nep-ino New Economics Papers
on Innovation
Issue of 2020‒08‒24
ten papers chosen by
Uwe Cantner
University of Jena

  1. Innovation in risky markets: ownership and location advantages in the UK regions By Gagliardi, Luisa; Iammarino, Simona
  2. Subsidising Innovation over the Business Cycle By Isabel Busom; Jorge Velez-Ospina
  3. Going Revolutionary: The Impact of 4IR Technology Development on Firm Performance By Mario Benassi; Elena Grinza; Francesco Rentocchini; Laura Rondi
  4. Entrepreneurial Recovery from COVID-19: Decentralization, Democratization, Demand, Distribution, and Demography By Naudé, Wim
  5. Patent Boxes and the Success Rate of Applications By Ronald B. Davies; Dieter Franz Kogler; Ryan M. Hynes
  6. Implementation of innovations in enterprises using the EU funds: A comparative analysis By Piątkowski, Marcin J.
  7. The geography of innovation and development: global spread and local hotspots By Crescenzi, Riccardo; Iammarino, Simona; Ioramashvili, Carolin; Rodríguez-Pose, Andrés; Storper, Michael
  8. GPTs and Growth: Evidence on the Technological Adoption of Electrical & Electronic Technologies in the 1920s By Sergio Petralia; ;
  9. The Wealth of (Open Data) Nations? Examining the Interplay of Open Government Data and Country-level Institutions for Entrepreneurial Activity at the Country-level By Franz Huber; Alan Ponce; Francesco Rentocchini; Thomas Wainwright
  10. Local-foreign technology interface, resource-based development, and industrial policy: how Chile and Malaysia are escaping the middle-income trap By Lebdioui, Amir; Lee, Keun; Pietrobelli, Carlo

  1. By: Gagliardi, Luisa; Iammarino, Simona
    Abstract: This article analyses the relationship between firm’s perception of market risk and engagement in innovation. We conceptualise this relationship by integrating insights from the management literature on innovation barriers with those derived from the international business and economic geography perspectives on the interplay of ownership and location advantages. By exploiting a firm-level panel dataset based on the UK Innovation Survey for the period 2002–2008, we test the relationship between perception of market risk and innovation behaviour in relation to firm ownership—i.e. multinational enterprises (MNEs) versus single domestic enterprises—and location—across regional contexts characterised by different degrees of technological dynamism. Our main results show that ownership advantages operate as a moderator by fundamentally affecting the direction of the relationship: while MNEs react positively to risk perception, single domestic firms reduce their innovation engagement as a strategy to cope with market uncertainty. Yet, ownership advantages play a pivotal role only in relatively inert or stable contexts, as in technologically dynamic regions differences between domestic firms and MNEs disappear.
    Keywords: Risk perception; Innovation behaviour; Ownership and Location advantages; Community Innovation Survey; UK Regions
    JEL: F23 O31 R11
    Date: 2018–09–01
  2. By: Isabel Busom (Department of Applied Economics: Universitat Autonoma de Barcelo); Jorge Velez-Ospina (Science Policy Research Unit (SPRU), University of Sussex)
    Abstract: We investigate whether the impact of direct support for business investment in R&D and innovation varies over the business cycle. We study 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. We find that (i) while the impact of support on monetary investment in innovation is pro-cyclical, it is counter-cyclical in terms of the employee-time allocation to innovation activities; (ii) the additionality of a one-year treatment is smaller than that of a longer treatment. Direct public support may have thus prevented a decline of the firms’ knowledge capital during the recession.
    Keywords: R&D subsidies, policy evaluation, business cycle, additionali
    JEL: O25 O38 C14 C21 D22 L29 L53 H5
    Date: 2020–06
  3. 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 large firms filing 4IR patents at the European Patent Office (EPO). Our results, which control for a large number of patent- and firmlevel variables as well as firm fixed unobserved heterogeneity, show a significant and economically relevant positive association between the development of 4IR technologies and firm productivity. However, no significant relationship with firm profitability is detected, thereby suggesting that the returns from 4IR technological developments are slow to cash in. We also find that late innovators benefit more from the development of 4IR technological capabilities than early innovators and experience a substantial “boost effect”. We provide empirical support to an explanation of these findings in terms of the ability of late innovators 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: 2020–06
  4. By: Naudé, Wim (RWTH Aachen University)
    Abstract: Entrepreneurship, as reflected in the start-up of new firms, the growth and market exit of existing firms, and the ow of venture capital, has been severely curtailed by the lockdown and social distancing measures taken by governments around the world in the fight against COVID-19. This paper, after documenting preliminary evidence on these declines, argues that there is a strong possibility that the unintended damage to entrepreneurship, innovation and growth could be persistent. This requires that short- term economic and business rescue packages be complimented by measures aimed at the longer-term, and that these be based on at least five principles. These 5 principles (5Ds) refer to decentralization, democratization, demand, distribution and demography.
    Keywords: entrepreneurship, innovation, COVID-19, public policy, economic growth, development
    JEL: I18 L26 L53 M13
    Date: 2020–07
  5. By: Ronald B. Davies; Dieter Franz Kogler; Ryan M. Hynes
    Abstract: Patent boxes significantly reduce the tax rate applied to income earned from a patent. Existing work finds that those reductions increase the number of patents. That said, not all patents are equally novel. In particular, the patent box encourages the submission of patents of marginal novelty, a selection effect that would reduce the average success rates of patents. At the same time, the increased return to patenting encourages additional effort in application preparation and prosecution, increasing suc- cess rates. While this predicts an ambiguous effect, due to lower financing costs, the net impact should be smaller for frequent innovators. We use data from applications to the European Patent Office from 1978 to 2017 and find that the introduction of a patent box increases the average success rate of applications by 4.4 percentage points, with the estimated effect becoming negative for frequent innovators. We further find that this effect is greater when boxes apply only to new innovations and when local development is required to access tax reductions. This suggests that for the frequent innovators, who form the bulk of submissions, patent boxes may indeed be encouraging the submission of marginally-novel applications.
    Keywords: Patent box; Patents; Likelihood of patent grant
    JEL: H2 O3
    Date: 2020–06
  6. By: Piątkowski, Marcin J.
    Abstract: The European Union sees the role of innovations as measurably influencing the improvement of social and economic development in the regions of its member states. Actions that promote the implementation of innovations in the SME sector as one of the elements having a positive impact on the European Union's cohesion policy have a special role in supporting enterprises. Therefore, the EU operational programmes dedicated to small and medium-sized enterprises are a valuable source of external financing for innovations in these entities. The implementation of innovative investment projects positively influences the development of enterprises. A company resistant to implementing innovations may lose its competitive position on the market and slow down its development. The aim of this article is to conduct a comparative analysis of the implementation of innovative investments between the enterprises that received financial assistance from the European Union in relation to the enterprises that implemented innovations using other sources of financing. The study shows that enterprises covered by financial support from operational programmes have a higher level of innovative investments than other economic entities. Companies receiving EU aid are more often implementing production innovations among all four types of innovations as compared to other enterprises. In addition, it was found that in the lack of financial support from the EU, almost half of the companies would not be able to implement innovations as such. Therefore, the issue of innovations implemented in enterprises with the use of the EU financial aid should be considered as a currently relevant topic and an extremely important one from the standpoint of entrepreneurship development. This study should be considered unique, as there are no studies, to the best of the author's knowledge, containing comparative analyses in this area.
    Keywords: implementing innovation; investments; enterprises; entrepreneurship; SMEs; EU subsidies; operational programmes; Poland; Małopolska region; comparative analysis; competitive advantage; financial support
    JEL: D92 L20 M21 O33 O39
    Date: 2020–06
  7. By: Crescenzi, Riccardo; Iammarino, Simona; Ioramashvili, Carolin; Rodríguez-Pose, Andrés; Storper, Michael
    Abstract: Through successive industrial revolutions, the geography of innovation around the globe has changed radically, and with it the geography of wealth creation and prosperity. Since the Third Industrial Revolution, high incomes are increasingly metropolitan, leading to a renewal of inter-regional divergence within countries. These metropolitan areas are also hotbeds of innovation. At the same time, global networks for the production and delivery of goods and services have expanded greatly in recent decades. The globalization of production is mirrored in the globalization of innovation. The paper argues that the emerging geography of innovation can be characterised as a globalized hub-to-hub system, rather than a geography of overall spread of innovation and illustrates these trends using patent data. Although much attention has been given to explaining the rise and growth of innovation clusters, there is as yet no unified framework for the micro-foundations of the agglomeration and dispersion of innovation. In addition, there appear to be strong links between growing geographical inequality of innovation and prosperity, particularly within countries. This is particularly relevant in the context of declining overall research productivity, which could be driving growing geographical concentration. All in all, there is a rich agenda for continuing to investigate the relationship between the geography of innovation, economic development and income distribution.
    Keywords: geography of innovation; clusters; networks; inequality
    JEL: O33 R12
    Date: 2020–06
  8. By: Sergio Petralia; ;
    Abstract: The pervasive diffusion of electricity-related technologies at the beginning of the 20th century has been studied extensively to understand the transformative potential of General Purpose Technologies (GPTs). Most of what we know, however, has been investigated in relation to the diffusion of their use. This article provides evidence on the county-level economic impact of the technological adoption of Electrical & Electronic (E&E) technologies in the 1920s in the United States (US). Thus focusing on the impact of a GPT on technological adopters, i.e. those who are able to develop, transform and complement it. It is shown that places with patenting activity in E&E technologies grew faster and paid higher wages than others between 1920 and 1930. This analysis required constructing a novel database identifying detailed geographical information for historical patent documents in the US since 1836, as well as developing a text-mining algorithm to identify E&E patents based on patent descriptions.
    Keywords: Disruptive Technological Change, General Purpose Technologies, Historical Patent Documents, Technological Adoption
    JEL: O33 O31 O30
    Date: 2020–08
  9. By: Franz Huber; Alan Ponce; Francesco Rentocchini; Thomas Wainwright
    Abstract: The provision of Open Data (OD) has been promoted by government s around the world with thehope of fuelling entrepreneurial use of the data for new products or process innovations. However, these benefits are still far from being fully understood and realised, and it remains unclear to what extent OD leads to systematic benefits for entrepreneurship. This paper aims to shed light to this open question by providing novel empirical evidence on the relationship between OD publishing and entrepreneurial outcomes at country-level. We draw upon a longitudinal dataset comprising90 countries observed over the period 2013-2016. We find a significant and positive association between OD adoption and entrepreneurship at the country-level. The results also show that OD adoption and entrepreneurship is strong in countries with high institutional quality. We argue that unless a country has quality institutions, publishing OD alone does not positively affect entrepreneurship for the digital economy. Publishing OD is not sufficient to improve entrepreneurship alone, so states need to move beyond a focus on OD initiatives and promotion, to focus on a broader set of policy initiatives that promote good governance.
    Keywords: open data; open government data; institutions; entrepreneurship; country-context; digital economy
    JEL: O33 O43 L26
    Date: 2020–08
  10. By: Lebdioui, Amir; Lee, Keun; Pietrobelli, Carlo
    Abstract: This paper starts by showing that Chile and Malaysia are on the path of escaping the middle-income trap in terms of their income level relative to that of the USA. In contrast to the conventional view, we find that the leading export sectors are not manufacturing (such as electronics) in Malaysia or mining alone in Chile. Instead, the engines of growth have been (i) resource-based sectors (petroleum, rubber and palm oil) in Malaysia; and (ii) non-mining resource-based sectors (salmon, fruits, wine and wood-based) in Chile.Furthermore, the sustained growth of these sectors is not the result of free-markets, as frequently argued, but also of specific industrial policy measures, that have enabled the accumulation of productive and innovation capabilities through R&D support, fiscal incentives, export assistance, and quality control. We also find that the emergence of locally-controlled firms has been an important aspect of this long- term success, although the sources of the initial learning included foreign actors and FDI.The cases of Chile and Malaysia consequently show the possibility of escaping the middle-income trap not through manufacturing but instead through resource-based development. Such strategy differs from the so-called short cycle technology-based catch-up by the East Asian tigers and from the unsustainable commodity rent-extraction in resource-rich countries, but is consistent with the view that emphasizes the need to specialize in sectors with low entry barriers, and to promote investments in innovation and technological capabilities.
    Keywords: resource-based development; industrial policy; Chile; Malaysia; middle-income trap; salmon; palm-oil
    JEL: R14 J01
    Date: 2020–06–20

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