nep-ino New Economics Papers
on Innovation
Issue of 2020‒07‒20
eleven papers chosen by
Uwe Cantner
University of Jena

  1. Dynamic Effects of Licensing and Knowledge Transfer across Research Stages: Evidence from the Pharmaceutical Industry By Zhili Tian; Ralph Siebert
  2. Regional patterns of unrelated technological diversification: the role of academic inventors By Francesco Quatraro; Alessandra Scandura
  3. Innovative Entrepreneurship as a Collaborative Effort: An Institutional Framework By Elert, Niklas; Henrekson, Magnus
  4. From Imitation to Innovation: Where Is all that Chinese R&D Going? By Michael König; Zheng Michael Song; Kjetil Storesletten; Fabrizio Zilibotti
  5. Did bank lending stifle innovation in Europe during the Great Recession? By Oana Peia; Davide Romelli
  6. The Impact of COVID-19 on Small Business Owners: Evidence of Early-Stage Losses from the April 2020 Current Population Survey By Fairlie, Robert W.
  7. Invention Disclosures and the Slowdown of Scientific Knowledge By Link, Albert; Scott, John
  8. Challenges in Governance of Smart Specialisation in South East Europe By Nikola Radovanovic; Elisa Gerussi
  9. Supporting innovative entrepreneurship: an evaluation of the Italian "Start-up Act" By Francesco Manaresi; Carlo Menon; Pietro Santoleri
  10. Intellectual property reform in the laboratory By Ismaël Benslimane; Paolo Crosetto; Raul Magni-Berton; Simon Varaine
  11. The cost of weak institutions for innovation in China By Rodríguez-Pose, Andrés; Zhang, Min

  1. By: Zhili Tian; Ralph Siebert
    Abstract: In the pharmaceutical industry, firms frequently engage in licensing agreements to overcome innovation challenges and keep up with the pace of developing new drugs. Licensing helps firms jointly develop new drugs and acquire external knowledge, which helps improve their internal drug development capability. Our study examines the dynamic effects of licensing on the success of the licensees’ internal drug development across research stages. We adopt a structural equation modeling approach and find that external knowledge transfer via licensing can have differential effects on firms’ internal research stage-specific R&D capabilities. The success of transferring external knowledge to an in-licensing firm is critically dependent on the firm’s internal R&D capabilities, their financial capability, and the research stage. We find that license agreements formed at the early stage (the discovery and preclinical test phases) and intermediate stage (phase 1 and 2 clinical test phases) exert strong direct and short-run effects on internal R&D capabilities in the same research stages. Moreover, licensing formed at the intermediate stage exerts remarkably strong indirect and long-run effects that impact R&D capabilities in successive research stages. Licensing in the late stage (phase 3 clinical test and product approval) is costly and does little to enhance firms’ internal R&D capabilities. Our results also show that licensing is formed among firms with stronger financial resources, and those resources are necessary for a successful technology transfer. Our results also provide insights into the impact of licensing on project success rates across research stages.
    Keywords: pharmaceutical drug development, licensing, R&D capabilities, effects of licensing on R&D capabilities
    JEL: L24 L25 L65 D22
    Date: 2020
  2. By: Francesco Quatraro; Alessandra Scandura
    Abstract: This paper investigates the relationship between the involvement of academic inventors in local innovation dynamics and the patterns of regional technological diversification. Based on the combination of the evolutionary economic approach and the theories on regional innovation capabilities, and on the distinctive features of academic inventors, we hypothesise that knowledge spillovers accruing from the participation of university scientists to local patenting activity influence the extent of regional technological diversification. In addition, we posit that the involvement of academic inventors mitigates the path dependency engendered by the constraining role of the existing capabilities. The empirical results highlight the key role of academic institutions for the development of regional technological trajectories while contributing to the academic and policy debate on regional diversification strategies.
    Keywords: regional diversification, relatedness, academic inventors
    JEL: O33 R11
    Date: 2020
  3. By: Elert, Niklas (Research Institute of Industrial Economics (IFN)); Henrekson, Magnus (Research Institute of Industrial Economics (IFN))
    Abstract: We demonstrate how successful entrepreneurship depends on a collaborative innovation bloc (CIB), a system of innovation that evolves spontaneously and within which activity takes place through time. A CIB consists of six pools of economic skills from which people are drawn or recruited to form part of a collaborative team, which is necessary for innovation-based venturing to flourish. The six pools include entrepreneurs, inventors, early- and later-stage financiers, key personnel, and customers. We show how the application of the CIB perspective can help make institutional and evolutionary economics more concrete, relevant, and persuasive, especially regarding institutional prescriptions. Generally, we envision an institutional framework that improves the antifragility of CIBs and the economic system as a whole, thus enabling individual CIBs and the broader economic system to thrive when faced with adversity.
    Keywords: Institutional economics; Evolutionary economics; Antifragility; Entrepreneurship; Innovation; Institutions
    JEL: D20 G32 L23 L26 O33
    Date: 2020–06–24
  4. By: Michael König; Zheng Michael Song; Kjetil Storesletten; Fabrizio Zilibotti
    Abstract: We construct a model of firm dynamics with heterogeneous productivity and distortions. The productivity distribution evolves endogenously as the result of the decisions of firms seeking to upgrade their productivity over time. Firms can adopt two strategies toward that end: imitation and innovation. The theory bears predictions about the evolution of the productivity distribution. We structurally estimate the stationary state of the dynamic model targeting moments of the empirical distribution of R&D and TFP growth in China during the period 2007--2012. The estimated model fits the Chinese data well. We compare the estimates with those obtained using data for Taiwan and find the results to be robust. We perform counterfactuals to study the effect of alternative policies. We find large effects of R&D misallocation on long-run growth.
    JEL: L16 O31 O47 O53
    Date: 2020–06
  5. By: Oana Peia; Davide Romelli
    Abstract: Using the 2008-09 Global Financial crisis and the 2012 Euro area sovereign debt crisis as natural experiments, we investigate the effects of contractions in credit supply on R&D spending in a large sample of European firms. Our identification strategy exploits differences in financial constraints across firms, as well as the cross-industry variation in dependence on external finance, to identify a causal effect of bank credit supply on firm investment in innovation. We show that firms that are more likely financially constrained, in industries more dependent on external finance, have a disproportionally lower growth rate of R&D spending, as well as lower R&D intensity and share of R&D investment in total investment during periods of tight credit supply. These results are robust to different proxies of financial constraints, model specifications and fixed-effects identification strategies.
    Keywords: Financial frictions; Investment; Innovation; R&D spending
    JEL: O30 G21 I22
    Date: 2019–11
  6. By: Fairlie, Robert W. (University of California, Santa Cruz)
    Abstract: Social distancing restrictions and demand shifts from COVID-19 are expected to shutter many small businesses, but there is very little early evidence on impacts. This paper provides the first analysis of impacts of the pandemic on the number of active small businesses in the United States using nationally representative data from the April 2020 CPS – the first month fully capturing early effects from the pandemic. The number of active business owners in the United States plummeted by 3.3 million or 22 percent over the crucial two-month window from February to April 2020. The drop in business owners was the largest on record, and losses were felt across nearly all industries and even for incorporated businesses. African-American businesses were hit especially hard experiencing a 41 percent drop. Latinx business owners fell by 32 percent, and Asian business owners dropped by 26 percent. Simulations indicate that industry compositions partly placed these groups at a higher risk of losses. Immigrant business owners experienced substantial losses of 36 percent. Female-owned businesses were also disproportionately hit by 25 percent. These findings of early-stage losses to small businesses have important policy implications and may portend longer-term ramifications for job losses and economic inequality.
    Keywords: small business, entrepreneurship, self-employment, COVID-19, coronavirus, shelter in place, social distancing
    JEL: J15 J16 L26
    Date: 2020–05
  7. By: Link, Albert (University of North Carolina at Greensboro, Department of Economics); Scott, John (Dartmouth College)
    Abstract: Invention disclosures are one measure of new scientific knowledge that represents and predicts the future scientific research output of a U.S. federal laboratory. In this paper, we document a negative shift in the production function for new scientific knowledge as measured by invention disclosures at one federal laboratory, the National Institute of Standards and Technology, over the first 16 years of the new millennium. We find a negative shift of the production function for new scientific knowledge, and that shift might reflect the coincidence of the ICT revolution that enabled fast science, and the evaluation of research with uncritical use of citation counts that created incentives to focus on incremental research in crowded research topics.
    Keywords: Invention disclosures; Federal laboratory; Scientific knowledge; Knowledge production function; ICT revolution;
    JEL: O31 O35 O38
    Date: 2020–07–13
  8. By: Nikola Radovanovic (European Commission - JRC); Elisa Gerussi (European Commission - JRC)
    Abstract: S3-based innovation policies highlight the relevant role of both governance - including its structures and mechanisms – and stakeholders’ engagement among the enabling factors of well-functioning R&I ecosystems. In particular, the principle of carrying out a thorough stakeholders’ dialogue on “new domains of technological and market opportunities†for decision-making processes demonstrates the importance of the bottom-up method as at the basis of S3. When it comes to the analysis of S3 in SEE, the effects of the recent years of economic transformation and lock-in situations encourage analysis of the way non-flexible institutional infrastructures can significantly harm local innovation capacity development. This creates a context where networking becomes largely uneven and the communication between different players hampers further progress. Whereas Bulgaria and Croatia are already implementing their S3 strategies, Serbia is about to start the implementation phase in 2020. Given their centralized management of the S3 strategies, the cases are particularly suitable for a comparative analysis on governance. We observe that some of the main challenges for S3 governance in SEE in the upcoming period are: enhancing the political commitment of national authorities as well as the collective awareness of S3; implementing an efficient policy mix that integrates S3 with other national policies on innovation; attracting relevant stakeholders to participate in the decision-making process; and boosting the role of cooperation and competitiveness at the macro-regional level.
    Keywords: Smart Specialisation, South East Europe, Governance, Stakeholders' engagement
    Date: 2020–05
  9. By: Francesco Manaresi (Directorate General for Economics, Statistics and Research, Bank of Italy); Carlo Menon (Laterite); Pietro Santoleri (Institute of Economics and EMbeDS, Sant'Anna School of Advanced Studies)
    Abstract: The role of innovative start-ups in contributing to aggregate economic dynamism has attracted increased attention in recent years. While this has translated into several public policies explicitly targeting them, there is little evidence on their e ectiveness. This paper provides a comprehensive evaluation of the "Start-up Act", a policy intervention aimed at supporting innovative start-ups in Italy. We construct a unique database encompassing detailed information on firm balance-sheets, employment, firm demographics, patents and bank-firm relationships for all Italian start-ups. We use conditional difference-in-differences and instrumental variable strategies to evaluate the impact of the "Start-up Act" on firm performance. Results show that the policy induces a significant increase in several firm outcomes whereas no effect is detected in patenting propensity and survival chances. We also document that the policy alleviates nancial frictions characterizing innovative start-ups through the provision of tax credits for equity and a public guarantee scheme which, respectively, trigger an increase in the probability of receiving VC and accessing bank credit.
    Keywords: Start-ups; Entrepreneurship policy; Policy Evaluation; Firm performance
    JEL: M13 L25 L53 D04
    Date: 2020–07
  10. By: Ismaël Benslimane (IPhiG - Institut de Philosophie de Grenoble - UGA - Université Grenoble Alpes); Paolo Crosetto (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Raul Magni-Berton (IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble); Simon Varaine (PACTE - Pacte, Laboratoire de sciences sociales - UGA - Université Grenoble Alpes - CNRS - Centre National de la Recherche Scientifique - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - UJF - Université Joseph Fourier - Grenoble 1 - UPMF - Université Pierre Mendès France - Grenoble 2)
    Abstract: This study attempts to experimentally capture the effects of democratic reform of intellectual property (IP) and measure how a vote "against IP" can disappoint the most talented innovators and reduce their creativity. Contrary to expectations, the results show that such a vote increases overall creativity. Actually, the most talented innovators do not vote in favor of IP. Rather, those who vote in favor of IP are those who benefit relatively more from royalties. Surprisingly, no correlation is found between these two populations: the IP in our experiment seems not to reward the best players, but the players choosing an 'autarkic' strategy of relying on their own creationsand forego cross-fertilization with other players. These are not particularly brilliant players thatopt for a rent-seeking strategy that maximises gainsfromthe IP systemitself. There are plausible arguments to argue that this result is at least partly valid in the real world, especially for complexand highly sequential innovations where it has been proven that patent trolls and anti-competitivestrategies are important. These findings lead us not to recommend IP constitutional protections,because there are no major "tyranny from the majority" concerns.
    Keywords: Intellectual Property,Patents,Institutional Reform,Innovation policy,Creativity,Real effort task,Vote,Laboratory experiment
    Date: 2020–05
  11. By: Rodríguez-Pose, Andrés; Zhang, Min
    Abstract: Does the variation in the quality of local government institutions affect the capacity of firms to innovate? This paper uses a unique dataset that combines the specific features of 2,700 firms with the institutional and socioeconomic characteristics of the 25 cities in China where they operate, in order to assess the extent to which institutional quality -- measured across four dimensions: rule of law, government effectiveness, corruption, and regulatory quality -- affects both the innovation probability and intensity of firms. The results of the econometric analysis show that poor institutional quality in urban China is an important barrier for firm-level innovation. In particular, a deficient rule of law, high corruption, and a weak regulatory quality strongly undermine firm-level innovation. The role of these factors is far more limited in the case of innovation intensity. Better institutions also reduce the amount of time firms spend dealing with government regulations in order to facilitate innovation. The results also indicate that the cost of weak institutions for innovation is higher for private than for state-owned firms, at least in the early stages of innovation. In general, differences in institutional quality generate local urban ecosystems that impinge on the propensity of firms to innovate.
    Keywords: China; cities; firms; Government quality; Innovation; institutions
    JEL: H1 O3 O31
    Date: 2020–02

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