nep-tid New Economics Papers
on Technology and Industrial Dynamics
Issue of 2014‒03‒30
seven papers chosen by
Fulvio Castellacci
Norwegian Institute of International Affairs (NUPI)

  1. The Causal Effects of Competition on Innovation: Experimental Evidence By Philippe Aghion; Stefan Bechtold; Lea Cassar; Holger Herz
  2. R&D Financing Constraints of Young and Old Innovation Leaders in the EU and the US By Michele Cincera; Julien Ravet; Reinhilde Veugelers
  3. Reviving demand-pull perspectives: the effect of demand uncertainty and stagnancy on R&D strategy By José García-Quevedo; Gabriele Pellegrino; Maria Savona
  4. A theory of trade liberalization and innovations with heterogeneous firms By Rutzer, Christian
  5. Globalization of Innovation Production: A Patent-Based Industry Analysis By Jérôme Danguy
  6. Cross-Functional Knowledge Integration, Patenting and Firm’s Performance By Marco MC Ceccagnoli; Nicolas van Zeebroeck; Roberto Venturini
  7. Corporate Science, Innovation and Firm Value By Marcus Simeth; Michele Cincera

  1. By: Philippe Aghion; Stefan Bechtold; Lea Cassar; Holger Herz
    Abstract: In this paper, we design two laboratory experiments to analyze the causal effects of competition on step-by-step innovation. Innovations result from costly R&D investments and move technology up one step. Competition is inversely measured by the ex post rents for firms that operate at the same technological level, i.e. for neck-and-neck firms. First, we find that increased competition leads to a significant increase in R&D investments by neck-and-neck firms. Second, increased competition decreases R&D investments by firms that are lagging behind, in particular if the time horizon is short. Third, we find that increased competition affects industry composition by reducing the fraction of sectors where firms are neck-and-neck. All these results are consistent with the predictions of step-by-step innovation models.
    JEL: C91 L10 O31
    Date: 2014–03
  2. By: Michele Cincera; Julien Ravet; Reinhilde Veugelers
    Abstract: Using firm level information on the world leading R&D investors, this paper investigates through a system GMM estimation of the investment error correction model, whether younger innovators face more severe or no financing constraints, as opposed to older innovators, and whether this would hold more for European young firms relative to the US. The analysis indeed confirms that over the last decade young leading innovators appear to be more affected by financing constraints compared to their older counterparts and that particularly EU young innovators exhibit higher sensitivities of R&D investment to cash-flow, particularly in medium and high tech sectors.
    Keywords: EU-US R&D gap, young innovators, financing constraints
  3. By: José García-Quevedo (Universitat de Barcelona & IEB); Gabriele Pellegrino (University of Barcelona & IEB); Maria Savona (University of Sussex)
    Abstract: This paper looks at the effects of demand uncertainty and stagnancy on firms’ decisions to engage in R&D activities and the amount of financial effort devoted to it. The paper contributes to the innovation literature in three respects: first, it adds to the revived debate on demand-pull perspectives in innovation studies, by specifically looking at demand-related (lack of) incentives to invest in innovation. Also, importantly, it complements the emerging literature on barriers to innovation in a two-fold way: first, by focusing on demand-related obstacles rather than the more explored financial barriers; second, by analyzing in detail whether experiencing uncertainty or lack of demand is a sector-specific feature, namely whether firms active in high or low tech manufacturing or in knowledge intensive or low tech services are more or less dependent on demand conditions when deciding to perform R&D. We find that uncertain demand and lack of demand are perceived as two completely different barriers. While uncertainty on demand does not seem to constrain R&D efforts, the perception of lack of demand does strongly reduce not only the amount of investment in R&D but also the likelihood of firms to engage in R&D activities. We interpret this evidence in terms of the specific phase of the innovation cycle in which decisions to invest in R&D are taken. Sectoral affiliation does not seem to matter when it relates to demand conditions, supporting the conjecture that positive expectations on market demand is a structural and necessary condition to be fulfilled for all firms prior to invest in R&D.
    Keywords: R&D strategy, barriers to innovation, demand uncertainty, lack of demand, innovative inputs, panel data
    JEL: C23 O31 O32 O33
    Date: 2014
  4. By: Rutzer, Christian
    Abstract: This paper extends the firm heterogeneity model of Melitz (2003) by introducing a new concept of endegenous investments in process R&D. The novelty is that if a firm invests more R&D its expected innovation return hazard rate stochastically dominates the return of less R&D investments. Due to this property, entrants invest more in R&D in response to trade liberalization. As a result the aggregate productivity is affected by a reallocation of resources to more productive firms and a simultaneous increase in firms´ investments in innovations, which is consistent with empirical findings. At the same time the firms´ increased R&D investments lead to a sector distribution with a higher right-tail compared to the distribution prior to trade liberalization. Hence, the model gives an explanation for the empirically found differences in the distribution tails among sectors with different trade openness levels. Another advantage of this paper´s framework compared to other trade models with innovations is its foundation in and extension of Melitz (2003). It enables most of the heterogeneous firms trade models to be extended by endegenous firm-level R&D in an empirically relevant and analytically tractable way. --
    Keywords: aggregate level,firm size distribution,heterogeneous firms,R&D investments,trade liberalization
    JEL: F12 F13 O31
    Date: 2014
  5. By: Jérôme Danguy
    Abstract: Using patent-based indicators, this paper aims at explaining to what extent the productionof innovation is globalized. Firstly, it provides evidence – over time, across countriesand across industrial sectors – on the patterns in international technological collaborationand in cross-border ownership of innovation. Secondly, a fractional logit model is estimatedfor a unique panel dataset covering patent information of 21 industries in 29 countries from1980 to 2005. The results show that countries tend to be more globalized in industrial sectorsin which they are less technologically specialized. It suggests that globalization of innovationis more driven by home-base augmenting determinants than home-base exploitingones. The empirical findings also indicate that the intensity of globalization of innovationis higher in multidisciplinary country-industry pairs and in those which compete internationallyin trade.
    Keywords: internationalization, R&D collaboration, patent statistics, industrial sectors
    Date: 2014–02–23
  6. By: Marco MC Ceccagnoli; Nicolas van Zeebroeck; Roberto Venturini
    Abstract: Cross-functional knowledge integration and patenting are both reckoned to increase the productivity of human capital and the profitability of the firms implementing them. The combined effect of a joint use is in many ways ambiguous since those practices pursue different objectives in terms of managing the flow of information within the firm's boundaries. The presence of knowledge spillovers in situations of high technological rivalry could deteriorate the positive impact of knowledge integration. We investigate empirically different channels of interactions between patenting and knowledge integration and we find that they are substitutes in terms of economic profitability; consistently with our theory, the effect is exacerbated by high technological rivalry and scarce effectiveness of secrecy. Our empirical analysis is conducted using a cross-section database with detailed firm-level information on U.S. manufacturing firms.
    Keywords: R&D, Performance, Knowledge Integration, Patents, Spillovers
    Date: 2013
  7. By: Marcus Simeth; Michele Cincera
    Abstract: It can be observed that many R&D performing firms produce scientific knowledge and discloseresearch outcomes in scientific journals. At the micro-level, prior work identified several potentialbenefits of such a strategy like superior access to informal information networks or the opportunity ofrecruiting the best PhD graduates. However, scientific research is costly and subject to considerableuncertainty with respect to the outcomes, and the disclosure may lead to spillover effects that decreasethe ability of firms to generate returns of their R&D investments. Overall, it remains unclear if andunder what conditions science-oriented strategies are beneficial for firms. We address this gap andexamine the impact of scientific activities on the firm’s market value using accounting data for USfirms from Compustat and matched patent and scientific publication data. We find evidence for apositive impact of scientific publication stocks on the firm value beyond the effects of R&D, patentstocks and patent quality.
    Keywords: R&D, Industrial science, Market value, Tobin's Q, Knowledge disclosure, Econometric evidence

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