Service-sector competition,innovation and R&D

The central prediction of the Aghion, Bloom, Blundell and Howitt model is an inverted U-shaped relationship between innovation and competition. The model is built on the assumption of a product market and has not yet been tested on the service sector. Using detailed firm-level data on Swedish service-sector firms, we find evidence of an inverse U-shaped relationship for exporting service-sector firms. A further breakdown of innovation expenditures shows that the inverse U-shaped pattern holds for intramural R&D and training, but not for extramural R&D. Finally, the results indicate that as competition increases, small firms tend to seek strategic alliances with competitors, whereas large firms tend to reduce collaboration with competitors. The behavior of large firms can partly be due to their superior capacity to handle innovation projects internally, which will become more important if increased competition results in higher pay-offs to innovation.     

Spillovers,product innovation and R&D cooperation: a theoretical model

ABSTRACT

We analyze the impact of post-innovation knowledge spillovers on firms’ decisions to invest and cooperate in R&D, forming a research joint venture (RJV). We study the case of two potential investors involved in a non-tournament stochastic competition for developing a new but imitable product. We propose a theoretical model where cooperation may emerge as a subgame perfect Nash equilibrium of a three-stage game. In the first stage, firms decide whether to cooperate; in the second, they decide whether to invest; and in the third, they compete. We show that firms cooperate in R&D when the spillovers are high enough and the fixed costs associated with R&D activities are low enough; however, our analysis suggests that forming an RJV may not always be socially optimal, and subsidizing R&D cooperation may not be efficient. We propose an optimal scheme of subsidies, which should be designed according to the intensity of the spillovers, the level of the R&D costs, and the probability of innovation success. Finally, we show that in the case of mergers the private incentive to invest is maximized, and firms may not need public subsidies to cooperate. When subsidies are costly, not hindering mergers may be the second-best solution.     

Competition,R&D and innovation: testing the inverted-U in a simultaneous system

To address the relationship between innovation and competition we jointly estimate the opportunity, production, and impact functions of innovation in a simultaneous system. Based on Swiss micro-data, we apply a 3-SLS system estimation. The findings confirm a robust inverted-U relationship, in which a rise in the number of competitors at low levels of initial competition increases the firm’s research effort, but at a diminishing rate, and the research effort ultimately decreases at high levels of competition. When we split the sample by firm types, the inverted-U shape is steeper for creative firms than for adaptive ones. The numerical solution indicates three particular configurations of interest: (i) an uncontested monopoly with low innovation; (ii) low competition with high innovation; and (iii) a ‘no innovation trap’ at very high levels of competition. The distinction between solution (i) and (ii) corresponds to Arrow’s positive effect of competition on innovation, whereas the difference between outcomes (ii) and (iii) captures Schumpeter’s positive effect of market power on innovation. Simulating changes of the exogenous variables, technology potential, demand growth, firm size and exports have a positive impact on innovation, while foreign ownership has a negative effect, and higher appropriability has a positive impact on the number of competitors.     

Succeeding in innovation: key insights on the role of R&D and technological acquisition drawn from company data

This paper discusses the relationship between a company’s investment in innovation and its success in introducing new product and/or process innovations. In doing so, this analysis departs from the standard approach which puts forward a homogenous R&D-based knowledge production function by introducing different types of innovation investments (R&D and technology acquisition) for different sets of companies. Using the Community Innovation Survey (CIS) dataset comprising more than 3,000 Italian manufacturing companies, the econometric analysis adopts a set of techniques which allows to control for the sample selection, endogeneity and simultaneity problems which arise when dealing with CIS data. The main findings are summarised as follows: (1) beyond the acknowledged effect of R&D in increasing the probability of success of product innovation, a larger-than-expected role is played by technology acquisition in the innovation process; (2) the relative importance of R&D and technology acquisition varies significantly across different types of companies where crucial dimensions of analysis are company size and the technological domain of a sector.     

R&D strategy and innovation performance: the role of standardization

Firms now increasingly recognise the important role of R&D strategy in building technological advantage. However, few attempts have linked standardisation with specific R&D strategies in explaining innovation performance. To bridge this gap, this study empirically examines the relationships between R&D strategies, standardisation, and firms’ innovation performance. Based on a sample of 371 firms in China, we use structural equation modelling (SEM) and find that novelty-oriented R&D strategy generates greater accumulation of standardisation knowledge and standards diversity, while R&D openness only positively relates to this standardisation knowledge accumulation. Moreover, standardisation knowledge accumulation is positively related to both administrative and technical innovation performance, while a greater variety of standards only leads to higher administrative innovativeness. More importantly, our results reveal that accumulation of standardisation knowledge mediates the relationships between R&D novelty and administrative and technical innovation performances. Both the theoretical and practical implications that arise from these findings are discussed.     

R&D,innovation activity,and the use of external numerical flexibility

We address theoretically and empirically the impact of R&D and innovation activity (IA) on the use of external numerical flexibility (ENF). We build a firm-sided model showing that a first-order stochastic dominance shift in the productivity distribution function decreases the probability of hiring workers with temporary contracts, while a second-order shift has ambiguous effects. Next, using a dataset based on a survey of Italian manufacturing firms, we find that R&D and IA increase the extensive and intensive margins of employing workers with temporary contracts. Moreover, we disentangle the impact of different types of R&D and IA, finding that extra muros R&D always has a positive effect, while the effect of intra muros R&D is generally null. Also the effect of IA changes according to the type of activity: positive with product innovation, null with process innovation.     

R&D,innovation and output: evidence from OECD and nonOECD countries

This article uses data from 41 OECD and nonOECD (Organisation for Economic Co-operation and Development) countries to examine the predictions of nonscale endogenous growth theories that an increase in the share of researchers in labour force leads to an increase in innovation and innovation raises per capita output. The results show that an increase in the share of researchers in labour force increases innovation only in the large market OECD countries. Moreover, an increase in innovation raises per labour GDP (Gross Domestic Product) in all nonOECD countries except for low income countries, while raising it only in the high-income OECD countries. These findings suggest that though the large market OECD countries are the world leader in innovation, nonOECD countries benefit more from it in promoting their growth.     

Origins of knowledge and innovation in R&D alliances: a contingency approach

Innovative performance is influenced both by the origins of the existing knowledge that is combined to generate innovation and by how economic actors search for new knowledge. Drawing on a sample of inter-firm dyadic R&D alliances, we found that whereas the integration of geographically distant knowledge and of organisationally proximate knowledge in R&D alliances are negatively related to the alliance innovative performance, search span positively moderates both relationships. We conclude that, in order to make the most of broad-span searching, firms participating in R&D alliances should integrate geographically distant but organisationally proximate knowledge. By doing so, firms take advantage of the diversity and novelty that characterises geographically distant knowledge, while preserving considerable levels of relative absorptive capacity that are needed for them to understand, internalise, and effectively use partners’ knowledge from different domains.     

Mapping research on R&D,innovation and productivity: a study of an academic endeavour

ABSTRACT

This paper accounts for the development of the academic endeavour to determine the firm-level relationship between investments in R&D and productivity. The impact of 28 highly cited publications within this line of study is investigated using a combination of bibliometric techniques and citation function analysis. We show how the attention paid to this line of research broadens and deepens in parallel to the diffusion of innovation as a research theme during 2000s. Our findings also suggest that the attraction of scholarly attention is driven by combination of broadening interest in the central research question under study and boundary-pushing methodological contributions made in the key contributions.     

R&D,public innovation policy,and productivity: The case of danish manufacturing

The purpose of this paper is to investigate the relationship between private R&D, public innovation support transferred to the private sector, and productivity in Danish manufacturing. Two main conclusions are established. First, public innovation support has a positive and significant effect on private R&D expenditures with an estimated elasticity of 0.062. Second, the indirect effect on productivity from public innovation support is reflected in a positive point estimate which is found to be robust to different specifications of R&D capital.     

On innovation cycles in a finite discrete R&D game

This paper shows that innovation (or Schumpeter's) cycles can be demonstrated in a discrete and finite dynamic game of innovation and imitation. We find that the cycles depend crucially on whether imitation is a credible threat and hence, we conclude that strategic interactions are sufficient to generate cycles in an innovation game.     

R&D organization,monitoring intensity,and innovation performance in chinese industry

This paper examines the relationship between organizational design and technological innovation in Chinese industry. In a principal-agent model, monitoring intensity is an endogenously determined input to innovation production. A recursive system of an innovation production function and a monitoring intensity equation, where the latent monitoring intensity is indicated by the existence of an R&D organization, is estimated with a nonlinear two-stage estimator for a sample of large- and medium-sized Chinese state-owned enterprises. It is the first knowledge production function estimate for China's enterprises. I find that R&D organization affects innovation performance positively and significantly.     

The productivity effects of local R&D outsourcing: the moderating role of subsidiary mandate and internal R&D

This study examined the moderating effects of two kinds of internal R&D (parent R&D and subsidiary R&D) on the relationship between local R&D outsourcing and subsidiary productivity as internal R&D challenges the collaborative relationships in the local environment. Due to the specific feature of a subsidiary mandate, we further investigate whether two distinct kinds of internal R&D have different moderating effects between exploitation-oriented subsidiaries and exploration-oriented subsidiaries, based on a sample of longitudinal data set of 263 Taiwan-based manufacturing subsidiaries over the period 2006–2009. The empirical results show that for exploitation-oriented subsidiaries parent R&D plays a significant and negative moderating role on the impact of local R&D outsourcing based on local collaboration, while a positive moderating role is observed with parent R&D and subsidiary R&D for exploration-oriented subsidiaries.     

R&D boundaries of the firm: An estimation of the double-hurdle model on commissioned R&D,joint R&D,and licensing in Japan

This paper studies the firm’s decisions on in-house R&D and its procurement from outside through commissioned R&D, joint R&D, and technology acquisitions (i.e., licensing-in). Using the data about 14,000 manufacturing firms in Japan, we estimate a modified double-hurdle model in which the first hurdle determines whether the firm should perform any R&D at all and the second hurdle determines whether (and how much) it should perform each mode of procured R&D. The results generally support the two major theories—the transaction cost theory and the capability theory. The estimated positive effects of firm size, in-house R&D intensity, diversification, and vertical integration support the hypothesis that capability is needed for procured R&D, while the estimated positive effect of the index of appropriability by patents supports the hypothesis that this appropriability reduces transaction costs. In addition, we found that information flow from scientific sources and that from transaction-based sources affect the three modes of procured R&D differently.     

Innovation, competition, and growth: Schumpeterian ideas within a Hicksian framework

Schumpeter’s ideas, which should be the basis of any evolutionary approach to the relations between innovation, competition and growth, are revisited and interpreted within the analytical framework proposed by Hicks in Capital and Time. Two main results emerge. First, the introduction of any new technology may lead to higher unemployment and reduced productivity; only an active monetary (and banking policy) will allow the economy to capture productivity gains. Second, within an industry confronted by recurrent technological changes, certain monopoly practices may be needed for this industry to converge towards an efficient market structure determined by the content of technology and the profile of demand. These results suggest some reconsideration of the macroeconomic and industrial or competition policies designed, in Europe, to cope with both technical change and globalization in modern economies.     

Efficiency and its determinants in pharmaceutical industries: ownership,R&D and scale economy

The purpose of this article is to measure the efficiency of pharmaceutical firms and identify their determinants using Korean and American samples from 1992 to 2004. We document some stylized facts in the patterns and sources of efficiency change in Korean and American pharmaceutical firms. The evidence shows that ownership structure can substantially influence the efficiency of pharmaceutical firms. Especially, institutional ownership rate affects corporate efficiencies negatively, corroborating the myopic institutional investor hypothesis. The hypothesis is supported by both Korean and American samples. However, we find evidence that foreign ownership in Korea promotes efficiency of pharmaceutical firms. It is shown that R&D intensity is positively related to contemporaneous largest ownership rate and prior foreign ownership rate in Korean pharmaceutical firms. In contrast, little evidence is found on the relationship between ownership structure and R&D intensity in the American pharmaceutical industry. These empirical results are robust even after we check the causal links among efficiency, R&D and ownership.     

Government grants,private R&D funding and innovation efficiency in transition economy

Although the development of the high-tech industry is part of the national agenda of many countries, particularly transition economies, few studies have analysed innovation efficiency in countries with environments unfavourable to high-tech industry development. This study explores the relationships of government grants, private R&D funding and innovation efficiencies of the high-tech industry in China. We use a stochastic frontier analysis model to study the roles of government and market mechanisms in high-tech industry innovation from 1995 to 2008. Findings show that government grants do not crowd out private funding, but stimulate private R&D expenditure. Private R&D funding has positively influenced innovation in the Chinese high-tech industry, and efficiency potentials are widely under-exploited. Additionally, government grants are observed to negatively impact innovation by large firms in the Chinese high-tech industry. Furthermore, we reveal that human capital can promote the innovation performance of high-tech firms, excepting those of medium scale. The findings provide insightful perspectives on China's high-tech industry.     

Animal spirits and the composition of innovation in a lab-equipment R&D model with transition

We study the effect of animal spirits on the composition of aggregate R&D, the consumption level and economic growth in a tournament model of horizontal and vertical R&D. By considering a full lab-equipment specification, the model predicts a positive effect of animal spirits on the balanced-growth-path (BGP) level of per-capita consumption without impacting on economic growth and on aggregate vertical R&D. However, transition is slower under “waves of enthusiasm”, implying a longer period in which growth rates are higher than the BGP level. An economy that is subject to expectations shocks then converges at a time-varying speed. On average over time, transition is longer but less “painful”—i.e., with higher per-capita consumption levels—than otherwise.     

On the economics of R&D and technological collaborations: Insights and results from the project colline

Research collaborations involve co-production and exchange of knowledge across organisational boundaries. They involve governance of intellectual property rights and partners' use of collectively produced knowledge. The principal findings arise from case studies of consortia governance in biotechnology and software and substantial variety in arrangements is identified. This variety may be explained by the appropriability of knowledge in particular research domains as well as by the nature of the knowledge generated. Consequences of governance rules are explored for European research consortia and for collective standards making activities. The analysis indicates several policy conclusions: government policy has an important role in overcoming market failures in consortia formation; adoption of any uniform intellectual property rights model for consortia would be likely to reduce research productivity; policies aimed at stimulating consortia formation must take account of the nature of knowledge that is to be exchanged.