nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2006‒06‒03
thirteen papers chosen by
Roberto Fontana
Universita Bocconi

  1. How Rapidly Does Science Leak Out? By James D. Adams; J. Roger Clemmons; Paula E. Stephan
  2. An Empirical Analysis of the Propensity of Academics to Engage in Informal University Technology Transfer By Albert N. Link; Donald S. Siegel; Barry Bozeman
  3. The Effectiveness of University Technology Transfer: Lessons Learned from Qualitative and Quantitative Research in the U.S. and U.K. By Phillip H. Phan; Donald S. Siegel
  4. Company R&D and University R&D - How Are They Related? By Charlie Karlsson; Martin Andersson
  5. Technological Characteristics and R&D Alliance Form: Evidence from the U.S. Biotechnology Industry By Xia Wang
  6. Intra-Industry Spinoffs By Peter Thompson; Steven Klepper
  7. Entrant Experience and Plant Exit By Mark Roberts; Shawn Klimek; Timothy Dunne
  8. Firm Entry and Exit in the U.S. Retail Sector, 1977-1997 By Javier Miranda; Shawn Klimek; Ron Jarmin
  9. The Industry Life-Cycle of the Size Distribution of Firms By Glenn MacDonald; Emin Dinlersoz
  10. The Influence of Geographic Clusters and Knowledge Spillovers on the Product Innovation Activities of New Ventures By Brett Anitra Gilbert; Mika Tatum Kusar
  11. Functional Demand Satiation and Industrial Dynamics - The Emergence of the Global Value Chain for the U.S. Footwear Industry By Alexander Frenzel Baudisch
  12. Entrepreneurial capabilities inherited from previous employment By Sierdjan Koster
  13. Are Patents used to Suppress Useful Technology? By Howells, John

  1. By: James D. Adams (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA); J. Roger Clemmons (Institute for Child Health Policy, College of Medicine of the University of Florida); Paula E. Stephan (Georgia State University)
    Abstract: In science as well as technology, the diffusion of new ideas influences innovation and productive efficiency. With this as motivation we use citations to scientific papers to measure the diffusion of science through the U.S. economy. To indicate the speed of diffusion we rely primarily on the modal or most frequent lag. Using this measure we find that diffusion between universities as well as between firms and universities takes an average of three years. The lag on science diffusion between firms is 3.3 years, compared with 4.8 years in technology for the same companies using the same methodology. Industrial science diffuses fifty per cent more rapidly than technology, and academic science diffuses still faster. Thus the priority publication system in science appears to distribute information more rapidly than the patent system, although other interpretations are possible. We also find that the speed of science diffusion in the same field varies by a factor of two across industries. The industry variation turns out to be driven by frictional publication lags and firm size in R&D and science. Friction increases the lag, but firm size in R&D and science decrease it. Industries having a lot of R&D or science and composed of fields with little friction exhibit rapid diffusion. Industries where the reverse is true exhibit slow diffusion.
    JEL: L3 O3
    Date: 2006–05
  2. By: Albert N. Link (Department of Economics, University of North Carolina at Greensboro, NC, USA); Donald S. Siegel (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA); Barry Bozeman (Department of Public Administration and Policy, University of Georgia, Athens, GA 30602, USA)
    Abstract: Formal university technology transfer mechanisms, through licensing agreements, research joint ventures, and university-based startups, have attracted considerable attention in the academic literature. Surprisingly, there has been little systematic empirical analysis of the propensity of academics to engage in informal technology transfer. This paper presents empirical evidence on the determinants of three types of informal technology transfer by faculty members: knowledge transfer, joint publications with industry scientists, and consulting. We find that male and tenured faculty members are more likely to engage in all three forms of informal technology transfer. We also find that academics who allocate a relatively higher percentage of their time to grants-related research are more likely to engage in informal commercial knowledge transfer.
    JEL: M13 D24 L31 O31 O32
    Date: 2006–05
  3. By: Phillip H. Phan (Lally School of Management & Technology, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA); Donald S. Siegel (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA)
    Abstract: In recent years, there have been numerous studies of the effectiveness of university technology transfer. Such technology transfer mechanisms include licensing agreements between the university and private firms, science parks, incubators, and university-based startups. We review and synthesize these papers and present some pointed recommendations on how to enhance effectiveness. Implementation of these recommendations will depend on the mechanisms that universities choose to stress, based on their technology transfer "strategy." For example, institutions that emphasize the entrepreneurial dimension of technology transfer must address skill deficiencies in technology transfer offices, reward systems that are inconsistent with enhanced entrepreneurial activity and the lack of training for faculty members, post-docs, and graduate students in starting new ventures or interacting with entrepreneurs. We conjecture that business schools are best positioned to address these skill and educational deficiencies through the delivery of targeted programs to technology licensing officers and members of the campus community wishing to launch startup firms.
    JEL: M13 D24 L31 O31 O32
    Date: 2006–04
  4. By: Charlie Karlsson; Martin Andersson
    Abstract: At the same time as we can observe strong tendencies of a globalisation of R&D, we also can observe a strong spatial clustering of R&D and related innovative activities. The standard explanation in the literature of the clustering of innovative activities is that such clusters offer external knowledge economies to innovative companies, since they are dependent upon knowledge flows and that knowledge flows are spatially bounded. Obviously, location is crucial in understanding knowledge flows and knowledge production, since knowledge sources have been found to be geographically concentrated. There are two major performers of R&D: industry and universities. It seems rather straight-forward to assume that industrial R&D might be attracted to locate near research universities doing R&D in fields relevant to industry. Already as far back as in the 1960s a number of case studies confirmed the important roles played by Stanford University and MIT for commercial innovation and entrepreneurship. During the years a large number of formal studies have presented evidences of a positive impact of university R&D on firm performance. The question is, does it also work the other way around? Does industrial R&D function as an attractor for university R&D? We may actually think of several reasons why university R&D may grow close to industry R&D. First of all political decision-makers may decide to start or expand university R&D at locations where industry already is doing R&D. Secondly, we can imagine that industry doing R&D in a region might use part of their R&D funds to finance university R&D. Thirdly, universities in regions with industrial R&D might find it easier to attract R&D funds from national and international sources due to co-operation with industry. Obviously, not all types of university R&D attract industrial R&D. There are reasons to believe that, in particular, university R&D in natural, technical and medical sciences attracts industrial R&D but that there are also strong reasons to believe that there are variations between different sectors of industry regarding how dependent their R&D is to be located close to university R&D. The above implies that there are behavioural relationships between industrial R&D and university R&D and vice versa. However, the litrature contains few studies dealing with this problem. Most studies have concentrated on the one-directional effect from university R&D to industrial R&D and the outputs of industrial R&D in most cases measured in terms of the number of patents and neglected the possible mutual interaction. However, if there is a mutual interaction between university and industry R&D, and if there are knowledge externalities involved, then we can develop a dynamic explanation to the clustering of innovative activities based on positive feedback loops. This would imply strong tendencies to path dependency and that policy initiatives to transfer non-innovative regions to innovative regions would have small chances to succeed. The fact that knowledge flows seem to be spatially bounded implies that proximity matters. Most contributions analysing spatial knowledge flows have used very crude measures of proximity. However, there are some authors that have argued that proximity could be measured using accessibility measures. Accessibility measures can be used to model interaction opportunities at different spatial scales: local, intra-regional and inter-regional. The purpose of this paper is to analyse the locational relationship between industry R&D and university R&D in Sweden using a simultaneous equation approach and to analyse existing differences between different science areas and different industry sectors.
    Date: 2005–08
  5. By: Xia Wang (University of Connecticut)
    Abstract: This study seeks to advance and test the knowledge-based theory of the firm as it applies to explaining the governance structure of R&D alliances. Unlike transaction-cost economics, the knowledge-based theory attempts to explain organizational form not primarily in terms of incentive misalignment but in terms of the creation, acquisition, and coordination of productive capabilities. To study the role played by firm-specific technological competencies, I consider three technological characteristics of an alliance: technological similarity, technological relatedness, and technological diversity. With a sample of 111 biotech-biotech R&D alliances, I find that technological relatedness and diversity increase the probability that allying firms would select the higher integration mode. Technological similarity, though, bears a non-monotonic relationship with organizational choice. Overall, the results support the knowledge-based argument that the idiosyncrasy in technological traits influences which type of alliance forms would be selected by allying firms.
    Keywords: technology, governance, alliance, R&D
    JEL: L22 O32 L65
    Date: 2005–08
  6. By: Peter Thompson (Department of Economics, Florida International University); Steven Klepper (Department of Social and Decision Sciences, Carnegie Mellon University)
    Abstract: A growing empirical literature on spinoff formation has begun to reveal some striking regularities about which firms are most likely to spawn spinoffs, when they are most likely to spawn them, and the relationship between the quality of the parent firm and its spinoffs. Deeper investigations into the causes of spinoffs have highlighted the impor-tance of strategic disagreements in driving some employees to resign and found a new venture. Motivated by this literature, we construct a new theory of spinoff formation driven by strategic disagreements, and show how the theory can explain the emerging empirical regularities.
    Keywords: Spinoffs, learning, strategic disagreement
    JEL: L2 D70 D83
    Date: 2006–06
  7. By: Mark Roberts; Shawn Klimek; Timothy Dunne
    Abstract: Producers entering a market can differ widely in their prior production experience, ranging from none to extensive experience in related geographic or product markets. In this paper, we quantify the nature of prior plant and firm experience for entrants into a market and measure its effect on the plant’s decision to exit the market. Using plant-level data for seven regional manufacturing industries in the U.S., we find that a producer’s experience at the time it enters a market plays an important role in the subsequent exit decision, affecting both the overall probability of exit and the method of exit. After controlling for observable plant and market profit determinants, there remain systematic differences in failure patterns across three groups of plants distinguished by their prior experience: de novo entrants, experienced plants that enter by diversifying their product mix, and new plants owned by experienced firms. The results indicate that the exit decision cannot be treated as determined solely by current and future plant, firm, and market conditions, but that the plant’s history plays an important independent role in conditioning the likelihood of survival.
    JEL: L0 L1 L6
    Date: 2004–08
  8. By: Javier Miranda; Shawn Klimek; Ron Jarmin
    Abstract: The development of longitudinal micro datasets in recent years has helped economists develop a number of stylized facts about producer dynamics. However, most of the widely cited studies use only manufacturing data. This paper uses the newly constructed Longitudinal Business Database (LBD) to examine producer dynamics in the U.S. the retail sector. The LBD is constructed by linking twenty-six years (1975-2000) of the U.S. Census Bureau's Business Register at the establishment level. The result is a dataset on the universe of employer establishments in the U.S. on an annual basis with detailed geographic, industry, firm ownership, and employment information. We use the LBD to examine patterns of firm entry and exit in the U.S. retail sector. We find that many of the patterns observed by Dunne, Roberts, and Samuelson (1988) are also observed within the retail sector, but interesting and important differences do exist.
    Keywords: retail sector, entry-exit, longitudinal establishment data
    JEL: L11
    Date: 2004–10
  9. By: Glenn MacDonald; Emin Dinlersoz
    Abstract: This paper analyzes the evolution of the distributions of output and employment across firms in U.S. manufacturing industries from 1963 until 1997. The evolutions of the employment and output distributions differ, but display strong inter-industry regularities, including that the nature of the evolution depends whether the industry is experiencing growth, shakeout, maturity, or decline. The observed patterns have implications for theories of industry dynamics and evolution.
    Keywords: Firm size distribution, industry evolution, industry dynamics, manufacturing industries
    JEL: L11 L60
    Date: 2005–07
  10. By: Brett Anitra Gilbert; Mika Tatum Kusar
    Abstract: Geographic clusters have an impressive track record for producing innovative firms. In this research, we examine whether a geographic cluster location and the knowledge spillovers new ventures assimilate influence both their explorative and exploitative innovation activities. We hypothesize a stronger relationship of industry clustering on exploitative innovations but a stronger relationship of knowledge spillovers on explorative innovations. We expect the interaction will result in more exploitative innovations than explorative innovations. The data support most hypotheses.
    Date: 2006–05
  11. By: Alexander Frenzel Baudisch
    Abstract: Around 1940 Schumpeter draws on an analysis of the U.S. footwear industry as an exemplar case to formulate his famous hypothesis about the positive relation between market concentration and innovative activity. Starting in the 1970s the value chain of U.S. footwear producers disintegrates, eventually separating the process of product innovation from manufacturing in this industry. Studies testing Schumpeter’s hypothesis commonly do not account for the modularity and globalization of an industry’s value chain. Schumpeter having neglected the demand side in his theorizing, we argue that the separation of product innovation and manufacturing in the U.S. footwear industry is influenced by functional satiation effects on demand. If the functional requirements of consumers are met, their willingness to pay for ever more product varieties decreases. Since the early 1970s the ‘oversupply’ of new product varieties and the simultaneously decreasing price level drive market growth beyond functional satiation (Frenzel Baudisch, 2006b). In this paper we argue that this simultaneous price and innovation competition separates the product innovation process from manufacturing to gain economies in both of these processes simultaneously. Discussing the consumers’ motivations to buy products beyond their functional requirements offers a deeper qualitative understanding of the business practices revealed in the historical case of the U.S. footwear industry.
    Keywords: Industrial organization; Schumpeter hypothesis; Modular Value Chain; Consumer Behavior; Footwear Industry
    JEL: B25 F02 L11 L67 O10
    Date: 2006
  12. By: Sierdjan Koster
    Abstract: The start-up process of every firm is unique; backgrounds of the founders differ, the goals of the firm differ, sectors differ. However, in firm demographic research there is a continuing quest for regularities in order to understand the start-up process of firms better. In relation to problems with the new foundings birth rate, an important dimension in the start-up process is the influence of existing firms on the start-up of new ones. Is the new firm an individual effort or is the new firm heavily influenced by another firm? This question can be approached from a organisational and an individual perspective. The organisational view takes the firm as a starting point, whereas the individual perspective focuses on the entrepreneur. Both views allow an analysis of the influence of other firms. Taking the organisational viewpoint, new firms can be classified from totally new entities to diversified parts of large existing firms. The former is a totally new configuration of resources, but the latter heavily builds on existing structures and organisation. The processes are pretty straightforward to recognize as the path history of the firms can be traced back pretty easily. However, little is known about the importance of different groups. How many firms are actual new configurations, and how many built upon existing firms? From the individual viewpoint, the influence of other firms is less easily recognised. Many studies reason along the lines of experience. Firms influence the start-up of new ones by educating their employees and giving them expertise in this way. The entrepreneurs use this to start up their own firm. Experienced founders start better firms than other entrants. Several studies have come up with this logically appealing result. After all, it makes sense that entrepreneurs with a reasonable degree of knowledge about the new firm and its sector will perform better than entrepreneurs with less experience. The experience of founders, however, is usually rather loosely defined and in many cases there is only a dichotomy between sector experience (spin-offs) and entrepreneurship experience (habitual entrepreneurs). At the level of the knowledge itself, very little is known and the mechanisms of knowledge transfer from existing firms to new ones are treated as a black-box. Consequently, the role of existing firms as educational institutes for entrepreneurs is only approximately known. This paper focuses on the question to what extent firms are actually new, or that they can be seen as rearrangements of old firms. Which are the most important resources transferred from firm to firm? Both the organisational approach and the individual are applied. The empirical results are based on a large questionnaire (N=347) of Dutch entrepreneurs and a follow-up in the form of focus interviews with the entrepreneurs. It appears that most entrepreneurs have a solid background in the business they are in. About 80% of all entrepreneurs has built up knowledge during their previous job, that they now use being an entrepreneur. Besides 20% of all entrepreneurs even receive direct help from their previous employers. From an organisational perspective, a large share of all firms has been based on existing firms, either as a continuation of a stopped firm (18%), or a diversified part of a larger company (10%). The paper concludes by proposing a framework, based on the above findings, that facilitates a new approach to birth rate calculation methods.
    Date: 2005–08
  13. By: Howells, John (Department of Organisation and Management, Aarhus School of Business)
    Abstract: This article examines the evidence behind claims that innovation is <p> hindered or blocked (termed technology suppression) by <p> corporations’ use of patents. In other words, are there ways in <p> which the exploitation of the exclusive development right of the <p> patent can be shown to retard the process of innovation, other than <p> in the trivial sense of excluding third parties from the right to <p> develop the technology covered by the patent? There are many <p> references to this possibility in the management, economic and <p> legal literatures, but two papers stand out for grounding their claims <p> of corporate suppression of innovation in the historical record <p> (Dunford 1987; Merges and Nelson 1990). Historical writing is the appropriate form of evidence bearing on how companies have made <p> use of their patents, but this paper shows that in Dunford and <p> Merges and Nelson’s writing the historical evidence has been <p> misinterpreted as providing evidence of technology suppression. <p> What it really reveals are a variety of practical problems in the <p> administration of the patents system as a system of development <p> prospects. <p> In the first sections of this paper the ground is prepared by a brief <p> review of the nature of property rights and the changing view of the <p> function of the patent system in the literature. This argues that the <p> development prospect function of patents must be considered a <p> feature of significant patent development. Then follows a detailed <p> reexamination of the claims for technology suppression in the <p> commonly cited historical cases. These are organised to cover the <p> major ‘development scenarios’ involving: ‘pioneer’, or platform <p> technology patents; multiple, necessary, but independently held <p> patents (eg. radio); the hundreds of minor patents in the so-called <p> ‘patent thicket’.2 <p> The empirical reanalysis confirms that most claims of deliberate <p> corporate technology suppression are the product of a misinterpretation <p> of the evidence. The interpretation that patents have <p> been used to retard technology development is found to have been <p> promoted by a number of features of the literature; <p> 1) the widespread belief, especially amongst economic analysts, <p> that a patent is a form of economic monopoly <p> 2) basic features of property law most pertinent to the function of <p> patents have been forgotten within the contemporary legal <p> literature <p> 3) some of the historical accounts themselves are confused in their <p> use of the term ‘competition’ and in their understanding of <p> patents as property <p> 4) the longstanding, hostile US anti-trust treatment of patents, itself <p> a product of the assumption that patents are conducive to the <p> formation of economic monopoly. Merges and Nelson argue that the cases of radio, the Selden <p> patent, Edison’s carbon filament patent and the Wright brothers’ <p> warped wing patent illustrate the general problem that awarded <p> patent scope tends to be excessively broad. In contradiction to their <p> position, it is shown here that these cases illustrate a range of <p> idiosyncratic problems in the administration of the patent system <p> that generated unusually severe conflicts between awarded scope <p> and technology development. The general problem is not an <p> excessive award of ‘broad scope’, but the ability of Patent Offices <p> and courts to maintain the patent institution as an effective system <p> of development prospects. In particular problem cases, one must <p> consider the reasons why the patent failed to act as a proper <p> development prospect and devise a tailored policy solution with the <p> object of retaining the development prospect function as much as <p> possible. <p> This revision therefore reinforces an understanding of the patent <p> system as a system of property rights that in principle, and usually <p> in practice, is an effective social device to aid the exploration and <p> exploitation of novel technical ideas (inventions).
    Keywords: No keywords;
    Date: 2005–11–01

This nep-tid issue is ©2006 by Roberto Fontana. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.