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on Innovation |
| By: | Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Francesca Micocci; Armando Rungi |
| Abstract: | This paper investigates how the presence of foreign direct investment (FDI) contributes to domestic innovation with a focus on green technologies in the European regions between 2013 and 2018. Using a rich dataset combining patent data, firm-level data and FDI proxies, we identify a clear pattern when foreign investors are technologically sophisticated, domestic firms in the regions where they invested show a higher propensity for patenting. The patenting activity by the parent companies of multinational enterprises (MNEs) and their corporate perimeter plays a more crucial role than local foreign subsidiaries. Furthermore, we find that the technological focus of MNEs – green vs. non-green – shapes the direction of these spill-overs. Notably, we provide novel evidence of linkages between the green patenting activity of MNE parents located abroad and the green innovation of domestic firms in the European Union, mediated through foreign subsidiaries operating in close proximity. Policy efforts aiming to foster green innovation should therefore prioritise attracting foreign investors with strong innovation records in environmentally sustainable technologies. |
| Keywords: | technological spill-overs, multinational enterprises, FDI, domestic innovation, firm-level data |
| JEL: | O32 F23 O34 L23 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:wii:wpaper:266 |
| By: | Ufuk Akcigit; Harun Alp; Jeremy Pearce; Marta Prato |
| Abstract: | This paper explores the symbiotic relationship between transformative entrepreneurs and inventors, which is crucial for economic growth. We utilize microdata from Denmark to demonstrate that while the relationship between IQ and general entrepreneurship tends to be negative, it is strongly positive among transformative entrepreneurs. Transformative entrepreneurs, often with higher IQ and education levels, significantly drive R&D and business growth, thereby providing substantial opportunities for inventors. In contrast, average entrepreneurs are more influenced by their family's entrepreneurship background. Our economic model links these dynamics to overall economic progress, highlighting how higher education influences career paths in entrepreneurship and invention. We identify talent misallocation caused by unequal education access, particularly affecting lower-income families. Our findings indicate the most effective policies strengthen the interplay between higher education, innovation, and entrepreneurship to foster transformative businesses and achieve long-run economic growth. |
| Keywords: | Entrepreneurship; R&D Policy; Innovation; IQ; Endogenous Growth |
| JEL: | O31 O38 O47 J24 |
| Date: | 2025–06–26 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgif:1410 |
| By: | Hasna, Z.; Hatton, H.; Jaumotte, F.; Kim, J.; Mohaddes, K. |
| Abstract: | This paper investigates how climate policies affect low-carbon innovation (as measured by patents) and assesses the link between such innovation and economic activity. Climate policies, including international cooperation, spur both specific and overall innovation, with regulations, emissions-trading systems, and expenditure measures such as R&D subsidies and feed-in tariffs being particularly impactful. In turn, low-carbon innovation raises economic activity as much as other types of innovation and past technological revolutions. However, the mechanisms are different: low-carbon innovation increases capital accumulation, while other types of innovation increase total factor productivity (TFP). |
| Keywords: | Low-Carbon Innovation, Growth, Climate Policies, Climate Change, Porter Hypothesis |
| JEL: | F64 H23 O33 O44 Q55 Q56 Q58 |
| Date: | 2025–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camjip:2516 |
| By: | James Driver |
| Abstract: | I analyze whether a change in patent systems differentially affects firm-level innovation investments at patent-valuing firms of different sizes. Using legally required, economically representative, U.S. Census Bureau microdata, I separate firms into groups based on a firm’s response to a question asking it to rank the degree of patent importance to its business and firm-size. I then measure how firms’ innovation inputs/outputs respond to the America Invents Act (AIA). Results show the AIA reduced innovation investments at smaller, patent-valuing firms while increasing innovation investments at larger, patent-valuing firms, highlighting differential firm-size effects of patent policy and policy’s importance to investments. |
| Keywords: | Investments, innovation, patents, firm size |
| JEL: | L25 O3 O51 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:25-31 |
| By: | Rik Rozendaal |
| Abstract: | This paper studies the relationship between climate policy, market power and innovation. Using data on patenting and firms' balance sheets, I document that firms with a higher degree of market power are, on average, more invested in dirty technologies than their direct competitors. I then develop a model of directed technical change with strategic innovation incentives, incorporating the empirical evidence. A carbon tax affects market power and both the intensity and the direction of innovation. In the calibrated model, a carbon tax lowers aggregate markups and increases clean innovation while also increasing dirty innovation by some firms. |
| Keywords: | climate policy, market power, innovation, directed technical change |
| JEL: | O30 O44 Q55 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11938 |
| By: | Fiona Paine; Richard R. Townsend; Ting Xu |
| Abstract: | This paper examines the evolving policy landscape surrounding foreign investment restrictions in innovative startups. Drawing on recent research, we analyze both the security benefits and economic costs of policies like the Foreign Investment Risk Review Modernization Act (FIRRMA). The evidence suggests that foreign investments do facilitate measurable cross-border knowledge spillovers that may raise legitimate security concerns. However, restricting these investments imposes significant costs on domestic innovation ecosystems, including reduced capital availability, disrupted investor networks, and potentially diminished innovation outcomes. These effects extend well beyond directly targeted foreign investors to affect domestic venture firms and startups. We explore design considerations for more effective investment screening policies, including industry targeting, investor heterogeneity, and implementation approaches, as well as complementary policies that might address security concerns while minimizing costs to innovation. We conclude by outlining promising directions for future research on this increasingly important intersection of innovation policy and national security. |
| JEL: | F50 F65 G15 G18 G24 O3 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33803 |
| By: | Amitabh Chandra; Connie Xu |
| Abstract: | Fundamental knowledge in the life sciences has consequential implications for medicine and subsequent medical innovations. Using publications in leading life science journals to measure fundamental knowledge, we document large agglomerations in the institutions where it is discovered and a robust correlation between knowledge and subsequent citations in patents. We assess whether the institution where research is produced affects the output of scientists by using a scientist-mover design, which compares annual research output before and after a move for the same scientist. Between 50 − 60% of a scientist’s research output is attributable to the institution where they work, and two thirds of this effect is driven by the presence of star researchers. The magnitude of these effects has not decreased in more recent time periods, in the wake of technologies that make cross-institution collaborations easier, nor is it larger for moves to larger agglomerations, nor concentrated in particular scientific fields. We discuss the implications of these findings for research allocations in science and scientists’ leaving one institution for another. |
| JEL: | H5 I2 O3 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33996 |
| By: | Simone Vannuccini (Graduate School of Economics and Management, University Cote d'Azur) |
| Abstract: | In this paper, I use the case of artificial intelligence (AI) to analyse the challenges and opportunities in designing a European industrial policy that (i) adopts a pro-competitive posture, (ii) does not fall victim of the risk of double weaponization by pro-nationalistic and pro-oligopolistic narratives, and (iii) re-orients its goals away from the AI ‘arms race’ and to the provision of public goods. At the moment, the AI industry is an infant industry, and the European digital stack enabling AI applications is controlled by non-European actors, which reduces European autonomy and justifies policy support. I suggest that while AI’s economic impact are overestimated and hyped, AI should be a pillar of European industrial policy due to its strategic asset and dual-use nature. Through a series of proposals, I outline the contours of a European AI industrial policy; its features can be summarised by three keywords: public, as in the public assets that the EU should aim to build on the basis of open source technology and in the public interest; federated, through variety and the decentralisation of AI solutions conceived as a non-oligopolistic European alternative to large scale systems; and federal, realising decoupling across the technology stack, when possible and advisable, through supranational tools, institutions, and finances. |
| Keywords: | Artificial Intelligence, Strategic Asset, Industrial Policy, European Union, Geopolitical Rivalries |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:bdj:smioir:2025-02 |
| By: | Edler, Jakob; Helfrich, Florian; Kuhlmann, Stefan |
| Abstract: | This article seeks to fill a critical gap in the context of mission oriented and transformative policies by conceptualising generic governance conditions for large public and private organisations to engage constructively with the transformation of wider socio-technological systems as an ongoing learning process. So far, innovation and other policies to achieve transformative missions tend to rely on established instruments, mostly supply side, fostering research and innovation activities to move in desired directions. More sophisticated approaches stimulate absorption and diffusion of innovation and support market creation and uptake. However, for existing socio-technological systems to shift towards sustainability, constitutive actors within such systems, like large public and private organisations, need to actively foster the transformation, as a process of internal and external organisational experimentation and innovation. They are critical actors in their respective system context in two ways: in the past they have co-produced the problematic effects of existing systems; in the future they can severely influence the speed and direction of transition of systems and act as change agents towards more sustainable systems - provided they manage to transform themselves, too. Those actors are very diverse organisations, ranging from large companies, governmental funding bodies, higher education institutions, and related intermediary organisations. They are situated between the individuals and their behaviour on the one hand and the broader systems level on the other, i.e. at the meso level of systems change, where they fulfil critical systemic functions. ... |
| Keywords: | Corporate actors, System transformation, Organizational change, Transition studies, Change agents, Meta-governance, Responsible research and innovation ", "Corporate actors, System transformation, Organizational change, Transition studies, Change agents, Meta-governance, Responsible research and innovation |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:fisidp:319877 |
| By: | Joshua S. Gans |
| Abstract: | This paper develops a transparent, simplified version of Carnehl and Schneider (2025)’s model of knowledge creation. Our tractable framework, which yields closed-form solutions for key welfare trade-offs, preserves the essential economic mechanisms while eliminating mathematical complexity. We derive four main insights. First, contrary to the original model’s emphasis on “moonshots, ” our analysis demonstrates that expanding knowledge and then deepening it (the moonshot approach) is never socially optimal under direct welfare comparisons. The original model’s case for moonshots relies on second-best arguments involving research costs and dynamic externalities, not on direct welfare considerations. Second, we identify a novel misalignment between private and social incentives in multidisciplinary research contexts. Even without research costs — where the original model predicts perfect alignment — researchers bridging large knowledge gaps between disciplines choose locations that create suboptimal knowledge structures. Third, we analyse how citation-based incentive systems affect knowledge creation trajectories. We show that systems privileging unique contributions over shared ones align private behaviour with social welfare objectives, while those rewarding shared contributions lead to excessive knowledge deepening. Fourth, our analysis provides precise characterisations of optimal knowledge creation paths under various initial conditions and offers clear guidance for science policy. By clarifying when interventions can address misalignments between researchers’ incentives and social welfare, our simplified model offers practical insights for the design of research funding mechanisms. |
| JEL: | D83 O31 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33815 |