nep-ino New Economics Papers
on Innovation
Issue of 2022‒04‒18
ten papers chosen by
Uwe Cantner
University of Jena

  1. Innovation and human capital policy By Van Reenen, John
  2. Fdi spillover effects on innovation activities of knowledge using and knowledge creating firms: evidence from an emerging economy By Vujanovic, Nina; Radosevic, Slavo; Stojcic, Nebojsa; Hisarciklilar, Mehtap; Hashi, Iraj
  3. Opening up military innovation: causal effects of 'bottom-up' reforms to US defense research By Van Reenen, John; Howell, Sabrina T.; Rathje, Jason; Wong, Jun
  4. Measuring process innovation output: Results from firm-level panel data By Rammer, Christian
  5. Effects of the Quality of Science and Innovation on Venture Finance: Evidence from University Spinoffs in Japan By FUKUGAWA Nobuya
  6. The Education-Innovation Gap By Barbara Biasi; Song Ma
  7. R&D grant and tax credit support for foreign-owned subsidiaries: Does it pay off? By Lenihan, Helena; Mulligan, Kevin; Doran, Justin; Rammer, Christian; Ipinnaiye, Olubunmi
  8. Strengthening State Capacity: Postal Reform and Innovation during the Gilded Age By Abhay Aneja; Guo Xu
  9. Political and Socioeconomic Factors That Determine the Financial Outcome of Successful Green Innovation By Riehl, Kevin; Kiesel, Florian; Schiereck, Dirk
  10. Artificial intelligence and firm-level productivity By Czarnitzki, Dirk; Fernández, Gastón P.; Rammer, Christian

  1. By: Van Reenen, John
    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.
    Keywords: innovation; R&D; intellectual property; tax; competition
    JEL: O31 O32
    Date: 2021–04–20
  2. By: Vujanovic, Nina; Radosevic, Slavo; Stojcic, Nebojsa; Hisarciklilar, Mehtap; Hashi, Iraj
    Abstract: The beneficial effects of innovation for firm performance and competitiveness are well established but it has been suggested in recent years that innovation regimes differ between advanced and emerging economies. While advanced economies rely on knowledge generation, their emerging counterparts follow mainly knowledge use regime through the application of existing knowledge and technology. Climbing up the technological ladder can be helped through spillovers from foreign investors to local firms. We investigate whether FDI spillovers influence different phases of innovation process (from decision to innovate to productivity) among knowledge using and knowledge creating firms in an emerging European economy. The results show that innovation process in emerging economies is closer to imitation than creation of novel products. Local firms benefit from foreign counterparts in the early phase of innovation process. Stronger FDI effects are found on firms that undertake innovation through knowledge use than through knowledge generation.
    Keywords: knowledge use; knowledge generation; FDI; innovation; emerging economy
    JEL: O31
    Date: 2022–01
  3. By: Van Reenen, John; Howell, Sabrina T.; Rathje, Jason; Wong, Jun
    Abstract: Organizations investing in R&D must decide whether to solicit specific technologies or allow innovators to suggest ideas. Using administrative data, we study the “Open” reform to U.S. Air Force R&D procurement, which invited firms to suggest any new potentially useful technology. The new program was run simultaneously with the traditional top-down “Conventional” program. Our regression discontinuity design offers the first causal evaluation of a defense R&D program. We document benefits from winning an Open award for VC funding, military technology, and innovation, and no benefits from Conventional, which instead fosters incumbency. The bottom-up approach appears to help explain Open’s success.
    Keywords: innovation; defense; R&D; procurement
    JEL: O31 O32 O38 H56 H57
    Date: 2021–04–13
  4. By: Rammer, Christian
    Abstract: Process innovation is an important part of firms' innovation activities and supposed to significantly contribute to positive returns from innovation. Measuring process innovation output at the firm level is still in its infancy, however. This paper reports empirical evidence on measures of process innovation output that have been collected in the German part of the Community Innovation Survey (CIS) over the past 25 years. Distinguishing between cost reduction and quality improvement, the paper finds low item non-response for the qualitative (yes/no) part of both indicators. Item non-response is much higher for quantitative information and does not decrease with questionnaire experience of firms. For both cost reduction and quality improvement, response to quantitative indicators is categorical in nature, and firms tend to report the same set of values when participating frequently in the survey. The determinants of realising the two types of process innovation output are very similar. The observed variance in the quantitative part is difficult to explain for both measures. The impact of process innovation output on firm performance is limited. While cost reduction seems to spur the export share, sales increase due to quality improvement is associated with higher profitability.
    Keywords: Process innovation,innovation output,panel data,Community Innovation Survey
    JEL: O31 O32 O33
    Date: 2022
  5. By: FUKUGAWA Nobuya
    Abstract: University spinoffs build on strong science, which allows them to create radical innovation. Radical innovation entails uncertainty in entrepreneurial outcomes, necessitating the participation of individuals and organizations that bridge the gap between science and the market. Recognizing that the commercial success of university spinoffs hinges on the entrepreneurial ecosystems they are embedded in, this study establishes unbalanced panel data (2015-2020) to examine the relationships among the key factors in university spinoff ecosystems: scientific productivity of academic researchers associated with university spinoffs, radicalness of the innovation created by the university spinoff, and entrepreneurial intermediaries who bridge the gap between science and the market. Estimation results reveal that h5-index positively affects venture capital funding. The quality of innovation does not affect the probability of university spinoffs receiving venture financing, negating the scout function of entrepreneurial intermediaries. Venture capital financing positively affects sales growth of university spinoffs, corroborating the coach function of entrepreneurial intermediaries.
    Date: 2022–02
  6. By: Barbara Biasi; Song Ma
    Abstract: This paper documents differences across higher-education courses in the coverage of frontier knowledge. Comparing the text of 1.7M syllabi and 20M academic articles, we construct the "education-innovation gap," a syllabus’s relative proximity to old and new knowledge. We show that courses differ greatly in the extent to which they cover frontier knowledge. More selective and better funded schools, and those enrolling socio-economically advantaged students, teach more frontier knowledge. Instructors play a big role in shaping course content; research-active instructors teach more frontier knowledge. Students from schools teaching more frontier knowledge are more likely to complete a PhD, produce more patents, and earn more after graduation.
    JEL: I23 I24 I26 J24 O33
    Date: 2022–03
  7. By: Lenihan, Helena; Mulligan, Kevin; Doran, Justin; Rammer, Christian; Ipinnaiye, Olubunmi
    Abstract: Foreign-owned subsidiaries make significant contributions to national Research and Development (R&D) in many host countries. Policymakers often support subsidiaries through R&D grants and R&D tax credits. A key objective of this funding is to leverage R&D-driven firm performance benefits for the host economy. However, the subsidiary's parent firm may decide not to exploit the results from publicly-funded R&D projects in the host country. Therefore, supporting subsidiaries' R&D presents a risk that significant amounts of public funding may translate into little, or no payoffs for the host economy. Our study provides the first evaluation of 1) whether public R&D funding stimulates additional R&D investment in subsidiaries, 2) whether policy-induced R&D drives subsidiary performance, and 3) the differential effects of R&D grants and R&D tax credits. Drawing on a unique panel dataset for Ireland (2007-2016), we find that both R&D supports drive subsidiary R&D, resulting in substantial host country firm performance benefits.
    Keywords: Public funding for R&D,Firm performance,Firm ownership,Foreign-owned subsidiaries,Multinational enterprise,R&D tax credit,R&D grant,Policy evaluation
    JEL: D22 O25 F23 F21 O38 D04 H25 O31
    Date: 2022
  8. By: Abhay Aneja; Guo Xu
    Abstract: We use newly digitized records from the U.S. Post Office to study how strengthening state capacity affects public service delivery and innovation in over 2,800 cities between 1875-1905. Exploiting the gradual expansion of a major civil service reform, cities with a reformed postal office experience fewer errors in delivery, lower unit costs and an increase in mail handled per worker. This improvement goes with greater information flow, as measured by increased volumes of mail and newspapers. We observe more joint patenting involving inventors and businesses from different cities, suggesting that a more effective postal service contributed to innovation and growth during the Gilded Age.
    JEL: D73 M5 N4 N41 O3
    Date: 2022–03
  9. By: Riehl, Kevin; Kiesel, Florian; Schiereck, Dirk
    Abstract: Green innovation and technology diffusion must be financially and commercially attractive to convince corporate decision makers. This paper focuses on the factors that determine the financial outcome of successful green innovation activities conducted by large, listed companies. We employ a cross-industry dataset including more than 97,954 reports on corporate environmentalism from 286 international listed companies. Our results indicate that economic, political, cultural, firm-specific, investor-related, and governance factors significantly determine the financial performance of green innovation, measured by abnormal returns. Moreover, we can show that factors that reduce the competition in green innovation markets benefit the financial success of firms operating via them. Finally, we find an opposing influence for several factors that benefit earlier stages of innovation (e.g., research output) while harming the later stages (e.g., market introduction and financial performance). These findings imply that a spatial separation strategy for different stages of innovation supports corporate environmentalism activities. Moreover, physical property rights, the governments’ willingness to support green technologies, and economic framework conditions such as oil price, GDP, or public R&D budget need to be balanced by policymakers to address and stimulate green innovation.
    Date: 2022
  10. By: Czarnitzki, Dirk; Fernández, Gastón P.; Rammer, Christian
    Abstract: Artificial Intelligence (AI) is often regarded as the next general-purpose technology with a rapid, penetrating, and far-reaching use over a broad number of industrial sectors. A main feature of new general-purpose technology is to enable new ways of production that may increase productivity. So far, however, only very few studies investigated likely productivity effects of AI at the firm-level; presumably because of lacking data. We exploit unique survey data on firms' adoption of AI technology and estimate its productivity effects with a sample of German firms. We employ both a cross-sectional dataset and a panel database. To address the potential endogeneity of AI adoption, we also implement an IV approach. We find positive and significant effects of the use of AI on firm productivity. This finding holds for different measures of AI usage, i.e., an indicator variable of AI adoption, and the intensity with which firms use AI methods in their business processes.
    Keywords: Artificial Intelligence,Productivity,CIS data
    JEL: O14 O31 O33 L25 M15
    Date: 2022

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