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on Innovation |
| By: | Pierre-Alexandre BALLAND; Valentina DI GIROLAMO; Florence BENOIT; Julien RAVET; Alexandr HOBZA |
| Abstract: | Fragmentation in the European Union's R&I system is increasingly acknowledged as a major hindrance to its performance. However, theoretical frameworks and empirical evidence remain scarce. This paper introduces a novel complexity-based approach to analyse the competitiveness costs of R&I fragmentation, focusing specifically on hub connectivity as a key metric. Using a comprehensive dataset combining patent records (OECD REGPAT) and scientific publications (OpenAlex) from 2000 to 2023, we examine R&I networks across multiple spatial levels and technological domains. Our analysis identifies three critical findings. First, the European R&I system is much more fragmented compared to the US, with major European hubs showing notably weaker interconnectivity than their US counterparts. Second, we demonstrate that hub connectivity becomes particularly crucial for complex technologies and scientific fields. Third, we find that there is an efficiency gap between the US and Europe in all domains, but it is most pronounced in complex ones, resulting in a substantial competitive disadvantage in strategic sectors. These findings have significant implications for European innovation policy and suggest the urgent need for targeted interventions to enhance cross- regional R&I collaboration in complex technological and scientific domains. |
| Keywords: | Research Fragmentation, Economic Complexity, Inter-Regional Connectivity, Innovation Networks, EU Competitiveness |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2608 |
| By: | Dany Bahar (Center for International Development at Harvard University); Shreyas Gadgin Matha; Ricardo Hausmann (Harvard's Growth Lab); Santiago Segovia (Harvard's Growth Lab) |
| Abstract: | Japan remains one of the world’s most technologically sophisticated economies, yet its labor productivity has been stagnant for more than two decades. This paper investigates the apparent contradiction between Japan’s high R&D intensity and its weak productivity performance by examining the allocation, composition, and effectiveness of innovation across industries. Using industry-level data from the OECD, patent-level data linked across technology and industry classifications, and a set of nine technological taxonomies, we document that Japan disproportionately concentrates R&D in mid-technology manufacturing sectors—such as motor vehicles, electrical equipment, and chemicals—that generate relatively low productivity spillovers. High-technology sectors, including ICT, pharmaceuticals, scientific R&D, and advanced digital services, receive a significantly smaller share of investment and exhibit much higher productivity contributions in other countries. We further show that Japan’s indirect, tax-based system of R&D support reinforces this equilibrium by favoring large incumbents and under-supporting SMEs. We conclude by assessing the potential of Japan’s new 17-sector strategy to reorient the innovation system toward frontier technologies. |
| Keywords: | Japan, innovation, industrial policy |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:glh:wpfacu:269 |
| By: | Enghin Atalay; Ali Hortacsu; Nicole Kimmel; Chad Syverson |
| Abstract: | How do investments in innovation translate into future productivity growth? Empirically answering this question is challenging. R&D spending is an observed input into the innovation process, but mapping it to productivity growth requires assumptions about the depreciation of R&D capital, gestation lags, and how well such expenditures capture true innovative effort (Hall, 2007). Patents, an alternative measure, capture successful innovations but vary widely in novelty (Kelly et al., 2021) and economic value (Kogan et al., 2017). Firms may forgo patenting to preserve secrecy, while others patent strategically to protect existing products even when their underlying innovations are marginal. |
| Keywords: | productivity measurement; innovation |
| JEL: | D24 E31 O31 O47 |
| Date: | 2026–04–20 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:103326 |
| By: | Andrea Bacchiocchi (Department of Economics, Society and Politics, University of Urbino Carlo Bo); Germana Giombini (Department of Economics, Society and Politics, University of Urbino Carlo Bo); Ludovica Segneri (Department of Economics, Society and Politics, University of Urbino Carlo Bo); Francesco Venturini (Department of Economics, Society and Politics, University of Urbino Carlo Bo) |
| Abstract: | Does financial risk affect the firm decision to develop a new technology? We study this issue in the context of the take-off of Artificial Intelligence (AI). Using data on 28, 000 Italian firms (2012–2019) matched with patent records, we find that companies handling higher cash-flow volatility are significantly more likely to innovate in AI. The role of financial risk is weaker for relatively more mature technologies, suggesting that firms more subject to financial uncertainty are more willing to undertake innovation in high-uncertainty, high-reward domains and drive frontier technological change. |
| Keywords: | Artificial Intelligence, Financial risk, Cash-flow volatility, Technological uncertainty. |
| JEL: | O31 G32 L25 C23 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:anc:wmofir:199 |
| By: | Ethan Kapstein; Javier Ospital; Guntram Wolff |
| Abstract: | Battlefields are rapidly evolving, with new technologies reshaping military strategy and tactics. Many of the new technologies originate in firms outside the traditional defence sector, rather than with the existing prime contractors. In the United States, the Department of Defense (DoD) created the Defense Innovation Unit (DIU) in 2015 to incentivise commercial tech companies to work on national security challenges. How successful has this new unit been in achieving its mission? In this article, we provide the first causal evaluation of the DIU’s effects on defence procurement. Using administrative procurement data and a firmlevel panel covering 2017-2025, and employing propensity score matching, additional firmlevel covariates and a staggered difference-in-differences design, we find that the DIU has expanded both the extensive and intensive margins of defence contracting. We find not only a significant increase in the likelihood of receiving a DoD contract because of DIU treatment, but also in the size of the contract. Our findings show that defence innovation organisations can broaden and deepen the defence-supplier base. Governments updating their defence acquisition strategies in response to the lessons from recent wars can benefit from reforms that facilitate firm entry into procurement, overcoming the transaction cost and information asymmetry problems typical in defence markets. |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:eca:wpaper:2013/407485 |
| By: | Guy Lalanne (Organisation for Economic Co-operation and Development (OECD) Directorate for Science, Technology, and Innovation); Antoine Dechezlepretre (Organisation for Economic Co-operation and Development (OECD) Directorate for Science, Technology, and Innovation); Won Hee Cho (Organisation for Economic Co-operation and Development (OECD) Directorate for Science, Technology, and Innovation) |
| Abstract: | Industrial policy has returned to the forefront of economic policy discussions, driven by the green and digital transitions, supply-chain resilience, and concerns about market concentration and strategic dependencies. This paper argues that the recent surge in industrial-policy discourse and announcements exceeds the expansion of measurable support. Semantic analyses of the Global Trade Alert database indicate a steep increase in announced measures (from 42 in 2010 to 1, 483 in 2022).<p> Using the OECD Quantifying Industrial Strategies (QuIS) database for 17 OECD economies from 2019 to 2023, the paper documents three stylized facts. First, spending through grants and tax expenditures rose by about 10 percent on average (from 1.39 percent to 1.59 percent of GDP), whereas support delivered via financial instruments declined slightly (from 0.97 percent to 0.87 percent of GDP). Second, industrial policy instruments are highly persistent, with limited entry and exit. Third, the observed targets of support have shifted, with expanded schemes related to fixed-capital investment, the green transition, R&D activities, energy costs, and SMEs, alongside reduced sectoral support.<p> The paper then sets out how to design and govern industrial policy using an OECD policy-cycle lens: a clear conceptual framework and objectives, coordination across policy actors and instruments, robust measurement and benchmarking, implementation capacity, and rigorous ex post evaluation. It concludes by emphasizing the need to strengthen evidence on beneficiaries, large-firm subsidies, and cross-border spillovers to ensure industrial policy supports productivity, resilience, and sustainable growth. |
| Keywords: | industrial policy; economic security; OECD; Quantifying Industrial Strategies; QuIS |
| JEL: | L52 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kieter:022555 |
| By: | Paula Arias; Vanya Georgieva; Rahul Giri; Maria González-Miranda; Mr. Ashique Habib; Anne-Charlotte Paret; Tatjana Schulze; Arthur Xie; Weining Xin; Yichen Xu; Dilan Yang |
| Abstract: | This paper provides a first comprehensive assessment of industrial policy (IP) across Asia‑Pacific and its potential to enable structural transformation. Building an IP database for 2009–2024, paired with a rich dataset, the paper documents a large wave of IP interventions. Subsidies dominate, followed by import-limiting measures. Novel applications of machine‑learning and clustering approaches to assess IP targeting suggest that, ex-ante, about three-quarters of IP could align with structural transformation strategies, including relatively safe (“safe-bets”) and risky (“moonshots”) strategies promoting technological upgrading and diversification, and strategies to alleviate market‑frictions and distortions in key sectoral nodes. IP’s ex-post linkages to trade, competitiveness, and domestic firms’ indicators are small and short‑lived; sustained gains that could lead into structural transformation appear only sporadically. Our findings underscore the need for a more parsimonious and carefully‑designed IP—anchored to targeting clear market‑failure rationales and complemented by ambitious structural reforms—potentially enhancing effectiveness and lowering net costs. |
| Keywords: | Industrial Policies; Asia; Pacific; Structural Transformation; Economic Performance; Exports; Productivity |
| Date: | 2026–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/101 |