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on Innovation |
| By: | Masami Imai; Koji Sakai; Michiru Sawada |
| Abstract: | Distortions in credit allocation can slow technological progress by sustaining unproductive firms and generating congestion that crowds out innovation from otherwise healthy firms. We study this mechanism using Japan’s banking crisis of the 1990s, linking firm-level borrowing data to the universe of patent applications with more than fifteen years of historical citation outcomes. Innovation declines more in technology fields facing greater credit distortion, with effects substantially larger for forward citations than for patent counts. Firm-level evidence reveals persistently low innovation by zombie firms and reduced innovation by healthy firms operating in zombie-intensive industries, consistent with congestion effects. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:tcr:wpaper:e220 |
| By: | Mehic, Adrian (Research Institute of Industrial Economics (IFN)) |
| Abstract: | How are preferences for innovation formed, and what determines the long-run direction of technological change? This paper shows that early-life exposure to environmental accidents can durably reorient inventive effort decades later, even in the absence of targeted policy. I study radioactive fallout from the 1986 Chernobyl nuclear accident across Sweden, exploiting plausibly exogenous variation in local exposure driven by rainfall. Combining municipality-level fallout data with Swedish patent records from 1967 to 2021, I find that more exposed areas experienced a persistent increase in green patenting, with no change in total patenting. The effect emerges only in the early 2000s, and is driven by individuals exposed during childhood: matching inventor-level data with detailed administrative records, I show that individuals exposed to fallout during their formative years are more likely to enter the patent system as green inventors and to begin their inventive careers with green technologies, consistent with a cohort-based entry mechanism. A simple model of directed technical change with formative exposure rationalizes these findings. In addition, the paper shows that green patents originating from more exposed areas do not have a lower number of citations than other patents, suggesting that the results are not driven by low-quality innovations. |
| Keywords: | Patent; Environmental accidents |
| JEL: | D91 O31 Q53 Q55 |
| Date: | 2026–02–16 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1552 |
| By: | Armstrong, Christopher; Glaeser, Stephen; Park, Stella; Timmermans, Oscar |
| Abstract: | We study how the assignment of intellectual property rights between inventors and their employers affects innovation. Incomplete contracting theories predict that stronger employer property rights reduce the threat that employee inventors hold up their employers, thereby affecting inventor and invention outcomes. We test these predictions using a U.S. appellate court ruling that shifted the assignment of property rights from inventors to their employers. Within-employer-year analyses demonstrate that affected inventors are less likely to retain patent rights, assign patents to new employers, or leave their current employer, all consistent with reduced inventor ability to hold up their employers. Due to the reduced possibility of hold-up, affected inventors’ innovations are revealed more promptly when disclosed, draw from a broader set of prior patents, and spread more to subsequent patents. If affected inventors do leave their employer, they are more likely to relocate to unaffected states. Furthermore, employers affected by the ruling are more likely to locate their inventors in agglomeration economies and alter their innovation strategy by reallocating activity across states and expanding their innovation portfolios. Our collective evidence suggests that shifting intellectual property rights to employers affects inventor and invention outcomes by reducing the threat of employee hold-up from the employer's perspective. |
| Keywords: | corporate-innovation; disclosure; employee mobility; hold-up; incomplete contracts; employer-specific investment; corporate innovation |
| JEL: | J41 J61 O30 |
| Date: | 2026–01–08 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130648 |
| By: | Weinrich, Arndt |
| Abstract: | Exploiting granular European innovation data and the introduction of nexus requirements to patent boxes, I find that tightening access to preferential tax treatment of innovation output reduces inventive activity. A stylized framework and firm-reported constraints both point to internal funding as the binding mechanism. Consistently, effects appear on both the extensive margin, lowering the number of innovating firms, and the intensive margin, reducing resources devoted to innovation. Externally organized innovation declines relative to in-house activity, and innovation quality declines modestly. Spillover analyses indicate innovation decreases reflect forgone rather than reallocated innovation. Findings inform tax policy design and corporate innovation strategies. |
| Keywords: | nnovation, International Taxation, Patent Box, Nexus Requirements |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:arqudp:336789 |
| By: | Pau Roldan-Blanco; Tom Schmitz; Christian Fons-Rosen |
| Abstract: | Innovative startups are frequently acquired by large incumbents. Such acquisitions have recently come under scrutiny, as policymakers suspect that incumbents might acquire startups just to "kill" their ideas. However, acquisitions also provide an incentive for startup creation, and have ambiguous effects on incumbents' own innovation. This paper assesses the net effect of these forces. To do so, we build an endogenous growth model with heterogeneous multi-product firms and startup acquisitions, and calibrate its parameters to match micro-level evidence from the United States. Our calibrated model implies that taxes on startup acquisitions lower the startup rate, but increase incumbent innovation as well as the implementation rate of startup ideas. Banning killer acquisitions, a policy that appears desirable in partial equilibrium, yields virtually no welfare gains in general equilibrium. The optimal policy instead imposes high taxes on startup acquisitions (reducing their frequency by more than half) and raises consumption-equivalent welfare by 0.48%. |
| Keywords: | acquisitions, firm dynamics, innovation, Productivity Growth |
| JEL: | O30 O41 E22 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1560 |
| By: | Rodríguez-Pose, Andrés; You, Zhuoying |
| Abstract: | Few studies have examined the economic consequences of deploying artificial intelligence (AI) and robotics in less-developed cities, where policies have often failed. To address this gap, we analyse a panel of 270 Chinese cities (2009–2019) using OLS, IV-2SLS, and quantile regression techniques. We find that AI and robotics significantly promote technological innovation in China, with especially pronounced implications for cities at or below the technological frontier. These technologies also enhance the returns to science and technology (S&T) investment. Its novelty lies in framing AI and robotics as policy substitutes and tools for narrowing innovation divides among Chinese cities. |
| Keywords: | AI; robotics; technological innovation; Chinese cities |
| JEL: | O31 O33 R11 R58 |
| Date: | 2026–02–05 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137040 |
| By: | Traversa, Marina |
| Abstract: | Can a recession have a positive, long-term impact on firm innovation? A downturn represents an opportunity for firms to learn from their peers and try to understand the main drivers of resilience. If they deem R&D capital one of them, they may raise innovation in the following years, in order to be better shielded from future crisis. In this paper, I provide evidence of this effect in the aftermath of the Great Recession. I do so by assuming that firms learned from their best peers and by examining the characteristics of these companies. I first look at their level of R&D capital and find that firms with high-R&D best peers raised intangible investment 5 percent more than others after 2008. I then examine the top competitors' type of R&D capital and show that companies raised innovation only in the case of high-productivity (as opposed to high-product differentiation) best peers. Using alternative tests, I find a positive (negative) relationship between productivity (product differentiation) and company performance during the crisis, which supports the fact that companies learned from their peers and raised innovation only when they deemed it a source of resilience to the downturn. Finally, I examine whether the increase in innovation improved firm resilience and show that it did: companies raised sales growth, profitability and international recognition and were less likely to fail. |
| Keywords: | Corporate Finance, Innovation, Learning, Resilience, Productivity, Product Differentiation |
| JEL: | G30 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewp:336815 |
| By: | Herbertson, Max; Lee, Neil; Pardy, Martina; Soskice, David; Storper, Michael |
| Abstract: | Europe’s economic stagnation and declining global position stem from its failure to lead in first mover innovation, as the United States and, increasingly, China have produced the new breakthrough technologies of the latest industrial revolution. In this paper, we consider the causes of this innovation problem: interrelated issues in the structure of innovation institutions, education, geography, finance and markets, all of which have deep political roots. We build on a game theory model of strategic complementarities and mutual commitments to suggest a path forward which would allow a ‘coalition of the willing’ of advanced European states to develop US style institutions of innovation while combining them with Europe’s social model. Using this, we chart a feasible transition path for Europe which builds on strengths in incremental innovation while creating first mover capacities through integrated capital markets, venture ecosystems, and focused regional cluster development. Only by overcoming its first mover innovation gap, while not abandoning the goals of its social model, can Europe achieve growth, global relevance, and social stability in an era of intensified geopolitical and technological competition. |
| JEL: | N0 R14 J01 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137116 |
| By: | Raza, Werner; Maukner, Julian |
| Abstract: | Competitiveness has returned to the fore of European economic policymaking with a vengeance. In this paper, we scrutinize the recent debate on the need for promoting European competitiveness, as prominently diagnosed by the Draghi Report. By disaggregating the overall academic and policy-oriented debate on competitiveness into three distinct conceptual strands - market share-focused competitiveness, productivity-focused competitiveness, and beyond-GDP competitiveness - we conduct a descriptive statistical analysis of competitiveness indicators for both the European Union and the United States. Though our analysis concurs with the Draghi Report by identifying an innovation gap in high-tech services and with respect to energy, by and large the state of EU competitiveness does not appear as bleak as insinuated by the recent public discourse. Based on a highly selective reading of the Draghi Report, the focus of current EU competitiveness policies on across-the-board deregulation will not only contribute little to address the identified problem areas, but risk to become self-defeating as they tend to exacerbate reliance upon an increasingly outdated export-oriented growth model of the EU, given pervasive protectionist tendencies in the global economy. We conclude that a more targeted approach to tackle both the innovation gap and energy dependencies is needed, which should be based on an expansionary public investment agenda and mission-oriented industrial polices. |
| Keywords: | competitiveness, Draghi-Report, innovation, European Union, geopolitics |
| JEL: | F6 O3 O4 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:oefsew:336801 |
| By: | Bothner, Jonathan; Lopez-Garcia, Paloma; Momferatou, Daphne; Setzer, Ralph |
| Abstract: | This paper investigates the relationship between institutional and regulatory quality, and high-tech sector investment. Using data from 25 European Union (EU) countries from 2004 to 2019 (extended to 2023 for artificial intelligence-specific analyses), the study examines how institutional governance, labour market regulations, and business regulations influence investments in innovative, high-tech, and artificial intelligence-intensive sectors. The findings reveal that better institutional quality and less burdensome regulations are associated with higher investment shares in innovative, high-tech, and artificial intelligence industries. Raising EU countries’ institutional and regulatory quality to the level of the current EU frontier could raise the share of investment in high-technology sectors by as much as 50%, hence notably narrowing the existent EU-US investment gap. These results highlight the importance of effective governance and efficient regulations in fostering investment, innovation, and therefore long-term productivity growth. JEL Classification: C23, E02, L51, O38 |
| Keywords: | artificial intelligence, innovation, institutional quality, investment, regulatory frameworks, risky technology |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263185 |
| By: | Wim Naudé (RWTH Aachen University & University of Coimbra, CeBER) |
| Abstract: | This paper provides a non-technical and selective explanation of the theory of innovation and economic growth, in light of the 2025 Bank of Sweden Prize in Memory of Alfred Nobel, awarded to Joel Mokyr, Philippe Aghion, and Peter Howitt. Their body of scholarship is critically evaluated, and the useful, less useful, and most problematic aspects are highlighted. The verdict is that it is largely a collection of anthropocentric stories of innovation and growth. It avoids spelling out why sustained growth is desirable, it reduces innovation’s ultimate goal to the pursuit of economic growth, it is based on a deep-seated notion of human exceptionalism, and it promotes directed technical change - based on the assumption that all resources are fungible and can be substituted - as a way to sustain economic growth without causing environmental destruction. Their analysis of growth is useful for highlighting the importance of scientific knowledge, for showing that creative destruction can be more destructive than creative, and that economic growth will only be sustained under very special conditions. However, the failure to satisfactorily address energy in innovation and growth remains a glaring gap in modern economic growth theory. For economics to become more useful, it would require becoming an Earth Systems Science based on biocentric holism. |
| Keywords: | Innovation, economic growth, technology, sustainability, energy |
| JEL: | O31 O33 J11 J24 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:gmf:papers:2026-03 |
| By: | Bartzokas, Anthony |
| Abstract: | Emerging economies confront unprecedented challenges mobilizing finance for green industrial transitions while maintaining development trajectories. This paper examines implementation effectiveness across India, South Africa, Brazil, and Indonesia-major economies representing diverse political systems, economic structures, and policy approaches- documenting systematic gaps between stated climate commitments and realized outcomes ranging from 33% to 77% of stated targets. Through comparative analysis of policy frameworks, financing architectures, and sectoral dynamics spanning renewable energy, industrial decarbonization, sustainable agriculture, and just transitions, we reveal that aggregate capital availability constitutes only partial explanation. Firm-level financial constraints systematically structure which technologies firms can adopt constrained firms pursue incrementally cleaner but emission-intensive options, while only unconstrained firms access frontier low-emission technologies. This "pecking order" mechanism-predicted by recent theoretical work and validated across four diverse country contexts-generates three fundamental policy challenges. Three critical implications emerge. First, green credit must target frontier technologies precisely, yet such targeting creates politically challenging coverage gaps and exceeds institutional capacity. Second, blended finance exhibits fundamental tension between leverage maximization and genuine additionality. Third, just transition programs systematically underserve workers dependent on constrained firms unable to finance transitions. Looking forward, financing effectiveness will depend increasingly on institutional autonomy rather than merely capital costs: capacity to navigate fragmented global financial architectures, preserve infrastructure control, and maintain policy space as geopolitical competition intensifies and debt burdens rise. |
| Keywords: | green industrial policy, development finance, blended finance, financial constraints, just transitions, emerging economies |
| JEL: | O38 L52 O16 G28 Q58 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iedlwp:336698 |
| By: | Sebastian, Raquel; Salas Rojo, Pedro; Palomino, Juan César; Rodríguez, Juan Gabriel |
| Abstract: | Technological change fuels economic growth, but its impact on wage inequality remains contested. This study presents a unified empirical framework that isolates the effects of new technologies such as automation and AI on the entire wage distribution. We develop a continuous and task-sensitive automation index and propose a distributional counterfactual-based method. Applying the approach to Spanish micro-data for 2000-2019 and instrumenting technology variables, we find automation to be a key driver of inequality: without task displacement the Gini coefficient would be 21.5% lower and significant wage shares would shift from the top 10% towards middle and bottom groups. Automation is found to barely affect the gender gap in the period studied, yet to widen the education premium. Like automation, AI exposure increases inequality, although the mechanisms to impact wages differ: automation tends to negatively impact wages in the middle of the distribution, while AI tends to increase wages at the top. Trade, offshorability, educational attainment, employment rates and mark-ups play secondary, period-specific roles. The results can inform policies on skill formation and inclusive innovation. |
| Keywords: | automation; AI; wage inequality; structural change; job tasks |
| JEL: | O33 D33 J21 J24 J31 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137287 |