nep-ino New Economics Papers
on Innovation
Issue of 2020‒10‒05
nine papers chosen by
Uwe Cantner
University of Jena

  1. International Trade and Innovation Dynamics with Endogenous Markups By Laurent Cavenaile; Pau Roldan-Blanco; Tom Schmitz
  2. Fencing Off Silicon Valley: Cross-Border Venture Capital and Technology Spillovers By Ufuk Akcigit; Sina T. Ates; Josh Lerner; Richard R. Townsend; Yulia Zhestkova
  3. Taxation and Innovation: What Do We Know? By Ufuk Akcigit; Stefanie Stantcheva
  4. Supervised learning for the prediction of firm dynamics By Falco J. Bargagli-Stoffi; Jan Niederreiter; Massimo Riccaboni
  5. Linguistic Metrics for Patent Disclosure: Evidence from University Versus Corporate Patents By Nancy Kong; Uwe Dulleck; Adam B. Jaffe; Shupeng Sun; Sowmya Vajjala
  6. Kill Zone By Sai Krishna Kamepalli; Raghuram G. Rajan; Luigi Zingales
  7. Digital Entrepreneurship Research: A Concise Introduction By Naudé, Wim; Liebregts, Werner
  8. Pharmaceutical Exports and Patents in India – An Empirical Investigation By Bibek Ray Chaudhuri; Sucharita Bhattacharyya; Susmita Chatterjee
  9. Financial Markets and Oil Prices in a Schumpeterian Context of CO2-Allowance Markets By Paul J.J. Welfens

  1. By: Laurent Cavenaile; Pau Roldan-Blanco; Tom Schmitz
    Abstract: Lower costs of international trade affect both firms’ innovation incentives and theirmarket power. We develop a dynamic general equilibrium model with endogenous innovation and endogenous markups to study the interaction between these effects. Lower trade costs stimulate innovation by large firms that are technologically close to their rivals. However, as innovators increase their productivity advantage over others, they also increase their markups. Our calibrated model suggests that a fall in trade costs which increases the trade-to-GDP ratio of the US manufacturing sector from 12% (its level in the 1970s) to 24% (its current level) increases productivity growth by 0.12 percentage points and the aggregate markup by 1.70 percentage points. Without the feedback effect of innovation on the productivity distribution, markups would actually have fallen. JEL codes: F43, F60, L13, O31, O32, O33, and O41. Keywords: International Trade, Markups, Innovation, R&D, Productivity.
    Date: 2020
  2. By: Ufuk Akcigit; Sina T. Ates; Josh Lerner; Richard R. Townsend; Yulia Zhestkova
    Abstract: The treatment of foreign investors has been a contentious topic in U.S. entrepreneurship policy in recent years. This paper examines foreign corporate investments in Silicon Valley from a theoretical and empirical perspective. We model a setting where such funding may allow U.S. entrepreneurs to pursue technologies that they could not otherwise, but may also lead to spillovers to the overseas firm providing the financing and the nation where it is based. We show that despite the benefits from such inbound investments for U.S. firms, it may be optimal for the U.S. government to raise their costs to deter investments. Using as comprehensive as possible a sample of investments by non-U.S. corporate investors in U.S. start-ups between 1976 and 2015, we find evidence consistent with the presence of knowledge spill-overs to foreign investors.
    JEL: G24 O33 O34
    Date: 2020–09
  3. By: Ufuk Akcigit (University of Chicago, CEPR and NBER); Stefanie Stantcheva (Harvard University, CEPR and NBER)
    Abstract: Tax policies are a wide array of tools, commonly used by governments to influence the economy. In this paper, we review the many margins through which tax policies can affect innovation, the main driver of economic growth in the long-run. These margins include the impact of tax policy on i) the quantity and quality of innovation; ii) the geographic mobility of innovation and inventors across U.S. states and countries; iii) the declining business dynamism in the U.S., firm entry, and productivity; iv) the quality composition of firms, inventors, and teams; and v) the direction of research effort, e.g., toward applied versus basic research, or toward dirty versus clean technologies. We give ideas drawn from research on how the design of policy can allow policy makers to foster the most productive firms without wasting public funds on less productive ones.
    Date: 2020
  4. By: Falco J. Bargagli-Stoffi; Jan Niederreiter; Massimo Riccaboni
    Abstract: Thanks to the increasing availability of granular, yet high-dimensional, firm level data, machine learning (ML) algorithms have been successfully applied to address multiple research questions related to firm dynamics. Especially supervised learning (SL), the branch of ML dealing with the prediction of labelled outcomes, has been used to better predict firms' performance. In this contribution, we will illustrate a series of SL approaches to be used for prediction tasks, relevant at different stages of the company life cycle. The stages we will focus on are (i) startup and innovation, (ii) growth and performance of companies, and (iii) firms exit from the market. First, we review SL implementations to predict successful startups and R&D projects. Next, we describe how SL tools can be used to analyze company growth and performance. Finally, we review SL applications to better forecast financial distress and company failure. In the concluding Section, we extend the discussion of SL methods in the light of targeted policies, result interpretability, and causality.
    Date: 2020–09
  5. By: Nancy Kong; Uwe Dulleck; Adam B. Jaffe; Shupeng Sun; Sowmya Vajjala
    Abstract: This paper proposes a novel approach to measure disclosure in patent applications using algorithms from computational linguistics. Borrowing methods from the literature on second language acquisition, we analyze core linguistic features of 40,949 U.S. applications in three patent categories related to nanotechnology, batteries, and electricity from 2000 to 2019. Relying on the expectation that universities have more incentives to disclose their inventions than corporations for either incentive reasons or for different source documents that patent attorneys can draw on, we confirm the relevance and usefulness of the linguistic measures by showing that university patents are more readable. Combining the multiple measures using principal component analysis, we find that the gap in disclosure is 0.4 SD, with a wider gap between top applicants. Our results do not change after accounting for the heterogeneity of inventions by controlling for cited-patent fixed effects. We also explore whether one pathway by which corporate patents become less readable is use of multiple examples to mask the “best mode” of inventions. By confirming that computational linguistic measures are useful indicators of readability of patents, we suggest that the disclosure function of patents can be explored empirically in a way that has not previously been feasible.
    JEL: O31 O34
    Date: 2020–09
  6. By: Sai Krishna Kamepalli (University of Chicago - Booth School of Business); Raghuram G. Rajan (University of Chicago - Booth School of Business and International Monetary Fund (IMF)); Luigi Zingales (University of Chicago - Booth School of Business)
    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 Òkill zoneÓ 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.
    Date: 2020
  7. By: Naudé, Wim (RWTH Aachen University); Liebregts, Werner (Tilburg University)
    Abstract: In the past few decades, technological progress has led to the digitization and digitalization of economies into what one could now call digital economies. The COVID-19 pandemic will accelerate the development of the digital economy. In a digital economy, digital entrepreneurs pursue opportunities to produce and trade in digital artifacts on digital artifact stores or platforms, and/or to create these digital artifact stores or platforms themselves. There is a well-recognized need for more research on digital entrepreneurship. As such, this paper provides an overview of the central research questions currently being pursued in this field. These include questions such as: What is digital entrepreneurship? What is different in the digital economy from an entrepreneurial perspective? What is the impact of digitalization - and big data - on business models and entrepreneurship? How can digital entrepreneurship be supported and regulated? The paper identifies areas of neglect, and makes proposals for future research.
    Keywords: gig economy, digital platforms, network effects, digital artifacts, digital entrepreneurship, digital entrepreneurial ecosystems
    JEL: L26 D21 M13 O33
    Date: 2020–09
  8. By: Bibek Ray Chaudhuri (Indian Institute of Foreign Trade,Kolkatta,India.); Sucharita Bhattacharyya (University of Calcutta, India.); Susmita Chatterjee (Maharaja Manindra Chandhra college, Kolkata , India.)
    Abstract: The Indian pharma industry are faced with challenges like slowing exports and rising costs. This has impacted their ability to capture a larger share of global pharmaceutical market. Sustaining the profitability and market share in this sector requires the ability on the part of the firms to obtain patents. Such activity involves huge investments in R&D and knowledge building. Hence it is of utmost importance to ascertain whether obtaining a patent enhance exports of pharma products especially since it is a significant revenue generator. The paper attempts to answer this question through a simultaneous equation approach. The results show that after controlling for the relevant variables impacting the export of pharma products, patents have a significant positive impact on pharma exports.
    Keywords: Exports, Empirical, Simultaneous Equation, Pharmaceutical.
    JEL: F14 C3 L65
    Date: 2019–01
  9. By: Paul J.J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: CO2 allowance pricing plays an increasingly important role in the EU, Switzerland, the US, Japan, China and other countries. One crucial question is how the CO2 allowance price and the oil price and financial markets, particularly stock markets, are linked. In the enhanced Hotelling approach developed here, the relevant links can be identified in a clear way for countries with CO2 allowance pricing and it is shown that a rise of the relative CO2 allowance price will reduce the oil price in equilibrium and could bring about a rise of stock market prices. The relative oil price is a negative function of the ratio of the real interest rate to the expected oil price inflation rate. Moreover, it is shown that the oil/gas market analysis can be linked to key aspects of the golden age debate in neoclassical growth theory and that the rate of technological progress has an ambiguous influence on the relative price of oil. Factors which reduce (raise) the relative oil price will raise (reduce) the general stock market price index, while the impact on the energy (oil & gas) sub-index in the stock market should be opposite. Policymakers should take the links between innovation and oil/gas prices and the stock markets into account where the linkages between the latter to CO2 mitigation innovation developments also have to be considered; and macroprudential supervisors certainly have to consider these dynamics. If national CO2 Emission Trading Systems are integrated internationally, there will be crucial global effects on climate neutrality, financial markets and output.
    Keywords: Emissions certificates, oil markets, stock market dynamics, carbon trading
    JEL: G10 G12 G15 Q5 Q58
    Date: 2019–12

This nep-ino issue is ©2020 by Uwe Cantner. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.