nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2010‒01‒16
ten papers chosen by
Rui Baptista
Technical University of Lisbon

  1. Recovering the Sunk Costs of R&D: the Moulds Industry Case By Carlos Daniel Santos
  2. Submarket Dynamics and Innovation: The Case of the U.S. Tire Industry By Guido Buenstorf; Steven Klepper
  3. User-producer relations, innovation and the evolution of market structures under alternative contractual regimes By Franco Malerba; Luigi Orsenigo
  4. Knowledge spillovers in U.S. patents: a dynamic patent intensity model with secret common innovation factors By Szabolcs Blazsek; ALvaro Escribano
  5. Tax Incentives and R&D Activity: Firm-Level Evidence from Taiwan By Chia-Hui Huang; Chih-Hai Yang
  6. Patent Protection with Cooperative R&D Option By Che, Xiaogang; Yang, Yibai
  7. Does Intellectual Monopoly Help Innovation By Michele Boldrin; David K Levine
  8. Patent Protection with Licensing By Che, Xiaogang; Yang, Yibai
  9. Technological Leadership and Persistence of Monopoly under Endogenous Entry: Static versus Dynamic Analysis By Eugen Kovac; Viatcheslav Vinogradov; Krešimir Žigiæ
  10. Corporate R&D and Firm Efficiency: Evidence from Europe’s Top R&D Investors By Kumbhakar, Subal C.; Ortega-Argilés, Raquel; Potters, Lesley; Vivarelli, Marco; Voigt, Peter

  1. By: Carlos Daniel Santos
    Abstract: Sunk costs for R&D are an important determinant of the level of innovation in the economy.In this paper I recover them using a Markov equilibrium framework. The contribution istwofold. First, a model of industry dynamics which accounts for selection into R&D, capitalaccumulation and entry/exit is proposed. The industry state is summarized by an aggregatestate with the advantage that it avoids the "curse of dimensionality". Second, the estimatedsunk costs of R&D for the Portuguese moulds industry are shown to be important (3.4 millionEuros). They become particularly relevant since the industry is mostly populated by smallfirms. Institutional changes in the early 1990s generated an increase in demand fromEuropean car makers and created the incentives for firms to pay the costs of investment.Trade-induced innovation reinforced the selection effect by which international trade leads toproductivity growth. Finally, using the estimated parameters, simulations evaluate the effectsof changes in market size, sunk costs and entry costs.
    Keywords: Aggregate state, industry dynamics, Markov equilibrium, moulds industry, R&D,structural estimation, sunk costs
    JEL: C61 D21 D92 L11 L22 O31
    Date: 2009–11
  2. By: Guido Buenstorf; Steven Klepper
    Abstract: Beginning in 1922, the rate of exit of U.S. tire producers increased sharply and the industry began a severe and protracted shakeout. Just five years earlier, the tire industry experienced a surge in entry that led to a rise of over 80% in the number of producers. We propose an explanation for this episode based on the idea of industry submarkets, which we incorporate in a model of shakeouts. We test this theory and alternative explanations for the surge in entry and exit and the shakeout using a novel data set on patenting in tires and production in the early 1920s of the cord tire, a key innovation we feature in our theory. Our analysis suggests that the development of a new submarket can open up opportunities for entry but also stimulate innovation and in the process reinforce the advantages of the leading incumbents, accentuating the shakeout of producers.
    Keywords: Submarkets, Innovation, Shakeouts Length 31 pages
    JEL: L65 R12 R30
    Date: 2009–12
  3. By: Franco Malerba (KITeS, Bocconi Univerity - Milan - Italy); Luigi Orsenigo (Università degli Studi di Brescia and KITeS, Bocconi Univerity - Milan - Italy)
    Date: 2009–12
  4. By: Szabolcs Blazsek; ALvaro Escribano
    Abstract: During the past two decades, innovations protected by patents have played a key role in business strategies. This fact enhanced studies of the determinants of patents and the impact of patents on innovation and competitive advantage. Sustaining competitive advantages is as important as creating them. Patents help sustaining competivite advantages by increasing the production cost of competitors, by signaling a better quality of products and by serving as barriers to entry. If patents are rewards for innovation, more R&D should be reflected in more patents applications but this is not the end of the story. There is empirical evidence showing that patents through time are becoming easier to get and more valuable to the firm due to increasing damage awards from infringers. These facts question the constant and static nature of the relationship between R&D and patents. Furthermore, innovation creates important knowledge spillovers due to its imperfect appropriability. Our paper investigates these dynamic effects using U.S. patent data from 1979 to 2000 with alternative model specifications for patent counts. We introduce a general dynamic count panel data model with dynamic observable and unobservable spillovers, which encompasses previous models, is able to control for the endogeneity of R&D and therefore can be consistently estimated by maximum likelihood. Apart from allowing for firm specific fixed and random effects, we introduce a common unobserved component, or secret stock of knowledge, that affects differently the propensity to patent of each firm across sectors due to their different absorptive capacity.
    Keywords: Point process, Conditional intensity, Latent factor, R&D spillovers, Patents, Secret innovations
    JEL: C15 C31 C32 C33 C41
    Date: 2009–12
  5. By: Chia-Hui Huang; Chih-Hai Yang
    Abstract: This paper investigates the effect of tax incentives on R&D activities in Taiwanese manufacturing firms. Specifically, we assess the potential R&D-enhancing effect on recipients of R&D tax credits compared with their non-recipient counterparts. Moreover, the potential difference in the R&D-enhancing effect between high-tech and non-high-tech firms is also examined. Utilizing a firm-level panel dataset during 2001 and 2005, empirical results obtained by propensity score matching show that recipients of R&D tax credits appear on average to have 93.53% higher R&D expenditures and a 14.47% higher growth rate for R&D expenditures than non-recipients with similar characteristics. The R&D-enhancing effect of R&D tax credits is not found to be particularly relevant to high-tech or non-high-tech firms. We further employ a generalized method of moment (GMM) of the panel fixed model to control for the endogeneity of R&D tax credits and firm heterogeneity in determining R&D expenditure. Various estimates based on the entire sample and high-tech-firms are quite similar and there is a significantly R&D-enhancing effect of R&D tax credits. This result suggests that the R&D preferential policy has induced more R&D expenditure by firms in Taiwan. While the existence of the R&D-enhancing effect brought on by tax incentives is intuitive, the estimates can provide insightful implications for the R&D tax policy.
    Keywords: R&D, Tax, Propensity Score Matching
    JEL: H25 H32 K34 O32 O38
    Date: 2009–12
  6. By: Che, Xiaogang; Yang, Yibai
    Abstract: We investigate R&D incentive under patent protection with cooperation option. Chowdhury [Economics Letters, 2005, 89(1), 120-126] claims that patent protection may decrease R&D incentive when the tournament effect (TE) is negative. However, We show that patent protection in the presence of R&D cooperation option always increases R&D incentive. In addition, to increase R&D incentive, this option strictly dominates imitation and may dominate royalty licensing under patent protection, introduced by Mukherjee [Economics Letters, 2006, 93(2), 196-201].
    Keywords: R&D investment; Patent protection; Cooperative R&D
    JEL: O38 O34 O32
    Date: 2009–12–19
  7. By: Michele Boldrin; David K Levine
    Date: 2009–12–25
  8. By: Che, Xiaogang; Yang, Yibai
    Abstract: This note gives a short proof that both fixed-fee and royalty licensing under patent protection can always create higher R&D investment.
    Keywords: R&D investment; Patent protection; Licensing
    JEL: O38 O34 O32
    Date: 2009–12–19
  9. By: Eugen Kovac; Viatcheslav Vinogradov; Krešimir Žigiæ
    Abstract: We build a dynamic oligopoly model with endogenous entry in which a particular firm (leader) invests in an innovation process, facing the subsequent entry of other firms (followers). We identify conditions that make it optimal for the leader in the initial oligopoly situation to undertake pre-emptive R&D investment (strategic predation) eventually resulting in the elimination of all followers. Compared to a static model, the dynamic one provides new insights into the leader’s intertemporal investment choice, its optimal decision making, and the dynamics of the market structure over time. We also contrast the leader’s investment decisions with those of the social planner.
    Keywords: Dynamic oligopoly, endogenous entry, persistence of monopoly, strategic predation, accommodation.
    JEL: L12 L13 L41
    Date: 2009–12
  10. By: Kumbhakar, Subal C. (Binghamton University, New York); Ortega-Argilés, Raquel (European Commission); Potters, Lesley (Utrecht School of Economics); Vivarelli, Marco (Università Cattolica del Sacro Cuore); Voigt, Peter (European Commission)
    Abstract: The main objective of this study is to investigate the impact of corporate R&D activities on firms' performance, measured by labour productivity. To this end, the stochastic frontier technique is applied, basing the analysis on a unique unbalanced longitudinal dataset consisting of 532 top European R&D investors over the period 2000–2005. R&D stocks are considered as pivotal input in order to control for their particular contribution to firm-level efficiency. Conceptually, the study quantifies the technical inefficiency of a given company and tests empirically whether R&D activities could explain the distance from the efficient boundary of the production possibility set, i.e. the production frontier. From a policy perspective, the results of this study suggest that – if the aim is to leverage companies' productivity – emphasis should be put on supporting corporate R&D in high-tech sectors and, to some extent, in medium-tech sectors. By contrast, supporting corporate R&D in the low-tech sector turns out to have a minor effect. Instead, encouraging investment in fixed assets appears vital for the productivity of low-tech industries. However, with regard to firms' technical efficiency, R&D matters for all industries (unlike capital intensity). Hence, the allocation of support for corporate R&D seems to be as important as its overall increase and an 'erga omnes' approach across all sectors appears inappropriate.
    Keywords: corporate R&D, productivity, technical efficiency, stochastic frontier analysis
    JEL: L2 O3
    Date: 2009–12

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