nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2006‒02‒26
twelve papers chosen by
Roberto Fontana
Universita Bocconi

  1. The Effects of Entry on Incumbent Innovation and Productivity By Philippe Aghion; Richard Blundell; Rachel Griffith; Peter Howitt; Susanne Prantl
  2. Perception and pursuit of entrepreneurial opportunities: an evolutionary economics perspective By G. Buenstorf
  3. Identifying technology spillovers and product market rivalry By Nick Bloom; Mark Schankerman; John Van Reenen
  4. Innovation and the evolution of industries By Franco Malerba
  5. "Stacking" or "Picking" Patents? The Inventors' Choice Between Quantity and Quality By Myriam Mariani; Marzia Romanelli
  6. Persistence of Innovation in Dutch Manufacturing: Is it Spurious? By Wladimir Raymond; Pierre Mohnen; Franz Palm; Sybrand Schim van der Loeff
  7. Strengthening Innovation in the Netherlands: Making Better Use of Knowledge Creation in Innovation Activities By David Carey; Ekkehard Ernst; Rebecca Oyomopito; Jelte Theisens
  8. The R&D Kiss of Death: Empirical Evidences on Failed Cooperation By Stéphane Lhuillery; Fabrice Galia
  9. Do innovation vouchers help SMEs to cross the bridge towards science? By Maarten Cornet; Björn Vroomen; Marc van der Steeg
  10. R&D in the Pharmaceutical Industry: A World of Small Innovations By Beatriz Domínguez; Juan José Ganuza; Gerard Llobet
  11. Market Power, Brand Characteristics and Demand for Retail Grocery Products By Paul H. Jensen; Elizabeth Webster
  12. African small and medium enterprises, networks, and manufacturing performance By Shah, Manju Kedia; Biggs, Tyler

  1. By: Philippe Aghion; Richard Blundell; Rachel Griffith; Peter Howitt; Susanne Prantl
    Abstract: How does firm entry affect innovation incentives and productivity growth in incumbent firms? Micro-data suggests that there is heterogeneity across industries--incumbents in technologically advanced industries react positively to foreign firm entry, but not in laggard industries. To explain this pattern, we introduce entry into a Schumpeterian growth model with multiple sectors which differ by their distance to the technological frontier. We show that technologically advanced entry threat spurs innovation incentives in sectors close to the technological frontier--successful innovation allows incumbents to prevent entry. In laggard sectors it discourages innovation--increased entry threat reduces incumbents' expected rents from innovating. We find that the empirical patterns hold using rich micro-level productivity growth and patent panel data for the UK, and controlling for the endogeneity of entry by exploiting the large number of policy reforms undertaken during the Thatcher era.
    JEL: E2
    Date: 2006–02
  2. By: G. Buenstorf
    Abstract: Considerable debate surrounds the concept of entrepreneurial opportunities. This paper contributes to the discussion by bringing in concepts and findings from evolutionary economics. It makes three points. First, adopting an evolutionary market process perspective sheds new light on the nature of opportunities. Second, not only the pursuit of entrepreneurial opportunities, but also the further development of the entrepreneurial venture is dependent on subjective opportunity perception and interpretation. Third, findings on industry evolution help understand how opportunities, as well as agents’ ability and willingness to pursue them, change over time. Effects of pre-entry experience on opportunity recognition and firm performance are also discussed.
    Keywords: opportunities, market process, business conceptions, industry evolution, spin-offs
    JEL: B25 D21 M13 L10
    Date: 2006–01
  3. By: Nick Bloom; Mark Schankerman; John Van Reenen
    Abstract: Support for many R&D and technology policies relies on empirical evidence that R&D "spills over" between firms. But there are two countervailing R&D spillovers: positive effects from technology spillovers and negative effects from business stealing by product market rivals. We develop a general framework showing that technology and product market spillovers have testable implications for a range of performance indicators, and exploits these using distinct measures of a firm's position in technology space and product market space. We show using panel data on U.S. firms between 1981 and 2001 that both technology and product market spillovers operate, but that net social returns are several times larger than private returns. The spillover effects are also revealed when we analyze three hightech sectors in detail - pharmaceuticals, computer hardware andtelecommunication equipment. Using the model we evaluate three R&Dsubsidy policies and show that the typical focus of support for small and medium firms may be misplaced.
    Keywords: Spillovers, R&D, market value, patents.
    JEL: F23
    Date: 2005–01
  4. By: Franco Malerba (CESPRI, Università Bocconi, Milano, Italy)
    Abstract: The analysis of innovation and the evolution of industries evolution has witnessed major progress in several areas. Contributions at the empirical, appreciative, econometric and modelling levels have greater advanced our understanding of innovation, industrial dynamics and the different evolution of industries. The main part of the paper is centred around four challenges that are required for a better understanding of the relationship between innovation and the evolution of industries: the analysis of demand, knowledge, networks and coevolution.
    Keywords: Innovation; Industrial Dynamics; Demand; Networks; Knowledge
    JEL: L1 L6 O32
    Date: 2005–07
  5. By: Myriam Mariani; Marzia Romanelli
    Abstract: This paper studies the determinants of the quantity and quality of inventors’ patents. It uses a sample of 793 inventors drawn from the PatVal-EU dataset and the information on EPO patents that they contributed to inventing during the period 1988-1998. It explores three aspects of the inventors’ productivity: 1) the number of EPO patents that they produce; 2) their average quality; 3) the quality of the most valuable patents. By jointly estimating the three equations we find that the inventors’ level of education, employment in a large firm and involvement in large-scale research projects positively affect quantity. Yet, apart from the size of the research project, none of these factors directly influences the expected quality of the innovations. They do, however, indirectly, as we find that the number of innovations explains the probability of producing a technological hit (the maximum value). Also, there are no decreasing returns in the innovation process at an individual level, as the number of innovations that an inventor produces is not correlated with their average quality.
    Keywords: Productivity, Industrial inventors, Patent quality
    Date: 2006–02–14
  6. By: Wladimir Raymond; Pierre Mohnen; Franz Palm; Sybrand Schim van der Loeff
    Abstract: This paper studies the persistence of innovation and the dynamics of innovation output in Dutch manufacturing using firm data from three waves of the Community Innovation Surveys (CIS), pertaining to the periods 1994-1996, 1996-1998, and 1998-2000. We estimate by maximum likelihood a dynamic panel data type 2 tobit model accounting for individual effects and handling the initial conditions problem. We find that there is no evidence of true persistence in achieving technological product or process innovations, while past shares of innovative sales condition, albeit to a small extent, current shares of innovative sales. <P>Cette étude analyse la persistance et la dynamique de l’innovation dans les entreprises manufacturières néerlandaises à partir des données de trois vagues d’enquêtes communautaires sur l’innovation (ECI), portant sur les périodes 1994-1996, 1996-1998 et 1998-2000. Nous estimons par la méthode du maximum de vraisemblance un modèle tobit de type II dynamique sur données de panel avec effets individuels et traitement explicite des conditions initiales. Nous concluons qu’il n’y a pas de véritable persistance dans le fait d’innover en produits ou en procédés, mais que les observations passées des parts du chiffre d’affaires en produits innovants influencent, quoique faiblement, les données contemporaines de ces parts.
    Keywords: dynamic panel data type 2 tobit, innovation, spurious persistence, modèle tobit de type II dynamique, données de panel, persistence, innovation
    JEL: C33 C34 O31
    Date: 2006–02–01
  7. By: David Carey; Ekkehard Ernst; Rebecca Oyomopito; Jelte Theisens
    Abstract: Strengthening the innovation system in the Netherlands is a priority for raising productivity growth, which has been relatively weak in recent years. Knowledge creation in the Netherlands is strong -- scientific publications per capita are the sixth highest in the OECD -- but innovation activity is only around the average for OECD countries according to the EIS Summary Innovation Index. The main weaknesses are in business R&D intensity, the share of the population with tertiary education, and in commercially applying new knowledge. This paper discusses reforms being implemented to overcome these weaknesses and suggests directions for building on such reforms. Co-operation between public research organisations and innovating firms is being strengthened, support for innovation is being rationalised and measures are being taken to increase both the current and prospective supply of scientists and engineers with a view to making the Netherlands a more attractive location for R&D investments. To increase the tertiary attainment rate, the authorities are considering introducing shorter tertiary courses and are experimenting with greater competition among tertiary education suppliers for public funds. To strengthen performance in commercial application of new knowledge, barriers to entrepreneurship are being reduced but more should be done to strengthen incentives for entrepreneurship. This Working Paper relates to the 2005 OECD Economic Survey of the Netherlands ( <P>Renforcer l’innovation aux Pays-Bas Il est essentiel de renforcer le système d’innovation aux Pays-Bas pour y relancer la croissance de la productivité, qui est relativement faible depuis quelques années. La création de connaissances est dynamique aux Pays-Bas -- qui se classe au sixième rang des pays de l’OCDE en termes de publications scientifiques par habitant -- mais les activités d’innovation se situent simplement aux alentours de la moyenne de la zone OCDE, d’après l’indice de synthèse de l’innovation (ISI) du tableau de bord européen de l’innovation (TBEI). Les principaux points faibles résident dans l’intensité de recherche-développement (R-D) des entreprises, la proportion de la population diplômée de l’enseignement supérieur, et l’exploitation commerciale des nouvelles connaissances. Ce document examine les réformes mises en ?uvre actuellement dans le but de remédier à ces faiblesses, et propose des orientations en vue d’aller plus loin. Pour l’heure, la coopération entre les organismes de recherche publics et les entreprises innovantes est renforcée, le système de soutien à l’innovation est rationalisé, et des mesures sont prises pour accroître l’offre, tant actuelle que future, de scientifiques et d’ingénieurs en vue de faire des Pays-Bas un site plus attractif pour les investissements de R-D. Afin de relever le taux de diplômés de l’enseignement supérieur, les autorités envisagent de mettre en place des formations supérieures plus courtes et ont décidé, à titre expérimental, de faire davantage jouer la concurrence entre les fournisseurs de services d’enseignement supérieur pour l’attribution des fonds publics. Afin d’améliorer les résultats obtenus en matière d’exploitation commerciale des nouvelles connaissances, les pouvoirs publics s’emploient à réduire les obstacles à l’entrepreneuriat, mais il faudrait aller plus loin pour stimuler l’esprit d’entreprise. Ce document de travail complète l’Étude économique consacrée aux Pays-Bas par l’OCDE en 2005 (
    Keywords: réforme de la réglementation, regulatory reforms, innovation, innovation, Netherlands, Pays-Bas, product market competition, concurrence sur les marchés de produits, factor analysis, analyse factorielle, tertiary education, intellectual property rights, droit de propriété intellectuelle, patents, scientists and engineers, public research organisations, brevets, scientifiques et ingénieurs, entry barriers, enseignement supérieur, migration de travailleurs qualifiés, EIS, TBEI, R-D, R-D, skilled migration, tertiary attainment, taux de diplômés de l'enseignement supérieur, organisme de recherche public, barrières à l'entrée
    JEL: I2 O31 O33 O34 O38 O39 O52
    Date: 2006–02–10
  8. By: Stéphane Lhuillery (Chaire en Economie et Management de l'Innovation, Ecole Polytechnique Fédérale de Lausanne); Fabrice Galia (ERMES – FRE 2887 – CNRS, Université Panthéon-Assas Paris II)
    Abstract: This paper studies failure to R&D cooperation embracing all research ties, those carried out with research organizations (universities, laboratories and research centers) and/or industrial partners, controlling for firms’ characteristics and sample selection thanks to the French Community Innovation Survey. Using a cross-section model on 2375 innovating firms, we address two questions that are still of interest thanks to the scarcity of empirical evidences: the first one is with whom an R&D cooperation failure is more likely to occur. Secondly, is there any learning effect emerging from previous collaboration? Findings show that failures are more likely to occur when partners are customers, public research organizations or competitors. The likelihood to fail is high and similar for R&D partnerships with competitors or PROs. Further investigation suggests that foreign partners are harder to deals with than national ones and those difficulties are centered on R&D cooperation with foreign universities. Regarding learning to cooperate, our results suggest that former R&D links do not lower the probability to fail with a category of partner even if it boosts the likelihood to cooperate. A stronger appropriation regime influences the likelihood to R&D cooperate but also the probability not to fail. We also provide evidences that large firms, especially belonging to groups, and R&D intensive firms are more likely not to encounter a failure in their R&D alliances. Government support is also found negatively correlated with failure likelihood. Finally, we show that cooperation failures cannot be considered independent from the decision to collaborate in R&D.
    Keywords: R&D cooperation, Strategic alliances, Failure, success, universities, CIS
    JEL: O32 L21 C35
    Date: 2006–02
  9. By: Maarten Cornet; Björn Vroomen; Marc van der Steeg
    Abstract: The Dutch innovation voucher aims to stimulate the interaction between small and medium-sized enterprises (SMEs) and public research institutes. This document provides an estimate of the effectiveness of the innovation voucher instrument, employing the fact that the vouchers were assigned randomly by means of a lottery. The main conclusion is that the innovation voucher instrument does stimulate SMEs to engage in many new assignments with public research institutes. Out of every ten vouchers, eight are used for a project that would not have been assigned without such a voucher, one is used for a project that would have been assigned anyhow, and one voucher is not used. An overall assessment of the innovation voucher also needs to take into account the value added of the additional assignments, however. No insights have yet been obtained here.
    Keywords: policy evaluation; innovation; social exper
    JEL: O38 C93
    Date: 2006–02
  10. By: Beatriz Domínguez; Juan José Ganuza; Gerard Llobet
    Abstract: It is commonly argued that in recent years pharmaceutical companies have directed their R&D towards small improvements of existing compounds instead of more risky drastic innovations. In this paper we show that the proliferation of these small innovations is likely to be linked to the lack of market sensitivity of a part of the demand to changes in prices. Compared to their social contribution, small innovations are relatively more profitable than large ones because they are targeted to the smaller but more inelastic part of the demand. We also study the effect of regulatory instruments such as price ceilings, copayments and reference prices and extend the analysis to competition in research.
    Keywords: Health-care, pharmaceuticals, innovation
    JEL: I11 I18 L51 O31
    Date: 2005–12
  11. By: Paul H. Jensen (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Elizabeth Webster (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: This paper examines the effects of market power and product differentiation on demand for grocery products in Australia over the period 2002 to 2005. We construct a model of the relationship between demand, market power and brand characteristics and then estimate the model using monthly data on price, quantity and volume sold for a bundle of 92 brands in 12 product categories from major supermarket stores across Australia. We also use data on the characteristics of each brand such as whether the product is environment-friendly, is a “private label”, or is made from recyclable materials. Our results suggest that firms are able to affect their demand curves through both product differentiation strategies and through market power.
    Date: 2006–02
  12. By: Shah, Manju Kedia; Biggs, Tyler
    Abstract: This paper examines the role of private support institutions in determining small and medium enterprise (SME) growth and performance in Sub-Saharan Africa (SSA). It finds that SMEs in SSA get around market failures and lack of formal institutions by creating private governance systems in the form of long-term business relationships and tight, ethnically-based, business networks. There are important links between these informal governance institutions and SME performance. Networks raise the performance of " insiders " and, in the sparse business environments of the SSA region, have attendant negative consequences for market participation of " outsiders, " such as indigenous African SMEs. This is indicated through the determinants of access to supplier credit. Policy interventions will be needed to improve the platform for relation-based governance mechanisms and to address the exclusionary effects of tight networks.
    Keywords: Economic Theory & Research,Banks & Banking Reform,Business in Development,Business Environment,Technology Industry
    Date: 2006–02–01

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