nep-ino New Economics Papers
on Innovation
Issue of 2021‒06‒14
nine papers chosen by
Uwe Cantner
University of Jena

  1. Stepping-up innovation in manufacturing firms: Knowledge combinations in an Italian local production system By Plechero, Monica; Grillitsch, Markus
  2. “Salvation and Profit”: Deconstructing the Clean-Tech Bubble By Vincent Giorgis; Tobias Huber; Didier Sornette
  3. Patenting in 4IR Technologies and Firm Performance By BENASSI Mario; GRINZA Elena; RENTOCCHINI Francesco; RONDI Laura
  4. Technological Change and Employment By Kauhanen, Antti
  5. Technological breakthroughs in European regions: the role of related and unrelated combinations By Ron Boschma; Ernest Miguelez; Rosina Moreno; Diego B. Ocampo-Corrales
  6. The role of business in constructing sustainable technologies: Can the Silicon Valley model be aligned with sustainable development? By Matthews, Nicholas; Stamford, Laurence; Shapira, Philip
  7. The political reception of innovations By Jeffry Frieden; Arthur Silve
  8. Pharmaceuticals: Beating the Hell Out of the Average By Nitzan, Jonathan; Bichler, Shimshon
  9. Disclosure, Firm Growth, and the JOBS Act By Divakaruni, Anantha; Jones, Howard

  1. By: Plechero, Monica (Ca’ Foscari University of Venice); Grillitsch, Markus (CIRCLE, Lund University)
    Abstract: Industry 4.0 requires from manufacturing firms to become more innovative in order to remain relevant and competitive. To step-up firm innovation, several studies in Innovation and Economic Geography foreground that firms need to combine knowledge in novel ways either within local industrial structures or over distance. The contribution of this paper is to investigate in-depth how manufacturing firms with traditional roots combine new generative knowledge in and beyond a local production system (LPS), what enables them to access and integrate such knowledge from external sources, and how this relates to the firms’ innovation performance, with a focus on radical and varied forms of innovation. The contribution of this paper lies also in a mixed-methods research approach, which combines a population-based survey of mechatronics firms in an Italian LPS, with in-depth interviews. This allows for a qualitative interpretation of the causes of the identified distributions and correlations. The main finding of the paper is that firms generating radical innovations and varied forms of innovation combine unrelated types of knowledge in-house and through external sources. The pattern is that the traditional manufacturing knowledge of mechatronics firms still prevails but that firms increasingly complement this with new knowledge, in particular science-based analytical knowledge. Firms that have acquired complementary knowledge in-house are able to access new knowledge nationally or internationally. Even though firms source knowledge relatively frequently within the local production system, the firms who access new knowledge nationally and internationally stand out in terms of their innovation performance.
    Keywords: Industry 4.0; knowledge bases; local productive system; innovation; manufacturing firms
    JEL: O33 R11
    Date: 2021–06–02
  2. By: Vincent Giorgis (ETH Zürich); Tobias Huber (ETH Zürich); Didier Sornette (ETH Zürich - Department of Management, Technology, and Economics (D-MTEC); Swiss Finance Institute; Southern University of Science and Technology; Tokyo Institute of Technology)
    Abstract: From 2004 to 2008, a bubble formed in clean technologies, such as solar, biofuels, batteries, and other renewable energy sources. In this paper, we analyze this clean-tech bubble through the lens of the Social Bubble Hypothesis, which holds that strong social interactions between enthusiastic supporters weave a network of reinforcing feedbacks that lead to widespread endorsement and extraordinary commitment by those involved. We present a detailed synthesis of the development of the clean-tech bubble, its history, and the role of venture capital and government funding in catalyzing it. In particular, we dissect the underlying narrative that was fueling the bubble. As bubbles can be essential in the process of accelerating the development of emerging technologies and diffusion of technological innovations, we present evidence that the clean-tech bubble constituted an example of an innovation-accelerating process.
    Keywords: Financial Bubbles, Narrative Economics, Technological Innovation, Clean Tech, Energy, Venture Capital
    JEL: C54 D61 D70 F64 G01 O25
    Date: 2021–05
  3. By: BENASSI Mario; GRINZA Elena; RENTOCCHINI Francesco (European Commission - JRC); RONDI Laura
    Abstract: We investigate whether firm performance is related to the accumulated stock of technological knowledge associated with the Fourth Industrial Revolution (4IR) and, if so, whether the firm’s history in 4IR technology development affects such a relationship. We exploit a rich longitudinal matched patent-firm data set on the population of large firms that filed 4IR patents at the European Patent Office (EPO) between 2009 and 2014, while reconstructing their patent stocks from 1985 onwards. To identify 4IR patents, we use a novel two-step procedure proposed by EPO (2020), based on Cooperative Patent Classification (CPC) codes and on a full-text patent search. Our results show a positive and significant relationship between firms’ stocks of 4IR patents and labour and total factor productivity. We also find that firms with a long history in 4IR patent filings benefit more from the development of 4IR technological capabilities than later applicants. Conversely, we find that firm profitability is not significantly related to the stock of 4IR patents, which suggests that the returns from 4IR technological developments may be slow to be cashed in. Finally, we find that the positive relationship with productivity is stronger for 4IR-related wireless technology and for AI, cognitive computing and big data analytics.
    Keywords: Fourth Industrial Revolution (4IR); patent applications; technology development; firm performance; longitudinal matched patent-firm data; Industry 4.0
    Date: 2021–05
  4. By: Kauhanen, Antti
    Abstract: Abstract In order to understand the employment effects of technological progress, it is useful to separate three types of technologies: 1) automation technologies, 2) technologies that create new tasks, and 3) capital- or labor-augmenting technologies. These different types of technological advances affect employment very differently and through different channels. Automation technologies may either decrease or increase employment, whereas the other types of technological progress unambiguously increase employment. Empirical estimates of the employment effects of automation are very different in different countries. The results from United States show negative employment effects, whereas German and French studies show the opposite. It is likely that the employment effects of automation technologies depend on the role of international trade, labor market institutions and political choices. However, there is still little research on these topics. There is even less research on how the direction of technological change (automation technologies vs. technologies creating new tasks) is determined and how it can be affected by policy.
    Keywords: Technological change, Employment, Robots, Artificial intelligence
    JEL: O33 J21 J23 J24
    Date: 2021–06–07
  5. By: Ron Boschma; Ernest Miguelez; Rosina Moreno; Diego B. Ocampo-Corrales
    Abstract: This paper analyzes if the emergence and occurrence of breakthrough technologies in 277 European regions in the period 1981 to 2010 is related to the existing technological portfolio of regions. The study shows that, by far, most combinations breakthrough inventions make are between related technologies: almost no breakthrough patent makes combinations between unrelated combinations only. We also find that breakthrough inventions primarily combine and cite technological classes that are present in the region. Regressions show that the occurrence of breakthrough patents in a technology in a region is positively affected by the local stock of technologies that is related to such technology, but we do not find such an effect for the local stock of unrelated technologies, in contrast to studies that suggest otherwise. However, the region’s ability to enter new breakthrough inventions in a technology relies on the combination of knowledge that is both related and unrelated to such technology.
    Keywords: relatedness, unrelatedness, technological breakthroughs, regional diversification, European regions
    JEL: O18 O31 O33 R11
    Date: 2021–06
  6. By: Matthews, Nicholas; Stamford, Laurence; Shapira, Philip (The University of Manchester)
    Abstract: Businesses are increasingly focussing their efforts on developing sustainable technological innovations. In doing so, they face obstacles in the systemic nature of innovation processes, the uncertain and ambiguous nature of sustainability, and in reconciling their business model and strategy with social and environmental value creation. This is particularly the case for those trying to emulate the so-called ‘Silicon Valley model’, which prioritises speed to deliver on its ambitious socially significant mission, relies on high-risk venture capital financing, and encourages flexibility and curiosity on the part of employees. This article uses data gathered during an action research case study to explore whether this much vaunted model could be better aligned with sustainable development. While, in this case, we find systemic and cognitive challenges to be currently precluding concerted action on sustainability, we also identify opportunities for greater alignment. Changes in the market and financial environment promise to provide new incentives for sustainability while the use of public deliberations such as citizen assemblies could help to reduce ambiguity. Complementary application of approaches like Constructive Sustainability Assessment within companies would allow business models to be more proactively and demonstrably aligned with employee values and ambitious sustainability missions.
    Date: 2021–05–26
  7. By: Jeffry Frieden; Arthur Silve
    Abstract: Why do some societies embrace innovative technologies, policies, and ideas, while others are slow to adopt, or even resist, them? We focus on features of an innovation that are expected to affect the incumbent elite's economic activities, and hence the elite's reaction. The elite can choose whether to appropriate the innovation for itself; encourage its adoption; tax, regulate, or limit or block it. Six features of the innovation affect the elite response: i) whether it is easy to replicate; ii) whether it complements or competes with the elite's sources of income; iii) whether its impact is broad or narrow; iv) whether it is location-dependent, and v) concealable; vi) whether it requires large fixed costs. Some of these factors have been considered in other work; here we assess them together. We provide illustrative evidence of the relevance and generality of the model to understand the fate of a variety of innovations.
    Keywords: : innovation, regulation, rent-seeking
    JEL: D72 L50 O30
    Date: 2021
  8. By: Nitzan, Jonathan; Bichler, Shimshon
    Abstract: A lot has been written on the imminent decline of pharmaceuticals: their falling production, reduced R&D, declining innovation, the opioid crisis, patent cliffs, biting competition from generic drugs, growing opposition to IPR. The list goes on. Judging by the yardsticks that matter the most, though – namely, the companies’ relative profit and relative capitalization – pharmaceuticals are doing just fine. In fact, based on these yardsticks, they remain the most powerful corporate sector of all.
    Keywords: capitalization,finance,pharmaceutical,power,profit
    JEL: P16 P26
    Date: 2021
  9. By: Divakaruni, Anantha; Jones, Howard
    Abstract: We study the effects of regulatory disclosure on investment and growth by comparing newly public firms before and after they lose disclosure exemptions under the Jumpstart Our Business Startups (JOBS) Act. Exempt firms invest more in physical assets, innovation, and acquisitions than firms that lose exemptions, but experience steeper declines in growth opportunities over time. Firms that lose exemptions exhibit better allocation of equity to investments and utilization of existing assets, which improves their Tobin’s q. Relaxing disclosure requirements seems to induce inefficiencies in managerial investment decisions and hence inhibits firms from exploiting or replenishing their growth opportunities.
    Date: 2021–05–23

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