nep-ino New Economics Papers
on Innovation
Issue of 2020‒06‒29
eleven papers chosen by
Uwe Cantner
University of Jena

  1. Hipsters vs. Geeks? Creative workers, STEM and innovation in US cities By Lee, Neil; Rodríguez-Pose, Andrés
  2. Innovate to Lead or Innovate to Prevail: When do Monopolistic Rents Induce Growth? By Piazza, Roberto; Zheng, Yu
  3. Competition Laws and Corporate Innovation By Ross Levine; Chen Lin; Lai Wei; Wensi Xie
  4. Innovating in Krugman’s Footsteps – Where and How Innovation Differs in Europe: Static Innovation Indicators for Identifying Regional Policy Leverages By Rhoden, Imke
  5. Subsidizing Innovation Over the Business Cycle. By Jorge Andrés Vélez-Ospina; Isabel Busom Piquer
  6. Dynamic Mergers Effects on R&D Investments and Drug Development across Research Phases in the Pharmaceutical Industry By Ralph Siebert; Zhili Tian
  7. Understanding the greater diffusion of mobile money innovations in Africa By Simplice A. Asongu; Nicholas Biekpe; Danny Cassimon
  8. Government policies for start-ups in Korea and its regions: Motives, mechanisms and major obstacles By Schüler, Diana; Suhalitca, Mihaela; Pascha, Werner; Oh, Keun-yeob
  9. Concentration and Agglomeration of IT Innovation and Entrepreneurship: Evidence from Patenting By Chris Forman; Avi Goldfarb
  10. Endogenous Task-Based Technical Change - Factor Scarcity and Factor Prices By Andreas Irmen
  11. Entrepreneurship and the fight against poverty in US Cities By Lee, Neil; Rodríguez-Pose, Andrés

  1. By: Lee, Neil; Rodríguez-Pose, Andrés
    Abstract: Innovation in cities is increasingly regarded as an outcome of two potential inputs: scientific activity and creativity. Recent research using firm level data has suggested that actually it might be the combination of these two inputs, rather than the mere presence of workers representing each group, which matters. Yet there is little evidence on whether this relationship holds using city level data in the case of the United States (US). This paper investigates this gap in our knowledge by examining how the combination of STEM (geeks) and creative workers (hipsters) in a panel of 290 US Metropolitan Statistical Areas during the period between 2005 and 2015 relates to city level innovation. The results indicate that, although the presence of STEM workers is a more important driver of innovation than that of creative ones, the most innovative cities are characterised by a combination of the two. Hence, current policies which tend to focus mainly on either STEM or creativity may be better targeted at ensuring interactions between the two.
    Keywords: cities; Creative Class; Creativity; Innovation; STEM; United States
    JEL: O18 O32 O33 R12
    Date: 2020–04
  2. By: Piazza, Roberto; Zheng, Yu
    Abstract: This paper extends the standard Schumpeterian model of creative destruction by allowing the cost of innovation for followers to increase in their technological distance from the leader. This assumption is motivated by the observation that the more technologically advanced the leader is, the harder it is for a follower to leapfrog without incurring extra cost for using leader's patented knowledge. Under this R&D cost structure, leaders have an incentive to play an "endpoint strategy": they increase their technological advantage, counting on the fact that followers will eventually stop innovating â?? allowing leadership to prevail. We find that several results in the standard model now fail to hold. In addition to the High Growth steady state in which only followers innovate, there now exist two other steady states: a Medium Growth (a source) and a Low Growth (a saddle) steady state, that feature both leaders and followers innovating. An increase in monopolistic rents or an extension of patent duration increases the likelihood that over time the economy converges to a low growth steady state.
    Keywords: Endogenous growth theory; Innovation; Persistent monopoly
    JEL: L16 O31 O34 O41
    Date: 2020–04
  3. By: Ross Levine; Chen Lin; Lai Wei; Wensi Xie
    Abstract: A central debate in economics concerns the relationship between competition and innovation, with some stressing that competition discourages innovation by reducing post-innovation rents and others emphasizing that more contestable markets spur currently dominant and other firms to invest more in innovation. We examine the impact of competition laws on innovation. We create a unique firm-level dataset on patenting activities that includes over 1.4 million firm-year observations, across 68 countries, from 1991 through 2015. Using a new, comprehensive dataset on competition laws, we find that more stringent competition laws are associated with increases in firms’ number of self-generated patents and the citation-impact and explorative nature of those patents. We also conduct the first examination of the relationship between competition laws and firms’ acquisition of patents from other firms. We find that competition increases patent acquisitions but lowers the ratio of acquired to self-generated patents. The results hold when using country-industry data on 186 countries over the 1888-2015 period.
    JEL: K21 L4 O3
    Date: 2020–05
  4. By: Rhoden, Imke
    Abstract: This paper introduces two indicators for innovation, showing the allocation of innovation and its inherent diversity. Both indicators can give insights for regional innovation policy conception. The first indicator measures the share of patents in research and development expenditure, proposing a locational innovation output indicator. It can show that innovation in Europe differs strongly among NUTS2-level regions, which points to regionally specific, place-based policies as a result of a strong dispersion in European innovation activity. The second measure, the innovation diversity indicator, shows the diversification of innovation in a region and is built upon Krugman’s locational Gini coefficients. Here, the share of patents belonging to a particular IPC class is related to the dispersion of all patents in a region. Possible implications for policy are the construction of place-based, technology-specific programs, on either national or subnational (NUTS2-) level, where each country or region has to be considered carefully. Analyses underline that innovation in Europe is a highly regionally and technically diversified concept.
    Keywords: Innovation Indicator,Innovation Gini,Regional Dispersion,Research and Development Allocation,Patent Data
    JEL: R12 O33 O38
    Date: 2020
  5. By: Jorge Andrés Vélez-Ospina (Departament d'Empresa, Universitat Autonoma de Barcelona); Isabel Busom Piquer (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: We investigate whether the impact of direct support for business investment in R&D and innovation varies over the business cycle. We address several questions: whether firms that obtain public support in a recession differ from firms that obtain it during expansions; whether the impact of support is smaller in recessions than in expansions, and whether effects vary with the treatment pattern. Using firm-level data from Spain during the period 2005 to 2014, we combine propensity score matching and difference-in-differences methods to estimate firms’ response to direct support in different phases of the cycle. Two findings stand out. First, while the impact of support on monetary investment in innovation is pro-cyclical, it is countercyclical in terms of the employee-time allocation to innovation activities. Second, the additionality of a one-year treatment is smaller than that of longer treatments, or repeate program participation. Firms receiving public support during the recession have assigned more employee time to innovation activities than a matched control group, preventing a decline of knowledge capital during the big recession.
    JEL: O25 O38 C14 C21 D22 L29 L53 H50
    Date: 2020–03
  6. By: Ralph Siebert; Zhili Tian
    Abstract: Pharmaceutical firms spend increasing amounts in mergers and acquisitions (M&As), which raises the question of whether sufficient investment is left after mergers to further develop firms’ internal drug development capability. We evaluate the effects of M&As on firms’ post-merger R&D investments and drug development capabilities across drug development phases. This study builds on a novel database that enables us to evaluate the post-merger effect at the research project level and across development phases. A further novel feature of the study is allowing measurement errors to enter firms’ R&D investments. Our study adopts a structural equation modeling approach, which is appropriate for evaluating a system of equations through which we examine the direct and indirect merger effects on R&D capabilities across development phases. We find that M&As have a strong effect on firms’ drug development at the late development phases through economies of scope. At the early development phases, M&As serve to replenish firms’ drug pipelines. The study shows that M&As have a direct and negative effect on firms’ R&D investments. However, the overall effect on R&D investments accounting for enhanced post-merger R&D capabilities and product approvals turns out to be positive. M&As can be an effective instrument for firms to acquire drug development knowledge and technology in late stages of the development process (Phases 3 clinical testing and regulatory filing). Our study provide empirical evidence that investments in M&As in late stage of drug development help firms’ growth and increase firms revenue.
    Keywords: drug development phases, dynamics, innovation management, merger and acquisition, pharmaceutical drug development, R&D capabilities
    JEL: L11 L13 L52 O31 O32 O38
    Date: 2020
  7. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas Biekpe (Cape Town, South Africa); Danny Cassimon (University of Antwerp, Belgium)
    Abstract: The present research extends Lashitew, van Tulder and Liasse (2019, RP) in order to understand the greater diffusion of mobile money innovations in Africa. To make this assessment, a comparative analysis is engaged between sampled African countries and the corresponding sampled developing countries. Three main types of predictor groups are used for the study, namely: demand, supply and macro-level factors. The empirical evidence is based on Tobit regressions. The tested hypothesis is confirmed because from a comparative analysis between African-specific estimates and those of the sampled countries, not all factors driving mobile money innovations in Africa are apparent in the findings of Lashitew et al. (2019). An extended analysis is also performed to take on board the concern of multicollinearity from which, the best estimators from the study are derived. Comparative findings from correlation analysis show that an African specificity is largely traceable to the ‘unique mobile subscription rate’ variable. An in-depth empirical analysis further confirms an African specificity in the outcome variables (especially in the mobile used to send/receive money) which, may be traceable to informal sector variables not documented in Lashitew et al. (2019). Scholarly and policy implications are discussed.
    Keywords: Mobile money; technology diffusion; financial inclusion; inclusive innovation
    JEL: D10 D14 D31 D60 O30
    Date: 2020–01
  8. By: Schüler, Diana; Suhalitca, Mihaela; Pascha, Werner; Oh, Keun-yeob
    Abstract: The paper discusses the role of government policies and related support services in the formation of start-up businesses in South Korea. Start-ups can infuse an economy with renewed vigor, but it is questionable how Korea, an economy that has been dependent on a few large conglomerates in the past, can successfully encourage such start-up dynamism. The paper traces the economic history of start-ups and venture businesses in Korea and highlights its current situation. The analysis then focusses on explaining the start-up support policies, both on the level of central government and of the regions, paying attention to the intertwined role of the venture capital industry. A number of major obstacles are identified, in particular the ambiguous effects of social networks, the widespread risk aversion among potential entrepreneurs, the shortage of exit opportunities and the pronounced regional imbalances. The authors conclude that financial support measures should be streamlined, that the state should focus on creating appropriate framework conditions and that the regions should be given more independence from central government to choose their own path of development.
    Keywords: South Korea,start-ups,start-up government policy,regional economic policy,venture capital industry
    JEL: M13 L26 L53 O38 R11
    Date: 2020
  9. By: Chris Forman; Avi Goldfarb
    Abstract: Information technology (IT) matters to prosperity. The top patenters are increasingly IT companies. We use data on US patents to document four trends in IT patenting. First, firm-level concentration in IT patenting is increasing over time. Second, geographic concentration in IT patenting is increasing over time. Third, most technology classes experienced a decline in new patenters from 1980 to 2000. This was not true of new IT patents. Since 2000, the trend in new IT patenters looks like other classes and is declining over time. Fourth, there is increased geographic concentration of new IT patenters. We do not identify the reasons behind these trends nor whether they are related to overall changes in industry concentration, agglomeration, or prosperity.
    JEL: L22 L26 M13 M15 O31 O32 O33 O34 R12
    Date: 2020–06
  10. By: Andreas Irmen (Department of Economics and Management, Université du Luxembourg)
    Abstract: This paper develops a static model of endogenous task-based technical progress to study how factor scarcity induces technological progress and changes in factor prices. The equilibrium technology is multi-dimensional and not strongly factor-saving in the sense of Acemoglu (2010). Nevertheless, labor scarcity induces labor productivity growth. There is a weak but no strong absolute equilibrium bias. This model provides a plausible interpretation of the famous contention of Hicks (1932) about the role of factor prices and factor endowments for induced innovations. It may serve as a micro-foundation for canonical macro-economic models. Moreover, it accommodates features like endogenous factor supplies and a binding minimum wage
    Keywords: "Economic Growth, Endogenous Technical Change, Direction of Technical Change, Biased Technology "
    JEL: O31 D92 O33 O41
    Date: 2020
  11. 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 â?? and, therefore, is more likely to have positive local multiplier effects â?? 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: cities; economic development; entrepreneurship; poverty; USA
    JEL: J21 J31 M13 O18 R11
    Date: 2020–04

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