nep-ino New Economics Papers
on Innovation
Issue of 2020‒06‒22
thirteen papers chosen by
Uwe Cantner
University of Jena

  1. Patents to Products: Product Innovation and Firm Dynamics By Argente, David; Baslandze, Salomé; Hanley, Douglas; Moreira, Sara
  2. Environmental Preferences and Technological Choices : Is Market Competition Clean or Dirty? By Aghion, Philippe; Bénabou, Roland; Martin, Ralf; Roulet, Alexandra
  3. Determinants of firms’ efficiency: do innovations and finance constraints matter? The case of European SMEs By Ferrando, Annalisa; Rossi, Stefania P. S.; Bonanno, Graziella
  4. Ownership, Compensation and Board Diversity as Innovation Drivers: A Comparison of U.S. and Canadian Firms By Gamal Atallah; Claudia De Fuentes; Christine A. Panasian
  6. Kill Zone By Sai Krishna Kamepalli; Raghuram Rajan; Luigi Zingales
  7. The Rise of Fintech: A Cross-Country Perspective By Aurore Oskar KOWALEWSKI; Paweł PISANY
  8. Financialization and Endogenous Technological Change: a Post-Kaleckian Perspective By Parui, Pintu
  9. Is Technological Change Really Skills-Biased? Firm-level Evidence of the Complementarities between ICT and Workers’ Education By Filippo Pusterla; Thomas Bolli
  10. Impact of urban transport innovation on the quality of life: what do passengers say? By Magdalena Gądek; Rafał Miśko
  11. What drives university-industry collaboration: Research excellence or firm collaboration strategy? By Atta-Owusu, Kwadwo; Fitjar, Rune Dahl; Rodríguez-Pose, Andrés
  12. Automation, Automatic Capital Returns, and the Functional Income Distribution By José L. Torres; Pablo Casas
  13. Vertical vs. Horizontal Policy in a Capabilities Model of Economic Development By Alje van Dam; Koen Frenken

  1. By: Argente, David; Baslandze, Salomé; Hanley, Douglas; Moreira, Sara
    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: creative destruction; growth; Innovation; patent value; patents; productivity
    JEL: O3 O4
    Date: 2020–05
  2. By: Aghion, Philippe; Bénabou, Roland; Martin, Ralf; Roulet, Alexandra
    Abstract: This paper investigates the joint effect of consumers' environmental concerns and product-market competition on firms' decisions whether to innovate "clean" or "dirty". We first develop a step-by-step innovation model to capture the basic intuition that socially responsible consumers induce firms to escape competition by pursuing greener innovations. To test and quantify the theory, we bring together patent data, survey data on environmental values, and competition measures. Using a panel of 8,562 firms from the automobile sector that patented in 42 countries between 1998 and 2012, we indeed find that greater exposure to environmental attitudes has a significant positive effect on the probability for a firm to innovate in the clean direction, and all the more so the higher the degree of product market competition. Results suggest that the combination of historically realistic increases in prosocial attitudes and product market competition can have the same effect on green innovation as major increase in fuel prices.
    Keywords: climate change; Competition; Environment; Innovation; patents; Social Responsibility
    JEL: D21 D22 D62 D64 H23 O3 O31
    Date: 2020–04
  3. By: Ferrando, Annalisa; Rossi, Stefania P. S.; Bonanno, Graziella
    Abstract: This paper aims at investigating the relationship between firms’ profit efficiency, access to finance and innovation activities. We enrich our understanding on firms’ performance by adopting the stochastic frontier approach (SFA), which allows us to estimate profit functions and to obtain efficiency scores for a large sample of European firms. We pioneer the use of a novel dataset that merges survey-based data derived from the ECB Survey on access to finance for enterprises (SAFE) with balance sheet information. Our evidence documents that credit constrained firms display an incentive to improve their efficiency in order to increase profitability. Among firms that have embarked in product innovation, those in the industry and high-tech sectors see their effort translated in higher profit efficiency. From a policy perspective, our results could help to better understand the link between innovation, financial constraints and efficiency, which goes beyond the idea that easier access to finance is the panacea to get higher profit efficiency. JEL Classification: D22, D24, L23, O31, C33
    Keywords: access to finance, innovation, stochastic frontier approach, survey data
    Date: 2020–06
  4. By: Gamal Atallah (Department of Economics, University of Ottawa, Ottawa, ON); Claudia De Fuentes (Department of Management, Sobey School of Business, Saint Mary’s University); Christine A. Panasian (Department of Finance, Information Systems and Management Science, Sobey School of Business, Saint Mary’s University)
    Abstract: Using a large sample of North American firms, from 1999 to 2016, we investigate the effect of corporate governance structures, specifically ownership, board characteristics, and executive compensation contracts on innovation intensity and output. We consider both R&D expenditures and patents as innovation proxies and evaluate consequences of the economic downturns of 2000 and 2008. We find that R&D investment increases with ownership by institutional blockholders and with the number of institutional owners, confirming the key role institutions play in innovation activities of firms. We observe higher R&D levels for firms with more independent boards, more females board members and more outside directorships held by directors. We report that firms with CEO/chair of the board duality have lower R&D intensity, as do firms with higher ownership by directors and with a higher mean board age. Innovation is negatively related to CEO salary levels, but positively related to the ratio of incentives to total compensation, confirming that incentives contribute to aligning shareholders and management interests, which leads to better long-term decisions. However, those incentives reduce the number of patents. We do not find any systematic changes in R&D for the 2000 recession, however there is an increase for the 2008 financial crisis.
    Keywords: Corporate Governance, Corporate Finance and Governance, Innovation, R&D investment, Canada, United States.
    Date: 2020
  5. By: James H. Love; Stephen Roper; Priit Vahter
    Abstract: Abandoned and failed innovations can be regarded as a part of the natural process of experimentation by firms, which can lead to important lessons being learned. Although the literature suggests some benefit from failure or abandoned innovation activities, prior studies using relatively large firm-level datasets to test the nature of this link are often unable to deal explicitly with the time dimension of learning. We contribute to the literature by showing the dynamic and causal nature of the linkage between abandoned innovation and subsequent innovation outcomes at firms. We demonstrate based on balanced panel data of Spanish manufacturing firms from 2008-2016 that innovation failure not only leads to more successful innovation, but that there is an explicit time dimension to this. We demonstrate that firms which have experienced ‘failure’ (as evidenced by abandoned innovation activities) in the past will have stronger positive effects of recent abandoned innovation activities on innovation output. This is a strong test of the ‘learning-from-failure’ hypothesis. In addition, we find evidence that in addition to enabling cumulative learning processes, abandoning innovation may also act as a dynamic corrective mechanism preventing firms carrying weaker innovation portfolios through from one period to the next.
    Keywords: innovation failure, abandoning innovation activities, learning effects, innovation performance
    Date: 2020
  6. By: Sai Krishna Kamepalli; Raghuram Rajan; Luigi Zingales
    Abstract: We study why high-priced acquisitions of entrants by an incumbent do not necessarily stimulate more innovation and entry in an industry (like that of digital platforms) where customers face switching costs and enjoy network externalities. The prospect of an acquisition by the incumbent platform undermines early adoption by customers, reducing prospective payoffs to new entrants. This creates a “kill zone” in the space of startups, as described by venture capitalists, where new ventures are not worth funding. Evidence from changes in investment in startups by venture capitalists after major acquisitions by Facebook and Google suggests this is more than a mere theoretical possibility.
    JEL: G31 G34 L41
    Date: 2020–05
  7. By: Aurore Oskar KOWALEWSKI (IESEG School of Management & LEM-CNRS 9221); Paweł PISANY (Institute of Economics, Polish Academy of Sciences)
    Abstract: This study investigates the determinants of fintech company creation and activity using a cross-country sample that includes developed and developing countries. Using a random effect negative binomial model and explainable machine learning algorithms, we show the positive role of technology advancements in each economy, quality of research, and more importantly, the level of university-industry collaboration. Additionally, we find that demographic factors may play a role in fintech creation and activity. Some fintech companies may find the quality and stringency of regulation to be an obstacle. Our results also show the sophisticated interactions between the banking sector and fintech companies that we may describe as a mix of cooperation and competition.
    Keywords: fintech, innovation, start up, developed countries, developing countries
    JEL: G21 G23 L26 O30
    Date: 2020–07
  8. By: Parui, Pintu
    Abstract: In post-Keynesian literature, Hein (2012a) was the first to incorporate financialization as an influential positive determinant of the rate of technological change. However, financialization is more like a two-edged sword which can affect technological change negatively as well. We capture both the positive as well as the negative effect of financialization on technological change which encapsulates the possibility of multiple equilibria. In analyzing the long run of the model we endogenize the financialization parameter as well and get richer dynamics than Hein (2012a). We show that under certain circumstances, the higher speed of diffusion of technological innovation, more regulated financial markets, and higher intra-class competition among firms are desirable for stabilizing the economy. Finally, we provide some policy prescriptions for the same.
    Keywords: Capital accumulation, Distribution, Financialization, Kaleckian model, technological change, Andronov–Hopf bifurcation, Limit cycles
    JEL: C62 C69 D33 E12 G01 O16 O41
    Date: 2018–10–05
  9. By: Filippo Pusterla (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Thomas Bolli (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: This paper extends and refnes the concept of ICT-driven skills-biased technological change by disentangling the effects of information technologies (IT) and communication technologies (CT). Guided by the theory that IT and CT differently affect firms' production processes, we investigate the complementarities between these two distinct technologies and workers' levels of education in affecting firms' productivity. Exploiting within-firm variation between 2005-2017, we find that the use of IT-measured as use of business management tools - is particularly beneficial for workers with a tertiary vocational education. In contrast, CT - measured as workers' use of the intranet - is especially complementary to workers with a tertiary academic education. While consistent with the ICT-driven skills-biased technological change hypothesis, our results offer evidence on the necessity for differentiating between the effects of IT and CT on firm productivity when differently educated workers use these technologies.
    Keywords: skills-biased technological change, information technologies, communication technologies
    JEL: J24 O33
    Date: 2019–12
  10. By: Magdalena Gądek; Rafał Miśko
    Abstract: City authorities are taking action to increase public transport attractiveness. More and more innovative solutions are being introduced. Therefore, the research was aimed at answering the question: have innovations improved residents' quality of life in their opinion. The research was conducted in one of the Polish cities due to the number of introduced innovations. Surveys were carried out, which showed that the introduced innovations improve the quality of life of residents. In their opinion, innovations most influencing their quality of life are connected with security and travel comfort. Innovations connected with the environment and availability of information play also an important role.
    Keywords: Quality of life (QOL); Public transport; Innovations; Management
    JEL: R41
    Date: 2020–08–23
  11. By: Atta-Owusu, Kwadwo; Fitjar, Rune Dahl; Rodríguez-Pose, Andrés
    Abstract: Research and innovation policy aims to boost research output and university-industry collaboration (UIC) at least in part to allow firms access to leading scientific knowledge. As part of their mission, universities are expected to contribute to innovation in their regions. However, the relationship between research output and UIC is unclear: research-intensive universities can produce frontier research, which is attractive to firms, but may also suffer from a gap between the research produced and the needs of local firms, as well as mission overload. This may hinder local firms' ability to cooperate with universities altogether or force them to look beyond the region for other suitable universities to interact with. This paper investigates the relationship between the research output of local universities and firms' participation in UICs across different geographical scales. It uses Community Innovation Survey (CIS) data for Norwegian firms and Scopus data on Norwegian universities' research output across various disciplines. The results demonstrate that local university research intensity and quality are negatively associated with firm participation in UICs at the local level. Firm characteristics, in particular the firm's general strategy towards cooperation and its geography, turn out to be much more important than university characteristics in explaining UICs. Notably, firms' cooperation with other external partners at the same scale is a strong predictor of UICs.
    Keywords: firms; Norway; Research; Universities; university-industry collaboration
    JEL: O31 O32 O33
    Date: 2020–04
  12. By: José L. Torres (Department of Economics, University of Málaga); Pablo Casas (Department of Economics, University of Huelva, and UNIA)
    Abstract: This paper studies the economic implications of automation. We consider that automation is affected by disruptive technologies which entail a structural change consisting in the introduction of a new physical capital input (a combination of artifficial intelligence and autonomous robots), additional to ``traditional'' capital assets and labor. This new ``automatic'' physical capital is assumed to carry out production activities without the need to be combined with labor. We propose a simple production function and show that the consequences of automation depend on the combination of the automatic capital adoption rate and the elasticity of substitution between traditional and automatic technology. We find out that, if the adoption rate is below a threshold that matches the marginal productivity of automatic capital, little effects are derived from automation, independently of the elasticity of substitution of the new capital to the traditional capital and labor. However, if the automatic capital adoption rate is above the threshold level and the elasticity of substitution is higher enough, the automation process can lead to a robocalypse scenario with a total shift of both traditional capital and labor. We estimate, through the benchmark calibration of the model, that the adoption rate threshold for automatic capital is about $22.5%$.
    Keywords: Automatic capital; Traditional inputs; Automation; Technological change; Income distribution
    JEL: O14 O33 E23 E25
    Date: 2020–05
  13. By: Alje van Dam; Koen Frenken
    Abstract: Against the background of renewed interest in vertical support policies targeting specific industries or technologies, we investigate the effects of vertical vs. horizontal policies in a combinatorial model of economic development. In the framework we propose, an economy develops by acquiring new capabilities allowing for the production of an ever greater variety of products with an increasing complexity. Innovation policy can aim to expand the number of capabilities (vertical policy) or the ability to combine capabilities (horizontal policy). The model shows that for low-income countries, the two policies are complementary. For high-income countries that are specialised in the most complex products, focusing on horizontal policy only yields the highest returns. We reflect on the model results in the light of the contemporary debate on vertical policy.
    Date: 2020–06

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