nep-ino New Economics Papers
on Innovation
Issue of 2021‒01‒25
eighteen papers chosen by
Uwe Cantner
University of Jena

  1. Public R&D investment in economic crises By Pellens, Maikel; Peters, Bettina; Hud, Martin; Rammer, Christian; Licht, Georg
  2. Entrepreneurial Teams: Diversity of Skills and Early-Stage Growth By Francesco D’Acunto; Geoffrey Tate; Liu Yang
  3. The impact of regulation on innovation By Philippe Aghion; Antonin Bergeaud; John Van Reenen
  4. In-house experts communities as a facilitator of innovation By Florence Charue-Duboc; Lise Gastaldi; Emmanuel Bertin
  5. Public Procurement and Innovation for Human-Centered Artificial Intelligence By Naudé, Wim; Dimitri, Nicola
  6. The Digital Social Economy - Managing and Leveraging Platforms and Blockchain for a People-Centred Digital Transformation By Samuel BRÜLISAUER; Anastasia COSTANTINI; Gianluca PASTORELLI
  7. Eco-Innovation and Employment: A Task-Based Analysis By Elliott, Robert J. R.; Kuai, Wenjing; Maddison, David; Ozgen, Ceren
  8. Smart Specialisation and Blue biotechnology in Europe By Mathieu Doussineau; Ales Gnamus; Javier Gomez; Silke Haarich; Frank Holstein
  9. Governance structure, technical change and industry competition By Mattia Guerini; Philipp Harting; Mauro Napoletano
  10. Public subsidies and the sources of venture capital By Berger, Marius; Hottenrott, Hanna
  11. A Theory of Debt Maturity and Innovation By Yuliyan Mitkov
  12. R&D-based Economic Growth in a Supermultiplier Model By Nomaler, Önder; Spinola, Danilo; Verspagen, Bart
  13. Are firms withdrawing from basic research? An analysis of firm-level publication behaviour in Germany By Krieger, Bastian; Pellens, Maikel; Blind, Knut; Schubert, Torben
  14. Technological Advance, Social Fragmentation and Welfare By Bosworth, Steven J.; Snower, Dennis J.
  15. Pilot study for essentiality assessment of Standard Essential Patents By BEKKERS Rudi; HENKEL Joachim; MAS TUR Elena; VAN DER VORST Tommy; DRIESSE Menno; KANG Byeongwoo; MARTINELLI Arianna; MAAS Wim; NIJHOF Bram; RAITERI Emilio; TEUBNER Lisa
  16. Michael Polanyi on creativity in science By Agnès Festré; Stein Østbye
  17. Essays in corporate finance and innovation By Desai, Pranav
  18. Immigration and Entrepreneurship in the United States By Pierre Azoulay; Benjamin F. Jones; J. Daniel Kim; Javier Miranda

  1. By: Pellens, Maikel; Peters, Bettina; Hud, Martin; Rammer, Christian; Licht, Georg
    Abstract: We study the cyclicality of public R&D in 28 OECD countries (1995-2017). While procyclical on average, public R&D reacts asymmetrically over different phases of the business cycle and becomes acyclical during recessions. It is also heterogeneous across countries: Innovation leaders and followers behave countercyclically during recessions while moderate innovators behave procyclically. Furthermore, the share of public R&D allocated to the business sector is countercyclical, but the thematic composition remains stable. These results, not driven by countries' financial constraints, imply that countries behind the innovation frontier might strengthen their resilience to economic crises by adopting countercyclical R&D strategies.
    Keywords: R&D,Public Policy,Business Cycle
    JEL: O38 H50 H12 E32
    Date: 2020
  2. By: Francesco D’Acunto; Geoffrey Tate; Liu Yang
    Abstract: We use employer-employee linked data to track the employment histories of team members prior to startup formation for a full cohort of new firms in the U.S. Using pre-startup industry experience to measure skillsets, we find that startups that have founding teams with more diverse collective skillsets grow faster than peer firms in the same industries and local economies. A one standard deviation increase in teams’ skill diversity is associated with an increase in five-year employment (sales) growth of 16% (10%) from the mean. The effects are stronger among startups in innovative industries and among startups facing greater ex-ante uncertainty. Moreover, the results are robust to a variety of approaches to address the endogeneity of team composition. Overall, our results suggest that teams with more diverse collective skillsets adapt their strategies more successfully in the uncertain environments faced by (innovative) startup firms.
    Keywords: Economic Growth, Startups, Teams, Diversity, Innovation, Personnel Economics
    JEL: L25 L26 J24 M51
    Date: 2020–12
  3. By: Philippe Aghion; Antonin Bergeaud; John Van Reenen
    Abstract: Does regulation affect the pace and nature of innovation and if so, by how much? We build a tractable and quantifiable endogenous growth model with size-contingent regulations. We apply this to population administrative firm panel data from France, where many labor regulations apply to firms with 50 or more employees. Nonparametrically, we find that there is a sharp fall in the fraction of innovating firms just to the left of the regulatory threshold. Further, a dynamic analysis shows a sharp reduction in the firm's innovation response to exogenous demand shocks for firms just below the regulatory threshold. We then quantitatively fit the parameters of the model to the data, finding that innovation at the macro level is about 5.4% lower due to the regulation, a 2.2% consumption equivalent welfare loss. Four-fifths of this loss is due to lower innovation intensity per firm rather than just a misallocation towards smaller firms and lower entry. We generalize the theory to allow for changes in the direction of R&D, and find that regulation's negative effects only matter for incremental innovation (as measured by citations and text-based measures of novelty). A more regulated economy may have less innovation, but when firms do innovate they tend to "swing for the fence" with more radical (and labor saving) breakthroughs.
    Keywords: innovation, regulation, patents, firm size
    JEL: O31 L11 L51 J8 L25 O31 L11 L51 J8 L25 O31 L11 L51 J8 L25
    Date: 2021–01
  4. By: Florence Charue-Duboc (i3-CRG - Centre de recherche en gestion i3 - X - École polytechnique - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique); Lise Gastaldi (Aix Marseille Univ, CNRS, LEST, Aix-en-Provence, France); Emmanuel Bertin (Whist Lab (Orange Labs-Institut Mines-Télécom))
    Abstract: This article highlights the role of internal communities of experts in supporting innovation. In the case of a technology company, it studies communities, composed of experts from different functions (R & D and downstream), has been set up by the organization to cover the fields of strategic skills related to the key challenges in terms of innovation. This article shows precisely how these communities contribute to innovation, in particular through their role of accompanying decisions at the different phases of the innovation process.
    Abstract: Cet article met en avant le rôle de communautés internes d'experts en matière de soutien à l'innovation. À partir du cas d'une entreprise technologique, il présente des communautés pilotées, composées d'experts de différents métiers (R & D et aval), créées par l'organisation pour couvrir des champs de compétences stratégiques en lien avec des enjeux clés en matière d'innovation. Cet article montre précisément comment ces communautés contribuent à l'innovation, notamment à travers leur rôle d'accompagnement des décisions aux différentes phases du processus d'innovation.
    Keywords: communautés,experts,innovation,technologie,R&D,Communities,technology,Communautés,R&D Communities
    Date: 2020–03
  5. By: Naudé, Wim (University College Cork); Dimitri, Nicola (University of Siena)
    Abstract: The possible negative consequences of Artificial Intelligence (AI) have given rise to calls for public policy to ensure that it is safe, and to prevent improper use and misuse. Human-centered AI (HCAI) draws on ethical principles and puts forth actionable guidelines in this regard. So far however, these have lacked strong incentives for adherence. In this paper we contribute to the debate on HCAI by arguing that public procurement and innovation (PPaI) can be used to incentivize HCAI. We dissect the literature on PPaI and HCAI and provide a simple theoretical model to show that procurement of innovative AI solutions underpinned by ethical considerations can provide the incentives that scholars have called for. Our argument in favor of PPaI for HCAI is also an argument for the more innovative use of public procurement, and is consistent with calls for mission-oriented and challenge-led innovation policies. Our paper also contributes to the emerging literature on public entrepreneurship, given that PPaI for HCAI can advance the transformation of society, but only under uncertaint.
    Keywords: artificial intelligence, data, innovation, public procurement, ethics
    JEL: H57 D02 O38 O32
    Date: 2021–01
  6. By: Samuel BRÜLISAUER; Anastasia COSTANTINI (Diesis Network - European Research and Development Service for the Social Economy); Gianluca PASTORELLI
    Abstract: "Digitalisation and other advanced technologies are increasingly reshaping our economy, including social economy enterprises. Disruptive technologies can inspire the social economy and vice versa. Blockchain for instance carries an intrinsic decentralisation approach that could have many implications for services and generate a high social added value through traceability, fair pricing, commonly recognised and verified standards and democratization of access to services and products in all societies and areas."- Ms Ulla Engelmann, Head of Unit for Advanced Technologies, Social Economy and Clusters, European Commission, DG Grow In the first two decades of the new century digital technologies have started to reshape work, leisure, behaviour, health, education, money, governance, and other aspects of human life. As people and businesses start using digital appliances for all kinds of interaction, an increasing amount of communication and value exchange shifts to the digital realm. This megatrend holds many promises to spur innovation, generate efficiencies, and improve services, and in doing so boost more inclusive and sustainable growth. But these technologies also tend to disrupt traditional ways to organize our economy and society, entailing important consequences for people, organisations and markets, and raise important issues around jobs and skills, privacy, security. We use the term digital transformation to describe these social, cultural, and economic changes resulting from digital innovations, and identify four socio-technological areas in which people are particularly affected by this transformation: work and income goods and services, money and finance, and state and governance. Digital platforms and blockchains (and other distributed ledger technology) are two of the most impactful technologies. Because of the astonishing possibilities these technologies offer, observers regularly fathom that it is not only unfeasible but also undesirable to ‘stop’ the digital transformation. Rather, it is argued that digital technologies and their impacts must be actively managed and leveraged to ensure their alignment with people-centred development and sustainability. In this context, a growing number of social economy innovations aim to create an internet and digital appliances that put individual users and society first. Social economy enterprises and organizations are either based on participatory governance where users are ultimately in (partial) control over the platform/technology, or bound by a statutory purpose asserting the priority of social and environmental goals before financial returns. The digital social economy innovations discussed in this paper aim to realize this vision in the four areas undergoing digital transformation. Our analysis is informed by insights from the workshop organised by Diesis on “Blockchain, digital social innovation and social economy. The future is here!†, as well as case studies elaborated in close collaboration with various digital social economy enterprises. The study finds a vivid variety of digital social economy enterprises, and important potential for further applications of social economy principles in the digital realm. Yet the realization of this potential depends on whether these enterprises manage the critical challenge to achieve sustainable and user-centred growth. We therefore conclude with a discussion of this challenge and some recommendations for policy, organization and entrepreneurship.
    Keywords: SSocial Economy, Social Enterprise, Cooperative Platform, Blockchain, Social Innovation, Sustainable Development, Digitalisation
    JEL: L31 O33 O35
    Date: 2020–11
  7. By: Elliott, Robert J. R. (University of Birmingham); Kuai, Wenjing (University of Birmingham); Maddison, David (University of Birmingham); Ozgen, Ceren (University of Birmingham)
    Abstract: This paper provides some of the first evidence of the relationship between eco-innovation and employment. Adopting a O*NET based task approach, in a study of the Dutch firms, we show that eco-innovation has no impact on overall employment. However, compared to non- eco-innovators there is an 18.2% increase in the number of green jobs (equivalent to 12 new green workers for the average firm). This means an average increase in the share of green workers of around 3.3%. Broadly speaking, the increase in the share of green jobs was driven by a reduction in non-green workers and a smaller but still significant increase in the number of green workers. We further show that subsidy-driven policies, rather than regulation-driven policies positively correlate with the number of green workers.
    Keywords: eco-innovation, green jobs, subsidies
    JEL: Q52 Q55 J23
    Date: 2021–01
  8. By: Mathieu Doussineau (European Commission - JRC); Ales Gnamus (European Commission - JRC); Javier Gomez (European Commission - JRC); Silke Haarich (Spatial Foresight gmbh); Frank Holstein (Spatial Foresight gmbh)
    Abstract: In May 2019, DG MARE and the JRC published its Blue economy Report. The main focus was on boosting a "blue" economy, the sustainable use of ocean resources for economic growth, through entrepreneurship, investment, and research and innovation. In order to better understand and illustrate the new opportunities coming from the Blue economy, this report introduces the emergent sector of Blue biotechnology. As one part of the larger Biotechnology sector, dedicated to marine bioresources, it is difficult to clearly define the sector. However, experts agree on the important value of the Blue biotechnology a) to make the existing sector of aquaculture and macroalgae harvesting more efficient and sustainable, and b) to develop new biological products and applications from marine bioresources with uses in energy, cosmetics, nutrition, health or manufacturing. 12 countries and 53 regions in the EU present linkages to the Blue biotechnology in their Smart Specialisation Strategies. A comprehensive screening of EU supported interventions in the current 2014-2020 funding period showed that € 238.6 million of EU funds have been invested in 182 projects and initiatives related to Blue biotechnology with a total budget of EUR 336 million. Smart Specialisation Strategies are a policy instrument which favour the discovery of innovation potential, also in the Blue biotechnology.
    Keywords: Smart specialisation, Blue economy, Blue biotechnology, emerging sector, regional policy
    Date: 2020–12
  9. By: Mattia Guerini (COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019), GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur); Philipp Harting (Universität Bielefeld = Bielefeld University); Mauro Napoletano (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po, GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur)
    Abstract: We develop a model to study the impact of corporate governance on firm investment decisions and industry competition. In the model, governance structure affects the distribution of shares among short-and long-term oriented investors, the robustness of the management regarding possible stockholder interference, and the managerial remuneration scheme. A bargaining process between firm's stakeholders determines the optimal allocation of financial resources between real investments in R&D and financial investments in shares buybacks. We characterize the relation between corporate governance and firm's optimal investment strategy and we study how different governance structures shape technical progress and the degree of competition over the industrial life cycle. Numerical simulations of a calibrated setup of the model show that pooling together industries characterized by heterogeneous governance structures generate the well-documented inverted-U shaped relation between competition and innovation.
    Keywords: governance structure,industry dynamics,competition,technical change
    Date: 2020–12–04
  10. By: Berger, Marius; Hottenrott, Hanna
    Abstract: Research suggests that public subsidies for newly founded firms have a positive effect on follow-on financing, in particular, Venture Capital (VC). This study differentiates between Government VC, Independent VC, Corporate VC, and Business Angels and shows that public subsidies are not relevant for all of these sources. When accounting for firm characteristics that drive both selection into public subsidies as well as into VC financing through econometric matching techniques, we find that subsidies are only linked to Government VC and Business Angel financing.
    Keywords: Start-up Subsidies,Entrepreneurship Policy,Entrepreneurial Finance,Venture Capital,Business Angels
    JEL: G24 L26 O25 O31
    Date: 2020
  11. By: Yuliyan Mitkov (University of Bonn)
    Abstract: I propose a theory of debt maturity as an incentive device to motivate innovation when contracts are fundamentally incomplete and shaped by ex-post renegotiation. The financing of innovative firms must balance two goals. On the one hand, since innovation is inherently risky, the entrepreneur must receive adequate protection after failure. Simultaneously, the firm must be liquidated when its assets can be redeployed more efficiently elsewhere. Meeting these two goals can be especially challenging when contracts are incomplete. I show how an appropriate choice of debt maturity, together with ex-post contract renegotiation, embeds a "put option" into the firm's capital structure. The put is exercised when liquidation is efficient, and it partially insures the entrepreneur against failure and thus motivates innovation. The theory has novel empirical implications for the financing patterns of innovative firms.
    Keywords: Innovation, Debt maturity, Incomplete contracts, Renegotiation
    JEL: C78 D82 D86 G32 G33 O31
    Date: 2020–12
  12. By: Nomaler, Önder; Spinola, Danilo; Verspagen, Bart
    Abstract: We investigate how economic growth in a demand-led economy with semi-endogenous productivity growth can be compatible with a stable employment path. Our model uses a Sraffian supermultiplier (SSM), and we endogenize the growth rate of autonomous demand, and semi-endogenize productivity growth. The basic model has a steady state that is consistent with a stable employment rate. Consumption smoothing (between periods of high and low employment) by workers is the mechanism that keeps the growing economy stable. We also introduce a version of the model where the burden for stabilization falls upon government fiscal policy. This also yields a stable growth path, although the parameter restrictions for stability are more demanding in this case.
    Keywords: Economic growth model; Sraffian supermultiplier; Research and Development (R&D)
    Date: 2021–01–12
  13. By: Krieger, Bastian; Pellens, Maikel; Blind, Knut; Schubert, Torben
    Abstract: Previous research has expressed concerns about firms engaging less in basic research. We contribute to this debate by studying trends in the scientific publishing activities of firms located in Germany. Our results do not confirm a declining trend in raw numbers with numbers indicating that firms' aggregate volume of scientific publications stayed constant between 2008 and 2016. However, the number of publishing firms declined, in particular in high-tech and knowledge-intensive industries. Beyond that, we observe positive trends in publishing in basic research journals compared to journals focused on applied research, and publishing in collaboration with academic partners compared to publishing alone. Thus, our results paint an ambiguous picture. While they do not confirm a decrease in firms' basic research engagement in the aggregate, the figures document a concentration of publishing activities on fewer firms. We argue that this concentration of basic research activities in firms may pose a threat to the longer term innovativeness of the German economy.
    Keywords: Corporate publishing,Basic research,R&D strategy
    JEL: O32 O33 O34 O36
    Date: 2020
  14. By: Bosworth, Steven J. (University of Reading); Snower, Dennis J. (Hertie School of Governance)
    Abstract: This paper models the welfare consequences of social fragmentation arising from technological advance. We start from the premise that technological progress falls primarily on market-traded commodities rather than prosocial relationships, since the latter intrinsically require the expenditure of time and thus are less amenable to productivity increases. Since prosocial relationships require individuals to identify with others in their social group whereas marketable commodities are commonly the objects of social status comparisons, a tradeoff arises between in-group affiliation and inter-group status comparisons. People consequently narrow the bounds of their social groups, reducing their prosocial relationships and extending their status-seeking activities. As prosocial relationships generate positive externalities whereas status-seeking activities generate negative preference externalities, technological advance may lead to a particular type of "decoupling" of social welfare from material prosperity. Once the share of status goods in total production exceeds a crucial threshold, technological advance is shown to be welfare-reducing.
    Keywords: conspicuous consumption, bowling alone, decoupling, social fragmentation, growth
    JEL: D63 D69 D71 E71 I39 O33 Z10
    Date: 2021–01
  15. By: BEKKERS Rudi; HENKEL Joachim; MAS TUR Elena; VAN DER VORST Tommy; DRIESSE Menno; KANG Byeongwoo; MARTINELLI Arianna; MAAS Wim; NIJHOF Bram; RAITERI Emilio; TEUBNER Lisa
    Abstract: This study investigates the technical and institutional feasibility of a system that ensures better essentiality scrutiny for Standard Essential Patents (SEPs). We first studied the state of the art on essentiality assessment in literature, court cases involving larger scale essentiality assessments, essentiality assessment in patent pools, and the Japanese Hantei for Essentiality advisory opinion. A patent landscape analysis of SDO declared patents was performed to assess their use as input to essentiality assessment mechanisms. Technical feasibility was assessed in a pilot experiment, in which a variety of assessors evaluated patents for their actual essentiality. Institutional feasibility was, among other means, assessed via a stakeholder workshop. Given (1) the observed interest in transparent data on essentiality of patents for standards, from implementers, patent owners and courts alike, (2) the potential benefits of such data for these parties and for the system as a whole, and (3) our finding that a system for generating such data seems both technically and institutionally feasible, we recommend policy makers to pursue the development and implementation of a system for essentiality assessments.
    Keywords: standardization, patents, essentiality
    Date: 2020–11
  16. By: Agnès Festré (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur); Stein Østbye (UiT - The Arctic University of Norway)
    Abstract: We can know more than we can tell. In this paper we discuss how Polanyi applies his tacit knowledge concept to approach creativity in science. We argue that Polanyi not only is a theoretician on creativity, but also a very creative educator aiming to communicate widely, thereby, increasing legitimacy of science. In order to make tacit knowledge and other concepts and ideas more accessible to the general public, he extensively used analogies alluding to visual representations and even made use of new innovative media like film to complement written expositions.
    Keywords: methodology,Michael Polanyi,creativity JEL Classification
    Date: 2020–12–02
  17. By: Desai, Pranav (Tilburg University, School of Economics and Management)
    Date: 2021
  18. By: Pierre Azoulay; Benjamin F. Jones; J. Daniel Kim; Javier Miranda
    Abstract: Immigrants can expand labor supply and compete for jobs with native-born workers. But immigrants may also start new firms, expanding labor demand. This paper uses U.S. administrative data and other data sources to study the role of immigrants in entrepreneurship. We ask how often immigrants start companies, how many jobs these firms create, and how firms founded by native-born individuals compare. A simple model provides a measurement framework for addressing the dual roles of immigrants as founders and workers. The findings suggest that immigrants act more as “job creators” than “job takers” and play outsized roles in U.S. high-growth entrepreneurship.
    Date: 2020–12

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