experiment indicates that, with a good rule of law, loosening knowledge protection by 5\% reduces product innovation by one fifth in the short run and one seventh in the long run, but boosts the spinoff rate by one tenth and one sixth in the short and long run, respectively. Nevertheless, per capita income growth drops and welfare deteriorates. The trade-offs are broadly consistent with evidence from Italian firm.
    Keywords: Corporate governance, Endogenous growth, Spinoffs
    JEL: E44 O40 G30
    Date: 2020–04
  9. By: Sari Pekkala Kerr; William R. Kerr
    Abstract: Immigrants account for about a quarter of US invention and entrepreneurship despite a policy environment that is not well suited for these purposes. This chapter reviews the US immigration policy environment that governs how skilled migrants move to America for employment-based purposes. We discuss points of strain in the current system and potential policy reforms that would likely increase the rate of innovation and the number of startups due to immigrants in the country. Key areas include adjustments to the allocation of permanent residency visas, adjustments to the H-1B visa program, and the creation of an immigrant startup visa.
    JEL: F22 F23 J15 J44 J61 L26 M13 O31 O32 O33
    Date: 2020–04

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