nep-ino New Economics Papers
on Innovation
Issue of 2021‒05‒24
eight papers chosen by
Uwe Cantner
University of Jena

  1. Tapping into Talent: Coupling Education and Innovation Policies for Economic Growth By Akcigit, Ufuk; Pearce, Jeremy; Prato, Marta
  2. The transformation of the defense innovation system: knowledge bases, disruptive technologies, and operational capabilities By Pierre Barbaroux
  3. Urban Agglomeration and Firm Innovation: Evidence from Asia By Chen, Liming; Hasan, Rana; Jiang, Yi
  4. The Influence of Value-Chain Governance on Innovation Performance: A Study of Italian Suppliers By Brancati, Emanuele; Pietrobelli, Carlo; Mazzi, Caio Torres
  5. The “kill zone”: copying, acquisition and start-ups’ direction of innovation By Massimo Motta; Sandro Shelegia
  6. Patent Screening, Innovation, and Welfare By Schankerman, Mark; Schuett, Florian
  7. Key Sectors in Endogeneous Growth By Huang, Jingong; Zenou, Yves
  8. The Economics of Diversity: Innovation, Productivity, and the Labour Market By Ozgen, Ceren

  1. By: Akcigit, Ufuk; Pearce, Jeremy; Prato, Marta
    Abstract: How do innovation and education policy affect individual career choice and aggregate productivity? This paper analyzes the various layers that connect R&D subsidies and higher education policy to productivity growth. We put the development of scarce talent and career choice at the center of a new endogenous growth framework with individual-level heterogeneity in talent, frictions, and preferences. We link the model to micro-level data from Denmark and uncover a host of facts about the links between talent, higher education, and innovation. We use these facts to calibrate the model and study counterfactual policy exercises. We find that R&D subsidies, while less effective than standard models, can be strengthened when combined with higher education policy that alleviates financial frictions for talented youth. Education and innovation policies not only alleviate different frictions, but also impact innovation at different time horizons. Education policy is also more effective in societies with high income inequality.
    Keywords: Education Policy; Endogenous Growth; inequality; Innovation; IQ; R&D policy
    JEL: J24 O31 O38 O47
    Date: 2020–09
  2. By: Pierre Barbaroux (CReA - Centre de Recherche de l'École de l'air)
    Abstract: The forces that drive much of the transformation of Defense Innovation Systems are manifold. The economic structure and institutional organization supporting defense innovation have been altered by technological as well as political changes. Increasing competitive pressures, together with the growing complexity of knowledge and technology have also shaped how defense companies, military services and procurement agencies adapted their core business models, competences, and strategies in order to be capable of providing their customers with the innovative products and services they need. This contribution builds on a ISTE-Wiley edition's recently published book untitled Disruptive Technology and Defence Innovation Ecosystems ([BAR 19b]) that aimed at improving our understanding of the transformation of defense innovation systems, by focusing on three interrelated dimensions. The first dimension is concerned with changes affecting defense-related knowledge bases, in particular the development of dual-use knowledge and the increasing complexity of defense-related knowledge structures. The second dimension is related to technology itself with a particular emphasis on the disruptive impacts of certain technological trajectories emerging from the outside of traditional boundaries of the defense industrial base. The third dimension is connected to the evolution of military customers' doctrines and capabilities towards netcentricity and multi-domains command and control (C²), the latter having a structuring effect on defense innovation systems.
    Date: 2020–05–01
  3. By: Chen, Liming (Asian Development Bank); Hasan, Rana (Asian Development Bank); Jiang, Yi (Asian Development Bank)
    Abstract: This paper presents evidence on the spatial distribution and effects of urban agglomeration on firm innovation. It uses a unique dataset that consistently defines city boundaries and identifies firms’ innovation-related activities across 25 developing countries in Asia. We find firm innovation to be highly concentrated at the city level. We also find substantial gains from increases in city population in terms of firms’ propensity to introduce process and product innovations and undertake research and development (R&D) activities. These gains remain even after addressing concerns regarding endogeneity through the use of historical population data as instruments. In addition, we present evidence that knowledge spillovers are an important channel through which agglomeration effects occur, specifically through the presence of top-tier universities in a given city and by raising the effectiveness of firms’ R&D efforts. These findings confirm the existence and significance of urban economies of scale in augmenting the knowledge flows that generate innovation.
    Keywords: agglomeration economies; innovation; knowledge spillovers
    JEL: O10 O30 R11
    Date: 2020–07–10
  4. By: Brancati, Emanuele (Sapienza University of Rome); Pietrobelli, Carlo (University of Rome 3); Mazzi, Caio Torres (UNU-MERIT)
    Abstract: This paper explores how value-chain governance affects the innovation performance of suppliers of intermediate products. We take advantage of a unique dataset of Italian firms to identify governance regimes along suppliers’ technological capabilities and the level of explicit coordination in the value chain. Our results indicate that ‘modular’ value-chain governance is more conducive to innovation for suppliers, especially when these firms have medium capability levels. Conversely, market-based governance modes appear to strongly reduce the innovativeness of suppliers with low capability. These patterns are also reflected in export performances and sales of innovative products. Our results go partially against other findings in the GVC literature, whereby relational value chains are seen to provide the most favorable environment to learn and innovate. Interestingly, the highest levels of technological capabilities consistently reduce the correlation between supplying intermediates and innovation performance, which indicates that technology-gap is an important mediator of learning within value chains.
    Keywords: global value chains, export, suppliers, innovation, technological capabilities
    JEL: F14 O30
    Date: 2021–04
  5. By: Massimo Motta; Sandro Shelegia
    Abstract: An incumbent monopolist may prevent a firm which currently sells a complementary product from developing a substitute, by copying its product. Imitation reduces the potential rival's current profits, making it less likely for it to obtain funding in the financial market. The anticipation of the incumbent's aggressive behaviour may also create an "ex ante" effect, by inducing the rival not to challenge the incumbent with a substitute (that is, not to enter the "kill zone") and develop another complement instead. Further, in this case the incumbent will have an incentive not to copy, since a new complement will raise its rents. The possibility of being acquired by the incumbent tends to push the rival towards developing a substitute rather than a complement. By choosing the former, potential gains from the acquisition are created (in the form of suppression of competition): as long as the rival has some bargaining power in the determination of the takeover price, it will then benefit from entering the "kill zone".
    Keywords: innovation, copying, Platforms
    JEL: L12 L41
    Date: 2021–05
  6. By: Schankerman, Mark; Schuett, Florian
    Abstract: Critics claim that patent screening is ineffective, granting low-quality patents that impose unnecessary social costs. We develop an integrated framework, involving patent office examination, fees, and endogenous validity challenges in the courts, to study patent screening both theoretically and quantitatively. In our model, some inventions require the patent incentive while others do not, and asymmetric information creates a need for screening. We show that the endogeneity of challenges implies that courts, even if perfect, cannot solve the screening problem. Simulations of the model, calibrated on U.S. data, indicate that screening is highly imperfect, with about forty percent of all patents issued on inventions that do not require the patent incentive. While we find that the current patent system generates positive social value, intensifying examination would yield large welfare gains. The social value of the patent system would also be larger if complemented by antitrust limits on licensing.
    Keywords: courts; Innovation; licensing; litigation; patent fees; Patent quality; screening
    JEL: D82 K41 L24 O31 O34 O38
    Date: 2020–09
  7. By: Huang, Jingong; Zenou, Yves
    Abstract: This paper develops a multi-sector endogenous growth model that includes an innovation network, which captures intrasectoral as well as heterogeneous intersectoral knowledge flows. We analyze the importance of sectors (nodes) and directed knowledge linkages (edges) in the innovation network by their contribution to the growth of knowledge in this economy. We show that the growth rate of knowledge is equal to the spectral radius of the innovation network. We also demonstrate that a sector's importance to growth (``key sectors'') is related to its positions in both the downstream and upstream technology network. Finally, the importance of a knowledge linkage is characterized by both the upstream centrality of its source sector, the downstream centrality of its target sector and the strength of knowledge flows from the source sector to the target sector.
    Keywords: Endogenous Growth; innovation networks; Key players
    JEL: D85 E2 O4
    Date: 2020–09
  8. By: Ozgen, Ceren (University of Birmingham)
    Abstract: The empirical evidence on the economic impacts of diversity is mixed. Many studies in the literature present context dependent and data driven results which are challenging to reconcile with each other. This paper offers a systematic synthesis of the empirical findings on the economic impacts of diversity on innovation, productivity, and the labour market. It presents a structured framework which takes the spatial scale of the analysis in the papers as a reference to understand the inconsistency of some previous predictions and the varying magnitudes of the diversity impact. The empirical findings reconcile more meaningfully when diversity effects are documented discretely at the regional, firm and individual levels. The paper further sets out an agenda for future research and links the findings for policy relevance.
    Keywords: innovation, cultural diversity, migration, knowledge production function
    JEL: J24 J15 F22 O15
    Date: 2021–04

This nep-ino issue is ©2021 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.