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on Innovation |
| By: | Paolo Castelnovo (University of Insubria and Fondazione Eni Enrico Mattei); Cinzia Lombardo (PTSCLAS); Valentina Morretta (University of Milan) |
| Abstract: | This paper evaluates the effectiveness of a public policy intervention introduced by the Italian government to support the economic valorization of patents held by small and medium-sized enterprises (SMEs). Using original survey data collected in 2025, the analysis compares firms that benefited from the measure during the 2020-2021 calls with a control group of comparable non beneficiary firms. The study examines patenting behavior, strategies for patent valorization, perceived obstacles, and innovation-related outcomes beyond traditional financial indicators. The results show that the measure effectively increases patenting activity and supports technological maturation, particularly for smaller, younger, and more resource-constrained firms, without crowding out private investment. Rather than directly boosting short-term financial performance, the measure acts as an enabling instrument by strengthening internal capabilities, know-how, and innovation processes, helping firms bridge the gap between invention and market readiness. While impacts on internationalization and market-based patent valorization remain limited, the intervention represents an effective component of a broader SME-oriented innovation policy mix. |
| Keywords: | Patents, Patents valorization, Public Policy, Business performance |
| JEL: | O30 O31 O34 O38 L38 P14 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:fem:femwpa:2026.18 |
| By: | Bardhi, Arjada; Callander, Steven |
| Abstract: | We develop a model of directed Bayesian search over a multi-dimensional landscape of available ideas, consisting of two fields of knowledge as well as their combinations. Success of ideas is represented by the sample paths of a Brownian staple, an extension of the Brownian motion framework of Callander (2011) to higher dimensions. We characterize prediction and optimal search by a sequence of short-lived researchers. Prediction is complex: predicting the outcome of any novel idea generically requires considering the entire set of previously explored ideas. Derivative research plays a pivotal role in mitigating such complexity. We demonstrate that optimal frontier search is gradual, advancing at most one field at a time by combining a familiar idea from one field with a novel idea from another. These search dynamics align with observed patterns in patent innovation, drug discovery, and scientific citations. |
| JEL: | D81 D83 C61 O31 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21350 |
| By: | Elert, Niklas (Institute of Retail Economics (HFI)); Henrekson, Magnus (Research Institute of Industrial Economics (IFN)) |
| Abstract: | To bolster entrepreneurship and innovation in welfare service provision, numerous countries have established quasi-markets. Yet, the actual benefits from these reforms have often been modest. We posit that quasi-markets can realize their potential only within the appropriate institutional framework, which highlights the need for studies in the field of institutional economics that identify how best to regulate quasi-markets so that they deliver in line with these expectations. While competition and the presence of for-profit actors are necessary conditions for quasi-market improvements, they alone are insufficient. We illustrate this point by showing how the three leading entrepreneurship conceptions—Knightian, Kirznerian, and Schumpeterian—risk falling short of their potential in typical quasi-market setups. Most importantly, we identify the need for a set of complementary institutions that are epistemic in nature. Such reforms should help bolster (Knightian, Kirznerian, and Schumpeterian) quasi-market entrepreneurship and help users construct the requisite knowledge to make informed choices. |
| Keywords: | Entrepreneurship; Innovation; Marketized care; Quasi-markets; Welfare services |
| JEL: | H42 H44 H75 I22 I28 L88 O31 |
| Date: | 2026–06–15 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1562 |
| By: | Caprettini, Bruno |
| Abstract: | Can state-sponsored industrial espionage promote innovation and lead to self-sustained growth? I study the effect of 18th-century French industrial espionage on French innovation and industrial activity in the 19th century. Between 1730 and 1800 the French Bureau of Commerce promoted an ambitious plan aimed at stealing from Britain the new technologies of the Industrial Revolution, bribing British entrepreneurs and inventors to leave England and bring their expertise to France. I assemble a novel database with a comprehensive list of French espionage and combine it with newly digitized 17th- and 18th-century industrial surveys, 1800s industrial censuses, and the full list of early French patents. I find large, positive, and persistent effects of industrial espionage on industrial activity and innovation. |
| Keywords: | France |
| JEL: | O33 O14 N73 F63 O38 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21551 |
| By: | Bernardo Ribeiro (Einaudi Institute for Economics and Finance (EIEF)) |
| Abstract: | This paper proposes a semi-endogenous growth theory that incorporates technology vintages and the endogenous evolution of multiple technological paradigms through innovation. It provides a characterization of both balanced growth equilibrium and transitional dynamics in an environment where new technologies continuously emerge. From a positive perspective, the model rationalizes two distinct empirical patterns. Using two centuries of US patent data, I first document that the age profile of patents has a pronounced hump shape: most contemporary patents build upon technologies that are between 50 and 100 years old. Second, this age profile has remained stable throughout the past century. From a normative standpoint, the theory underscores a misallocation of research effort induced by the tendency among profit-maximizing firms to overinvest in further developing mature technologies. This yields a suboptimally slow development of emerging technologies. According to a calibrated version of the model, correcting such misallocation could generate welfare gains of 7%. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2515r2 |
| By: | Fassio, Claudio (University of Pisa); Mattsson, Pauline (CIRCLE, Lund University); Geuna, Aldo (University of Torino); Igna, Ioana (Copenhagen Business School) |
| Abstract: | International university-industry collaboration expands access to heterogeneous knowledge environments but simultaneously raises coordination costs that may impede the deep, exploratory exchange needed to produce genuinely novel science. This paper examines the relational conditions under which geographically dispersed firm-academia collaborations generate knowledge novelty. We argue that social proximity, operationalized as prior shared institutional affiliation between AstraZeneca researchers and their academic collaborators, serves as a critical enabling mechanism, particularly under geographic distance, where institutional and cultural frictions are highest. Using a longitudinal dataset of 17, 522 co-authored publications by AstraZeneca scientists from 2000 to 2020, we measure novelty through word-embedding indicators capturing both recombination novelty and element novelty. Exploiting the within-firm variation across AstraZeneca's globally distributed R&D network, we test whether the novelty-enhancing effect of social ties is stronger in international than in domestic academic collaborations. Results support an asymmetric substitution mechanism: prior social ties are positively associated with novelty specifically in international collaborations, where they compensate for the absence of spatial and institutional proximity, but not in domestic ones. These findings refine the proximity literature's substitution hypothesis and contribute to the understanding of how multinational firms organize knowledge recombination across geographically dispersed innovation networks. |
| Keywords: | International university-industry collaborations; Novelty; Social proximity; Geographic proximity; R&D sites |
| JEL: | D83 F23 I23 L24 L65 O32 |
| Date: | 2026–07–02 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:lucirc:2026_007 |
| By: | Manassé Drabo; Horatio M. Morgan |
| Abstract: | This paper examines the impact of cultural and industrial diversity on innovation across 152 Canadian urban areas from 2001 to 2021. By applying a knowledge spillover lens, it associates such diversity with enhanced knowledge variety and diffusion. Using inventor counts and Shannon indices as proxies for innovation and diversity, the authors show that cultural and industrial diversity fosters innovation. An increase of one standard deviation in cultural diversity raises innovation by 13.4% to 81.7%, while the same increase in industrial diversity raises it by 6.6% to 36.6%. Their interaction synergistically yields an additional 2.2% to 12.4% increase in innovation. Meanwhile, recent immigration diversity amplifies these effects, validating the knowledge mechanisms and highlighting significant theoretical and policy implications. |
| Keywords: | cultural diversity, immigration, industrial structure, innovation, knowledge spillovers |
| JEL: | J23 M21 |
| Date: | 2025–11–26 |
| URL: | https://d.repec.org/n?u=RePEc:stc:stcp8e:20250110003e |
| By: | Bilgin, Nuriye Melisa; Ottaviano, Gianmarco |
| Abstract: | Do the determinants of technology adoption depend on technological architecture? Using administrative data on Turkish firms from 2021 to 2024, we compare the adoption of traditional and generative artificial intelligence (GenAI). We show that GenAI adoption is driven by workforce skill intensity and is not positively associated with firm size, whereas traditional AI depends on both scale and skills. Firms that adopt both technologies are distinct and represent the most persistent adoption mode. Conditional on adoption, the skill-to-size ratio governs technology choice, and transition dynamics indicate a sequential process in which firms adopt GenAI before expanding to hybrid use. Exploiting the release of ChatGPT as a quasi-experimental reduction in access costs, we find that high-skill firms differentially increased GenAI adoption, while firm size played a limited role. These results suggest that the canonical size-based diffusion pattern is not universal but depends on the cost structure of technologies, with implications for innovation policy and productivity dispersion. |
| Keywords: | Artificial intelligence |
| JEL: | O33 L25 D22 O14 J3 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21506 |
| By: | Cervellati, Matteo; Lazzaroni, Sara; Marciante, Gianni; Masella, Paolo |
| Abstract: | The roots of sustained growth in England are increasingly located in the period from the Scientific Revolution to the Age of the Enlightenment. Productivity increases have been suggestively linked to the development of communication infrastructures and the diffusion of useful knowledge. In this paper, we isolate the empirical impact of the evolution of the postal system in England and Wales over the period 1570-1769 on interpersonal communication exchanges in the context of the Republic of Letters. We exploit a quasi-natural experiment due to a postal system reform leading to the opening of the pre-existing network to the public in 1635. We build a novel geo-referenced database involving about 56, 000 letters by roughly 9, 000 correspondents. Using difference-in-differences, we show that the reform led to a substantial increase in interpersonal communications. The main findings are confirmed by event-study analyses and an instrumental-variables strategy, bolstering confidence in a causal interpretation of our estimates. Looking at the patterns of interactions, we detect a sizable intensification of communications between scholars and professionals. We collect the content of around 30, 000 letters, classify their topics exploiting unsupervised text analysis, and detect a sizable impact of the reform on the evolution of communications related to useful knowledge. Finally, drawing on biographical data, we document the effects on innovation activities. Taken together, the findings provide the first systematic evidence of the role of the postal system for the rise of the Knowledge Economy in England on its way to the Industrial Revolution in the early modern period. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21550 |
| By: | Christophe André; Matthias Schief |
| Abstract: | Demographic headwinds are set to weaken economic growth in OECD countries over the coming decades. At the same time, artificial intelligence (AI) provides opportunities for productivity gains, potentially alleviating labour shortages and boosting economic growth. However, little is known about how exposure to AI varies over the life cycle and what this may imply for AI deployment in ageing societies. This paper shows, using OECD Programme for the International Assessment of Adult Competencies (PIAAC) data, that workers’ overall exposure to AI (automation and augmentation) exhibits an inverted U-shaped pattern across age groups, albeit less pronounced when controlling for education, occupation and country. Exposure to automation is higher in younger age groups and declines rapidly with age, as experience tends to complement AI. Nevertheless, as a general-purpose technology, AI is bound to be disruptive. Reaping its benefits will require labour market reallocation, reskilling and upskilling, and business dynamism and innovation, which may all be weaker in ageing societies. |
| Keywords: | ageing, artificial intelligence, business dynamism, demography, economic growth, innovation, labour market policies, lifelong learning, PIAAC, productivity, reskilling, technological change, upskilling |
| JEL: | J08 J11 J24 O33 O40 |
| Date: | 2026–07–06 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ecoaaa:1870-en |
| By: | Klaus Friesenbichler; Agnes Kügler; Andreas Reinstaller (Austrian Productivity Board) |
| Abstract: | Recent evidence suggests that Chinese imports negatively impact firm-level productivity growth in the EU. We argue that this effect is moderated by the technological frontier, as proposed by Acemoglu et al. (2006). Using three distinct measures of the frontier, we examined firm-level data from twenty-three EU countries between 2003 and 2022 and found mixed results. We find that an increase in Chinese import intensity positively affects catching up to a productivity frontier. However, the productivity growth of firms operating in less technologically advanced sectors is adversely affected by an increase in Chinese import competition. The results for the country-level measure of national innovation system performance are inconclusive. We partly attribute the productivity growth slowdown to Chinese import competition which lowers growth of non-frontier firms. The findings also have implications for EU trade policy in the context of centralized negotiations. |
| Keywords: | Import competition, Productivity, Manufacturing, EU, China, Frontier, Productivity slowdown |
| Date: | 2026–04–01 |
| URL: | https://d.repec.org/n?u=RePEc:wfo:wpaper:y:2026:i:727 |
| By: | Bedre Defolie, Ozlem; Biglaiser, Gary; Jullien, Bruno |
| Abstract: | We study a startup’s choice of its "direction of innovation, " how well the technology fits alternative acquirers, and the effects on acquisition outcomes and market dominance. Two horizontally differentiated firms bid to acquire the innovation and then compete in the product market. Firms differ in initial quality stock and in "absorption capabilities, " how effectively the acquired innovation is integrated into their stock. The innovator designs the innovation to intensify bidding by putting firms on a more equal footing, thereby favoring the initially lower-quality firm. As a result, "increasing dominance" is less likely than under exogenous fit. The winner of the innovation is driven primarily by relative absorption capabilities rather than initial quality: the firm with higher absorption capability is more likely to win. The equilibrium innovation direction minimizes industry profit and consumer surplus. In a two-period model, decreasing dominance becomes more likely when the low-quality firm has stronger absorption capabilities. |
| Keywords: | Startup Acquisitions; Direction of Innovation; Decreasing Dominance |
| JEL: | L13 L15 L24 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21361 |
| By: | Melillo, Andrea; Pascali, Luigi; Prem, Mounu; Trento, Francesca Asja |
| Abstract: | What role did the Republic of Letters play in Europe’s transition to sustained innovation? We combine a corpus of digitized correspondence within the Republic of Letters with European aristocratic genealogies, historical postal routes, and a database of notable individuals to trace the diffusion and consequences of Enlightenment correspondence between 1600 and 1850. We first show that the Republic spread, in part, through aristocratic kinship networks: aristocrats connected to already participating peers entered earlier, and their probability of entry declined sharply with network distance. To isolate a causal channel, we exploit changes in postal distances along pre-existing kinship paths to already-inoculated aristocrats, while controlling directly for local postal access. We then aggregate this variation to European grid cells and estimate the effect of exposure to the Republic on the rise of applied science, innovation, and economic activity. Cells instrumented into the Republic experienced a near- doubling in applied scientists and inventors roughly three decades after first contact, with no pre-trends and effects concentrated in scientific and technical correspondence rather than religion or philosophy. |
| JEL: | N13 O31 O33 Z13 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21562 |
| By: | Costas Arkolakis (Yale University and NBER); Sun Kyoung Lee (University of Michigan); Michael Peters (Yale University and NBER) |
| Abstract: | Between 1880 and 1920, more than 20 million immigrants settled in the United States. We study how this migration wave affected innovation and growth. Using a newly constructed dataset linking individual census records to historical immigration records and the universe of US patents, we highlight a new channel through which immigrants contributed to growth: they disproportionately settled in urban innovation hubs. To quantify the aggregate and regional effects of this mass migration episode, we develop a new spatial growth model in which skilled workers have a comparative advantage in innovation and sort endogenously across space. We find that international arrivals after 1880 raised US income per capita by 8.2% by 1940. Removing the subsequent immigration restrictions of the 1920s would have raised income per capita by a further 1.7% by 2000. Immigrants' skill composition and their concentration in urban hubs are key drivers of these effects. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2538 |
| By: | Murillo Campello; Guilherme Junqueira |
| Abstract: | Do tax subsidies prompt investors to take on risk? We address this question by looking at investors' responses to changes to the Qualified Small Business Stock (QSBS) program, which reduces capital gains taxes on startup investing. We do so under a framework in which some startup investors — venture capitalists (VCs) — combine outside funding with incentive-based compensation, while others invest their own funds. Using bunching, triple-differences, and matching designs that exploit industry eligibility, investment vintage, and holding-period requirements, we analyze data from 158 thousand investor–firm pairings over two decades. We identify strategic investment timing, with subsidies prompting bunching at tax-eligible holding-period thresholds. Most notably, when and where tax subsidies apply, VCs shift their project selection toward riskier ventures: they invest more in pre-commercial stage startups, become more likely to provide startups with their initial capital, and invest more in startups with pre-existing debt, while becoming less likely to co-syndicate their investments. Tax-subsidized VC-backed ventures show higher failure rates, but on the flip side, attain higher valuations at exit and are more likely to reach "unicorn status." None of these patterns are observed for comparable non-VC investors in startups exposed to the same tax subsidies. Our tests further show that tax incentives lead to reallocation toward more innovative industries, yielding more impactful patents. Our study is the first to show that tax policy can shift entrepreneurial financing toward riskier, more innovative, and valuable startups. |
| JEL: | G23 G24 H25 O31 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35418 |
| By: | Hankui Wang (Université Côte d'Azur, CNRS, GREDEG, France); Jiachen Yi (School of Economics, University of Bristol, United Kingdom); Philipp Harting (Université Côte d'Azur, CNRS, GREDEG, France) |
| Abstract: | Artificial Intelligence (AI) is adopted far faster by individuals than by organisations, yet most diffusion models treat both populations as homogeneous and independent. We develop an extended Bass model with heterogeneous archetypes, bidirectional cross-group spillovers, endogenous barrier decay, and productivity feedback. Base parameters are estimated from survey data on individual and organisational AI adoption across 45 countries (2020-2025); the extended model is calibrated and simulated over ten years. Two findings emerge: cross-group spillover from individual to organisational adoption is the dominant diffusion accelerator in the cross-country evidence, while within-group imitation is undetectable in the current two-year panel; and heterogeneity generates a 5.2-year spread across firm archetypes in time to 50% adoption, capturing most of the 6-year empirical firm-size gap. The calibrated model simulates overall organisational AI adoption reaching 50% by 2029 and 74% by 2033 under the benchmark calibration, translating into sustained productivity growth. Education and training delivers the largest adoption gain per unit of intervention intensity, while direct subsidies most effectively narrow the adoption gap between large and small firms. |
| Keywords: | artificial intelligence; technology diffusion; Bass model |
| JEL: | O33 O31 O38 O53 O14 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2026-16 |
| By: | Dermot P. Coates (Head of the Irish Government Economic and Evaluation Service (IGEES)) |
| Abstract: | This paper examines the evolving role of State Aid within the European Union’s Single Market, with a focus on the expansion of the Important Projects of Common European Interest (IPCEI) instrument. While State Aid is generally restricted due to its potential to distort competition, recent economic and geopolitical pressures have prompted a more flexible approach across the EU. The analysis examines how successive crises, from COVID 19 to supply chain disruption and the green and digital transitions, have reshaped EU industrial policy and intensified the use of IPCEIs alongside other instruments, to address market failures and support breakthrough innovation. Using EU State Aid expenditure data, the paper highlights widening divergences in State Aid between larger and smaller Member States and assesses the implications for competitiveness and the cohesion of the level playing field. The study evaluates Ireland’s limited engagement with IPCEIs to date, the fiscal constraints shaping participation of smaller countries, and recent policy commitments aimed at increasing involvement. It argues that while IPCEIs present significant opportunities for technological innovation, they also carry risks of market fragmentation and an emerging subsidy race. The paper concludes by outlining policy options to strengthen Ireland’s strategic positioning within an evolving EU State Aid landscape. |
| Keywords: | Competition, Competitiveness, Subsidies, State Aid, Single Market, European Union, Ireland |
| JEL: | E02 F02 F13 H25 H32 |
| Date: | 2026–06–23 |
| URL: | https://d.repec.org/n?u=RePEc:ucd:wpaper:202602 |
| By: | Döttling, Robin; Emery, Logan P.; Zhao, Shuo |
| Abstract: | Generative AI has the potential to transform corporate innovation, but intellectual property (IP) created without sufficient human input is ineligible for protection by IP systems. We model a firm's choice of AI versus human-capital use when investing in innovation, with IP protection granted based on a noisy signal of human-capital use. We derive the IP policy's effect on incentives and characterize when the IP system can "kill" AI use. Alternatively, low AI costs can "kill" the IP system or shift its role to providing a human-capital subsidy, depending on signal noise and the social value of human-capital use in innovation. When consumers value human-created works, human-capital use is distorted by an adverse selection discount. The IP policy can mitigate this by deterring high-cost firms' investment, or by acting as a credible signal of incentives for human-capital use that triggers a positive feedback loop through consumer beliefs. |
| Keywords: | Generative AI; Innovation; Copyright; Intellectual property protection; Adverse selection |
| JEL: | G31 G38 O31 O34 O38 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21399 |
| By: | Michael Peneder |
| Abstract: | Amid widening gaps in innovation and productivity growth, growing geopolitical tensions, and high ambitions for green and digital transitions, industrial policy has re-emerged as a central pillar of European strategy. This paper traces its evolution from post-war sectoral interventions through decades of market-led deregulation, to the current integrated approach embodied in the EU's Competitiveness Compass and supporting instruments. It argues for a development perspective centred on the economy's capacity to adapt and innovate. Organised around three complementary pillars of evolutionary change, this involves fostering novelty through innovation policies, accumulating productive resources (including human capital and infrastructure) and shaping the selection environment through regulation and market integration. The paper examines key policy instruments, including Important Projects of Common European Interest (IPCEIs), FDI-screening and the Carbon Border Adjustment Mechanism (CBAM). Key challenges and limitations include the persistent fragmentation and weak coordination between member states, inadequate funding mechanisms, and mounting conflict between competitive and protectionist approaches. An integrated approach is advocated, leveraging the Single Market, rule-based governance, and Europe's institutional diversity in order to scale up successful strategies, securing long-term competitiveness and strategic autonomy. |
| Keywords: | Industrial policy, Competitiveness, Transformation |
| Date: | 2026–03–30 |
| URL: | https://d.repec.org/n?u=RePEc:wfo:wpaper:y:2026:i:726 |
| By: | de Pleijt, Alexandra; Koschnick, Julius; Wallis, Patrick |
| Abstract: | We provide evidence that education contributed to England’s Industrial Revolution by increasing upper-tail human capital. Contrary to the prevailing view that schooling was irrelevant to early industrialization, we show that the expansion of schooling lowered barriers to entering apprenticeships in skill-intensive trades. We introduce new parish-level data on 3, 000 school foundations, 46, 000 charitable bequests, and 350, 000 apprenticeship contracts between 1711 and 1805. Using a staggered difference-in-differences design exploiting educational endowments through wills, we show that the expansion of schooling increased apprenticeship training, particularly in occupations requiring reading, writing, and mathematical skills that were crucial for the Industrial Revolution. |
| Keywords: | Education; Skill formation; Human capital; Innovation; Industrial revolution |
| JEL: | N13 I21 J24 O14 O33 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21279 |