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on Innovation |
| By: | Dechezlepretre, Antoine; Hemous, David; Olsen, Morten; Zanella, Carlo |
| Abstract: | Do higher wages lead to more automation innovation? To answer this question, we first introduce a new measure of automation by using the frequency of certain keywords in patent text to identify automation innovations in machinery. We validate our measure by showing that it is correlated with a reduction in routine tasks in a cross-sectoral analysis in the US. Then we build a firm-level panel dataset on automation patents. We combine macroeconomic data from 41 countries and information on geographical patent history to build firm-specific measures of lowskill and high-skill wages. We find that an increase in low-skill wages leads to more automation innovation with an elasticity between 2 and 4. An increase in highskill wages tends to reduce automation innovation. Placebo regressions show that the effect is specific to automation innovations. Finally, we use the Hartz labor market reforms in Germany for an event study and find that they are associated with a relative reduction in automation innovations. |
| Keywords: | automation; innovation; patents; income inequality |
| JEL: | O31 O33 J20 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:108420&r=all |
| By: | Madhuparna Ganguly (Indira Gandhi Institute of Development Research) |
| Abstract: | We model a patent regime in which an innovating firm can partially recover its damage due to scientist movement from the infringing rival. The strength of the patent system, which is a function of litigation success probability and recovery proportion, stipulates expected indemnification. We show that stronger patents fail to reduce the likelihood of infringement and further, decrease the innovation's expected profitability. Higher potential reparation also reduces the scientist's expected return on R&D knowledge, entailing greater R&D investment. The expected effects manifest when the market for the new product is moderately competitive. Our results suggest important considerations for patent reforms. |
| Keywords: | Competition intensity, Damage rules, Patent strength, Scientist mobility |
| JEL: | J60 K40 L11 L13 O34 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2020-037&r=all |
| By: | Agarwal, Ruchir (International Monetary Fund); Gaule, Patrick (University of Bath) |
| Abstract: | To examine the drivers of innovation, this paper studies the global R&D effort to fight the deadliest diseases and presents four results. We find: (1) global pharmaceutical R&D activity—measured by clinical trials—typically follows the 'law of diminishing efforts': i.e. the elasticity of R&D effort with respect to market size is about 1/2 in the cross-section of diseases; (2) the R&D response to COVID-19 has been a major exception to this law, with the number of COVID-19 trials being 7 to 20 times greater than that implied by its market size; (3) the aggregate short-term elasticity of science and innovation can be very large, as demonstrated by aggregate flow of clinical trials increasing by 38% in 2020, with limited crowding out of trials for non-COVID diseases; and (4) public institutions and government-led incentives were a key driver of the COVID-19 R&D effort—with public research institutions accounting for 70 percent of all COVID-19 clinical trials globally and being 10 percentage points more likely to conduct a COVID-19 trial relative to private firms. Overall, while economists are naturally in favor of market size as a driving force for innovation (i.e."if the market size is sufficiently large then innovation will happen"), our work suggests that scaling up global innovation may require a broader perspective on the drivers of innovation—including early-stage incentives, non-monetary incentives, and public institutions. |
| Keywords: | COVID-19, innovation, market size, pharmaceutical industry |
| JEL: | O31 O38 J24 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14079&r=all |
| By: | Thomas Jungbauer; Sean Nicholson; June Pan; Michael Waldman |
| Abstract: | Why do firms outsource research and development (R&D) for some products while conducting R&D in-house for similar ones? An innovating firm risks cannibalizing its existing products. The more profitable these products, the more the firm wants to limit cannibalization. We apply this logic to the organization of R&D by introducing a novel theoretical model in which developing in-house provides the firm more control over the new product’s location in product space. An empirical analysis of our testable predictions using pharmaceutical data concerning patents, patent expiration, and outsourcing at various stages of the R&D process supports our theoretical findings. |
| JEL: | D23 L24 L65 O32 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28379&r=all |
| By: | Aghion, Philippe; Bénabou, Roland; Martin, Ralf; Roulet, Alexandra |
| Abstract: | This paper investigates the joint effect of consumers' environmental concerns and product-market competition on firms’ decisions whether to innovate “clean” or “dirty”. We first develop a step-bystep innovation model to capture the basic intuition that socially responsible consumers induce firms to escape competition by pursuing greener innovations. To test and quantify the theory, we bring together patent data, survey data on environmental values, and competition measures. Using a panel of 8,562 firms from the automobile sector that patented in 42 countries between 1998 and 2012, we indeed find that greater exposure to environmental attitudes has a significant positive effect on the probability for a firm to innovate in the clean direction, and all the more so the higher the degree of product market competition. Results suggest that the combination of historically realistic increases in prosocial attitudes and product market competition can have the same effect on green innovation as major increase in fuel prices. |
| Keywords: | environment; product market competition; innovation |
| JEL: | R14 J01 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:108425&r=all |
| By: | Phillipe Aghion; Roland Bénabou; Ralf Martin; Alexandra Roulet |
| Abstract: | This paper investigates the joint effect of consumers' environmental concerns and product-market competition on firms' decisions whether to innovate "clean" or "dirty". We first develop a step-by-step innovation model to capture the basic intuition that socially responsible consumers induce firms to escape competition by pursuing greener innovations. To test and quantify the theory, we bring together patent data, survey data on environmental values, and competition measures. Using a panel of 8,562 firms from the automobile sector that patented in 42 countries between 1998 and 2012, we indeed find that greater exposure to environmental attitudes has a significant positive effect on the probability for a firm to innovate in the clean direction, and all the more so the higher the degree of product market competition. Results suggest that the combination of historically realistic increases in prosocial attitudes and product market competition can have the same effect on green innovation as major increase in fuel prices. |
| Keywords: | environment, product market competition, innovation |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1684&r=all |
| 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. |
| JEL: | J08 O33 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28381&r=all |
| By: | Enrico Moretti; Claudia Steinwender; John Van Reenen |
| Abstract: | In the US and many other OECD countries, expenditures for defense-related R&D represent a key policy channel through which governments shape innovation, and dwarf all other public subsidies for innovation. We examine the impact of government funding for R&D - and defense-related R&D in particular - on privately conducted R&D, and its ultimate effect on productivity growth. We estimate models that relate privately funded R&D to lagged government-funded R&D using industry-country level data from OECD countries and firm level data from France. To deal with the potentially endogenous allocation of government R&D funds we use changes in predicted defense R&D as an instrumental variable. In both datasets, we uncover evidence of "crowding in" rather than "crowding out," as increases in government-funded R&D for an industry or a firm result in significant increases in private sector R&D in that industry or firm. A 10% increase in government-financed R&D generates 4.3% additional privately funded R&D. An analysis of wages and employment suggests that the increase in private R&D expenditure reflects actual increases in R&D employment, not just higher labor costs. Our estimates imply that some of the existing cross-country differences in private R&D investment are due to cross-country differences in defense R&D expenditures. We also find evidence of international spillovers, as increases in government-funded R&D in a particular industry and country raise private R&D in the same industry in other countries. Finally, we find that increases in private R&D induced by increases in defense R&D result in significant productivity gains. |
| Keywords: | defense, R&D, productivity |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1662&r=all |
| By: | Philippe Aghion; Antonin Bergeaud; Richard Blundell; Rachel Griffith |
| Abstract: | Matched employee-employer data from the UK are used to analyze the wage premium to working in an innovative firm. We find that firms that are more R&D intensive pay higher wages on average, and this is particularly true for workers in some low-skilled occupations. We propose a model in which a firm's innovativeness is reflected in the degree of complementarity between workers in low-skill and high-skilled occupations, and in which non-verifiable soft skills are an important determinant of the wages of workers in low-skilled occupations. The model yields additional predictions on training, tenure and outsourcing which we also find support for in data. |
| Keywords: | innovation, skill-based technological change, wage, complementarity |
| JEL: | O33 L23 J31 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1665&r=all |