nep-ino New Economics Papers
on Innovation
Issue of 2021‒05‒03
sixteen papers chosen by
Uwe Cantner
University of Jena

  1. The reward and contract theories of patents in a model of endogenous growth By Klein, Michael A
  2. Detecting the labour-friendly nature of AI product innovation By Giacomo Damioli; Vincent Van Roy; Daniel Vertesy; Marco Vivarelli
  3. Opening up Military Innovation: Causal Effects of 'Bottom-up' Reforms to U.S. Defense Research By Howell, Sabrina T.; Rathje, Jason; Van Reenen, John; Wong, Jun
  4. Innovation and Human Capital Policy By John Van Reenen
  5. Patent Boxes and the Success Rate of Applications By Ronald B. Davies; Ryan M. Hynes; Dieter Franz Kogler
  6. Technological & innovation challenges for industry: New science for policy insights By Maria Teresa Álvarez; Salvador Barrios; Andrea Bellucci; Mark Boden; Giacomo Damioli; Nestor Duch-Brown; Gianluca Gucciardi; Anabela Marques-Santos; Robert Marschinski; David Martínez-Turégano; Pietro Moncada-Paternò-Castello; Daniel Nepelski; Dimitris Pontikakis; Emanuele Pugliese; Giuseppina Testa; Alexander Tübke
  7. Induced automation: evidence from firm-level patent data By Antoine Dechezleprêtre; David Hémous; Morten Olsen; Carlo Zanella
  8. Two-Dimensional Constrained Chaos and Industrial Revolution Cycles with Mathemetical Appendices By Makoto Yano; Yuichi Furukawa
  9. Wired in? Genetic traits and entrepreneurship around the world By Krammer, Sorin; Gören, Erkan
  10. Mobilizing innovation for the global green shift: The case for demand-oriented innovation policy By Jan Fagerberg
  11. Organizing for Entrepreneurship: Field-Experimental Evidence on the Performance Effects of Autonomy in Choosing Project Teams and Ideas By Boss, Viktoria; Ihl, Christoph; Dahlander, Linus; Jayaraman, Rajshri
  12. New directions for RIS studies and policies in the face of grand societal challenges By Franz Tödtling; Michaela Trippl; Veronika Desch
  13. Open innovation and prizes: is the European Commission really committed? By Isabelle Liotard; Valerie Revest
  14. Technology, Market Structure and the Gains from Trade By Giammario Impullitti; Omar Licandro; Pontus Rendahl
  15. Artificial intelligence and industrial innovation: Evidence from firm-level data By Rammer, Christian; Fernández, Gastón P.; Czarnitzki, Dirk
  16. Impact of knowledge search practices on the originality of inventions: A study in the oil & gas industry through dynamic patent analysis By Quentin Plantec; Pascal Le Masson; Benoît Weil

  1. By: Klein, Michael A
    Abstract: I develop a general equilibrium model of endogenous growth to jointly analyze two distinct theories of the patent system’s social value: (1) that patents stimulate innovation by enhancing private incentives to invest in R&D (reward theory) and (2) that patents disseminate technical information into the public domain through disclosure requirements (contract theory). The model features endogenous innovator selection into patents versus secrecy based on heterogenous innovation size, the effective cost of disclosure, and expected licensing revenue from holding a patent. Innovation is cumulative, patent rights overlap across industries, and new innovator’s pay mandatory licensing fees to a subset of previous innovators if those innovators hold a patent. The economy’s endogenous patent propensity determines each new innovator’s licensing burden, consistent with the concept of patent thickets. The model captures the inherent tension between the two objectives of the patent system and highlights novel, competing effects of patent policy on both economic growth and social welfare.
    Keywords: Innovation; Patent policy; Patent thickets; Trade secrets; Endogenous growth
    JEL: O31 O34 O43
    Date: 2021–04–30
  2. By: Giacomo Damioli (European Commission, Joint Research Centre, Ispra, Italy); Vincent Van Roy (European Commission, Joint Research Centre, Seville, Spain); Daniel Vertesy (International Telecommunication Union, Geneva, Switzerland – UNU-MERIT, Maastricht, The Netherlands); Marco Vivarelli (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore – UNU-MERIT, Maastricht, The Netherlands – IZA, Bonn, Germany)
    Abstract: This study investigates the possible job-creation impact of AI technologies, focusing on the supply side, namely the providers of the new knowledge base. The empirical analysis is based on a worldwide longitudinal dataset of 3,500 front-runner companies that patented the relevant technologies over the period 2000-2016. Obtained from GMM-SYS estimates, our results show a positive and significant impact of AI patent families on employment, supporting the labour-friendly nature of product innovation in the AI supply industries. However, this effect is small in magnitude and limited to service sectors and younger firms, which are the leading actors of the AI revolution. Finally, some evidence of increasing returns seems to emerge; indeed, the innovative companies which are more focused on AI technologies are those obtaining the larger impacts in terms of job creation.
    Keywords: Innovation, technological change, patents, employment, job-creation
    JEL: O33
    Date: 2021–04
  3. By: Howell, Sabrina T. (New York University); Rathje, Jason (U.S. Air Force Academy); Van Reenen, John (MIT Sloan School of Management); Wong, Jun (NYU Stern)
    Abstract: When investing in research and development (R&D), institutions must decide whether to take a top-down approach – soliciting a particular technology – or a bottom-up approach in which innovators suggest ideas. This paper examines a reform to the U.S. Air Force Small Business Innovation Research (SBIR) program that transitioned from "Conventional topics," which solicit specific technologies, to "Open topics," which invite firms to suggest any new technology that may be useful to the Air Force. The reform seeks to address challenges facing military R&D, in particular a less innovative defense industrial base. We show that the Open program attracts new entrants, defined as younger firms and those without previous defense SBIR awards. In a regression discontinuity design that offers the first causal evaluation of a defense R&D program, we show that winning an Open award increases future venture capital investment, non-SBIR defense contracting, and patenting. Conventional awards have no effect on these outcomes but do increase the chances of future defense SBIR contracts, fostering incumbency. The bottom-up approach appears to be a mechanism behind Open's success. For example, winning has a positive effect on innovation even in less specific Conventional topics. The results suggest that government (and perhaps private sector) innovation could benefit from more bottom-up, decentralized approaches that reduce barriers to entry, minimize lock-in advantages for incumbents, and attract a wider range of new entrants.
    Keywords: innovation, defense, R&D, procurement
    JEL: O31 O32 O38 H56 H57
    Date: 2021–04
  4. By: John Van Reenen
    Abstract: If innovation is to be subsidized, a natural place to start is to increase the quantity and quality of human capital. Innovation, after all, begins with people. Simply stimulating the “demand side” through R&D subsidies and tax breaks may only drive up the price, rather than the volume of research activity. By contrast, increasing the supply of potential inventors can both directly increase innovation and reduce its cost. This paper examines the evidence on human capital policies for stimulating innovation such as expanding the home-grown workforce, fostering immigration, boosting universities and reducing barriers to entry into inventor careers, especially for under-represented groups. The evidence suggests targeting high ability but disadvantaged potential inventors at an early age is likely to have the largest long-run effects on growth.
    JEL: O31 O32
    Date: 2021–04
  5. By: Ronald B. Davies; Ryan M. Hynes; Dieter Franz Kogler
    Abstract: Patent boxes significantly reduce the corporate tax rate applied to income earned from a patent. This incentivizes firms to increase the likelihood of a patent application being granted by creating more novel research and using more successful legal representation when filing the application. Conversely, it supports submitting applications for marginally novel innovations that otherwise would not have been submitted, lowering the probability of success. We use data from applications to the European Patent Office from 1978 to 2019 and find that the introduction of a patent box increases the average success rate of applications from large, corporate innovators by 6.9 percentage points. This impact only materializes two years after a patent box takes effect, suggesting that improved research effort is the dominant response by firms. Therefore patent boxes may help to increase innovation novelty and improve the overall quality of research.
    Keywords: Patent Box; Patents; Application Success; Corporate Taxation
    JEL: H25 O31 O32
    Date: 2021–04
  6. By: Maria Teresa Álvarez (European Commission - JRC); Salvador Barrios (European Commission - JRC); Andrea Bellucci (European Commission - JRC); Mark Boden (European Commission - JRC); Giacomo Damioli (European Commission - JRC); Nestor Duch-Brown (European Commission - JRC); Gianluca Gucciardi (European Commission - JRC); Anabela Marques-Santos (European Commission - JRC); Robert Marschinski (European Commission - JRC); David Martínez-Turégano (European Commission - JRC); Pietro Moncada-Paternò-Castello (European Commission - JRC); Daniel Nepelski (European Commission - JRC); Dimitris Pontikakis (European Commission - JRC); Emanuele Pugliese (European Commission - JRC); Giuseppina Testa (European Commission - JRC); Alexander Tübke (European Commission - JRC)
    Abstract: This report holds the results of a selection of European Commission’s JRC activities which aim to support EU policies to tackle the technological and innovation challenges of the European industry in the next decade. It addresses some of these challenges by implementing novel scientific analyses within the following themes: Technology diffusion and industrial dynamics; innovation and company value chains; Financing innovation; Industrial innovation for transitions and transformation; Employment and skills for industrial transformations; Integration of global to local industrial innovation perspectives; and new data, standards and methods. The outcomes obtained provide insights relevant to EU policy initiatives dealing with innovation and industry and aiming to achieve the priorities of the European Commission's "Green Deal" and "A stronger Europe in the world", and in general the EU industrial competitiveness & sustainability.
    Keywords: Research, technology and innovation challenges; Industrial transitions and transformation; science for policy; Industrial and innovation policy; European Union
    Date: 2021–04
  7. By: Antoine Dechezleprêtre; David Hémous; Morten Olsen; Carlo Zanella
    Abstract: Do higher wages lead to more automation innovation? To answer this question, we first use the frequency of certain keywords in patent text to create a new measure of automation innovation in machinery. We show that our measure is correlated with a reduction in routine tasks in a cross-sectoral analysis in the US. We combine macroeconomic data from 41 countries and information on geographical patent history to build firm-specific measures of low- and high-skill wages. In a firm-level panel analysis, we find that an increase in low-skill wages leads to more automation innovation with an elasticity between 2 and 5. Placebo regressions show that the effect is specific to automation innovations. Finally, we focus on a specific labor market shock, the German Hartz reforms, and show that they reduced automation innovations by those non-German firms relatively more exposed to Germany.
    Keywords: Automation, innovation, patents, income inequality
    JEL: O31 O33 J20
    Date: 2021–04
  8. By: Makoto Yano (Institute of Economic Reserch, Kyoto University and RIETI); Yuichi Furukawa (Aichi University and RIETI)
    Abstract: Between the 1760s and 1980s, we have experienced at least three industrial revolutions. We explain such cycles as ergodic chaos and relate it to the average long-run interest rate and intellectual property protection. Because innovation dynamics is intrinsically multi-dimensional, we need newly to develop a structural characterization of multi-dimensional ergodic chaos suitable for an economic analysis. Introducing such a characterization for the two-dimensional case, we show that if the monopolistic use of a new invention lasts eight years, an industrial-revolution-like burst of new technologies recurs about every one hundred years, given empirically reasonable values of the determinants of a long-run interest rate.
    Keywords: industrial revolutions, chaotic cycles, intellectual properties, market quality dynamics
    JEL: C62 E32 O41
    Date: 2021–03
  9. By: Krammer, Sorin; Gören, Erkan
    Abstract: Entrepreneurship is a cornerstone of technological innovation and economic development. We posit that the genetic make-up of countries (populations) will affect the extent of their engagement in entrepreneurial activities, in addition to the factors showcased by prior literature (e.g., institutions, culture, socio-economic, demographic, or historical). To test this conjecture we employ a country-level genetic measure that is commonly associated with novelty- and risk- seeking behaviours using the frequency of the 2- and 7-repeat allele variants of the DRD4 exon III gene. Our results confirm a systematic, positive association between genetics and entrepreneurial activities across 97 countries using a large set of controls and battery of robustness tests. These findings reconcile the “nature versus nurture” debate with respect to entrepreneurial activities around the world and provide some valuable insights on the significance of different determinants of entrepreneurship.
    Keywords: Entrepreneurship, Genetic Diversity, Novelty-Seeking, DRD4 Exon III
    JEL: D02 L26 O31
    Date: 2021–04–08
  10. By: Jan Fagerberg (Center for Technology, Innovation and Culture, University of Oslo)
    Abstract: This paper focuses on the role of demand-oriented innovation policies in supporting the global green shift. Three specific cases, all from Europe, in which change has been very quick indeed, are considered: Wind energy in Denmark, the German Energiewende and electrical cars in Norway. The emphasis is particularly on the nature of the policies that were adopted, how they came about, and their impacts on a national as well as global scale. It is shown that demand-oriented innovation policies played a decisive role in all three cases and contributed to encourage (green) innovation, create new jobs and significantly speed up the transition. Moreover, these policies had very important global repercussions.
    Date: 2021–04
  11. By: Boss, Viktoria (TUHH); Ihl, Christoph (TUHH); Dahlander, Linus (ESMT Berlin); Jayaraman, Rajshri (ESMT Berlin and University of Toronto)
    Abstract: Organizations constantly strive to unleash their entrepreneurial potential to keep up with market and technology changes. To this end, they engage employees in practices like corporate crowdsourcing, incubators, accelerators or hackathons. These organizational practices emulate independent “green-field” entrepreneurship by relinquishing hierarchical control and granting employees autonomy in the choices of how to conduct work. We aim to shed light on two such choices that are fundamental in differentiating hierarchical from entrepreneurial modes of organizing work: (1) choosing projects ideas to work on and (2) choosing project teams to work with. Both of these choices are typically pre-determined in hierarchies and self-determined in entrepreneurship. We run a field experiment in an entrepreneurship course carefully designed to disentangle the separate and joint effects of granting autonomy in both choosing teams and choosing ideas compared to a pre-determined base case. Our results show that high autonomy in choosing implies a trade-off between personal satisfaction and objective performance. Self-determined choices along both dimensions promote subjective well-being in a complementary way, but their joint performance impact is diminishing. After ruling out alternative explanations related to differing project qualities and homophilic team choices, the detrimental performance impact of too much choice seems to be related to the implied cognitive burden and overconfidence.
    Keywords: teams; ideation; entrepreneurial performance; field experiment;
    JEL: L23 L26 M5
    Date: 2019–11–29
  12. By: Franz Tödtling (Vienna University of Economics and Business); Michaela Trippl (University of Vienna); Veronika Desch (University of Vienna)
    Abstract: The regional innovation system (RIS) approach has become a widely used framework for examining the dynamics of innovation across space as well as for crafting policies aimed at promoting the innovation capacity of regions. The dominant focus of RIS studies and regional innovation policies has been on technological innovation that drives competitiveness and economic growth. In light of persistent environmental and social challenges such as climate change, health problems, and growing inequalities, this narrow understanding of innovation appears to be obsolete. This article claims that the RIS approach requires critical rethinking and reassessment to provide a solid basis for informing the next generation of regional innovation policies. We explore how RIS scholarship and policies could benefit from engaging more deeply with an alternative understanding of innovation. Inspired by recent work on responsible innovation, mission-oriented and transformative innovation policies, we develop the notion of ‘challenge-oriented RIS’ (CORIS). In contrast to conventional understandings of RIS, this approach embraces a broader and more critical understanding of innovation, captures the directionality of change, opens up to new innovation actors and novel coordination mechanisms between various stakeholders and territorial scales, and pays more attention to the application side and upscaling of innovation within the region and beyond. Acknowledging that regions vary in their capacity to fashion transformative change and challenge-oriented innovation, the paper outlines new directions for place-based innovation policies.
    Keywords: regional innovation systems, grand societal challenges, sustainability transitions, challenge-oriented regional innovation policy
    Date: 2021
  13. By: Isabelle Liotard; Valerie Revest
    Abstract: In 2015, the European Commission decided upon new political directions toward open innovation. Our aim is to assess to which extend the European Innovation Prizes are enshrined in the open innovation's movement. 22 innovation's prizes have been scrutinized on the basis on official EC's documents and interviews carried out with stakholders. The results tend to show that if a degree of openess is noted, European Innovation prizes could tend toward greater citizens' inclusivity. From an academic viewpoint, we propose to combine the properties of the concepts of innovation prizes and communities.
    Keywords: Prize; Open Innovation; European Commission; Public Policy; Crowdsourcing; Stakeholders.
    Date: 2021–04–27
  14. By: Giammario Impullitti; Omar Licandro; Pontus Rendahl
    Abstract: We study the gains from trade in a model with oligopolistic competition, heterogeneous firms and innovation, and provide a formula to decompose the mechanism. The new insight we provide is that market concentration can be a welfare-relevant feature of market power above and beyond markup dispersion. Trade liberalisation increases foreign competition and reduces the number of active firms in the market, thereby increasing concentration. A more concentrated economy is more efficient due to increasing returns in production. Moreover, higher concentration produces a scale effect on firms’ incentives to innovate, which increases welfare via productivity improvements. In the calibrated version of the model we show that a trade-induced increase in concentration contributes substantially to the gains from trade, mostly via its stimulating effect on innovation. Sizeable gains also come from the reduction of the inefficiency produced by trade in identical goods; i.e. through a reduction in reciprocal dumping. Changes in markup dispersion, in contrast, have only negligible effects.
    Keywords: gains from trade, heterogeneous firms, oligopoly, innovation, endogenous markups, market concentration
    JEL: F12 F13 O31 O41
    Date: 2021
  15. By: Rammer, Christian; Fernández, Gastón P.; Czarnitzki, Dirk
    Abstract: Artificial Intelligence (AI) represents a set of techniques that enable new ways of innovation and allows firms to offer new features of products and services, to improve production, marketing and administration processes, and to introduce new business models. This paper analyses the extent to which the use of AI contributes to the innovation performance of firms. Based on firm-level data from the German part of the Community Innovation Survey (CIS) 2018, we examine the contribution of different AI methods and applications to product and process innovation outcomes. The representative nature of the survey allows extrapolating the findings to the macroeconomic level. The results show that 5.8% of firms in Germany were actively using AI in their business operations or products and services in 2019. The use of AI generated additional sales with world-first product innovations in these firms of about €16 billion, which corresponds to 18% of total sales of world-first innovations in the German business sector. Firms that developed AI by combining in-house and external resources obtained significantly higher innovation results. The same is true for firms that apply AI in a broad way and have already several years of experience in using AI.
    Keywords: Artificial Intelligence,Innovation,CIS data,Germany
    JEL: O14 O31 O32 O33 L25 M15
    Date: 2021
  16. By: Quentin Plantec (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique); Pascal Le Masson; Benoît Weil
    Date: 2021–07

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