Regulation,innovation and public welfare: the example of the food industry

The complex relationship between innovation and regulation in the food industry is analyzed with a view to identifying the ways in which regulation both promotes and inhibits particular kinds of innovation, and also the relevance of both innovation and regulation to the protection and improvement of public health. The effects of regulation on innovation are complex, since regulation simultaneously inhibits some kinds of development while encouraging others, but those which are inhibited are typically unsafe or undesirale. There is, however, no evidence that public welfare is being undermined by excessive regulations or by too few innovations in the food sector.     

Does Technological Innovation Really Reduce Marginal Abatement Costs? Some Theory,Algebraic Evidence,and Policy Implications

The existing literature models innovation in pollution control as a reduction in marginal abatement costs. We show that this assumption is inappropriate for production process innovations such as fuel switching. Algebraically, we examine the effects of different innovation types on marginal abatement cost curves, showing that some desirable innovations increase marginal abatement costs. Empirically, we estimate marginal abatement costs for sulfur dioxide by measuring the output distance function for electric power in Korea. Regression results confirm that production process innovations did raise marginal abatement costs in this case. One policy implication: economic instruments do not always provide stronger innovation incentives than command-and-control policies.      

VENTURE CAPITAL AND INNOVATION: WHICH IS FIRST?

Policy‐makers typically interpret positive relations between venture capital (VC) investments and innovations as evidence that VC investments stimulate innovation (VC‐first hypothesis). This interpretation is, however, one‐sided because there may be a reverse causality that innovations induce VC investments (innovation‐first hypothesis): an arrival of new technology increases demand for VC. We analyze this causality issue of VC and innovation in the US manufacturing industry using both total factor productivity growth and patent counts as measures of innovation. We find that, consistent with the innovation‐first hypothesis, total factor productivity growth is often positively and significantly related with future VC investment. We find little evidence that supports the VC‐first hypothesis.     

The nonlinear effects of firm size on innovation: an empirical investigation

ABSTRACT

In conventional studies, large firms tend to emphasize more on process innovation than product innovation. This paper explores factors that could indicate a distinct pattern of firms’ innovation-size relationship: threshold size that implies a positive effect of firm size on the probability of product innovation success; cannibalization effect that creates incentives for large firms to favor product innovations; and financial constraints that have differential effects given different firm sizes. A hypothesis about a non-monotonic relationship between the proportion of product innovation and firm size is tested with nonlinear and dynamic econometric models. For the large firms, empirical evidence shows product innovations result in an overall larger share of new products in total sales, relative to existing products in which process innovations are rooted.     

Regulation, innovation and public welfare: the example of the food industry

The complex relationship between innovation and regulation in the food industry is analyzed with a view to identifying the ways in which regulation both promotes and inhibits particular kinds of innovation, and also the relevance of both innovation and regulation to the protection and improvement of public health. The effects of regulation on innovation are complex, since regulation simultaneously inhibits some kinds of development while encouraging others, but those which are inhibited are typically unsafe or undesirale. There is, however, no evidence that public welfare is being undermined by excessive regulations or by too few innovations in the food sector.     

Effects of public funding on firm innovation: transforming or reinforcing a weak innovation pattern?

ABSTRACT

This paper adds to the ongoing debate on the effects of public funding programmes on business innovation. This policy instrument, based upon a simple but a robust rationale, has been applied in an almost homogeneous manner in different contexts, but evidence from such experiences is far from shown homogeneous effects. The main contribution of this paper is that it shows the limitations faced by public funding instruments in affecting a traditionally low innovative pattern. Using panel data techniques, we find heterogeneous effects of public funding on the innovation behaviour of Uruguayan firms between 2001 and 2015. Our results show that, after a strong public policy effort, the critical mass of innovative firms has hardly changed. Input additionality effects of public funding in private innovation investment are found, but only for innovation activities based on the acquisition of embodied knowledge. Moreover, we obtain some evidence of behavioural additionality in process and organizational innovation leading to higher productivity levels, but we find no effects on interaction for innovation.     

Innovation and new public water

ABSTRACT

Technological innovation has made significant improvements to water services but water delivery remains largely unchanged since Victorian times. This is because water is an essential, non-substitutable resource with little potential for economies of scale. By contrast, there has been dynamic innovation in the governance of water services, with privatization now giving way to a significant shift back to public ownership and management, with new and creative forms of societal engagement. This article reviews these governance changes through the lens of a “hydrosocial cycle”, arguing that innovations in “new public water” can only be achieved by recognizing how water-society relations take place.     

Intersections in system innovation: a nested-case methodology to study co-evolving innovation journeys

Current persistent sustainability challenges are widely understood to require transitions and system innovations. As these systemic changes typically emerge from multiple co-evolving innovations, Schot and Geels [2008. Strategic niche management and sustainable innovation journeys; theory, findings, research agenda, and policy. Technology Analysis and Strategic Management 20, no. 5: 537–54] urge to study the interactions between innovation journeys. Their call for multiplicity has been met through several studies. Yet considering that these analyses still leave the attendant navigational challenges underexposed, this article demonstrates the usefulness of nested-case methodologies. Focusing on the ‘intersections’ between interpenetrating case histories, in-depth investigation is combined with broader attention to next-order changes. The relevance and implications of these intersections are illustrated through four innovation journeys in the Dutch traffic management field: unfolding largely in parallel, but sometimes intersecting, they yield a mixed picture of trajectory formation and fragmentation. The phenomenon of emergent incoherence is identified as a key strategic challenge in system innovation processes.     

The diffusion of policy innovations -an experimental investigation

What causes a government to adopt a new program or policy? Despite a large number of empirical studies available to date, the relative importance of various determinants remains obscure because of difficulties of statistical identification. We present an experimental setting to study the diffusion of policy innovations in the laboratory. Our approach discriminates between experimentation, experience, and emulation as determinants of policy adoption. The policy innovation we study is an internalization tax to mitigate a local market externality. Our results demonstrate the importance of information about innovations in other states in the diffusion of policy innovations.JEL Classification: C9, D7, H7Correspondence to: Rupert SausgruberWe gratefully acknowledge financial support by the Austrian National Bank (Jubiläumsfonds under project no. 9134) and the Austrian Science Fund (FWF under project no. P17029). We are grateful for comments by Ernst Fehr, Simon Gächter, Simon Hug, Arno Riedl, Frans van Winden and seminar participants at the Universities of Amsterdam, Erfurt, and St. Gallen.     

Top management team social capital,exploration-based innovation,and exploitation-based innovation in SMEs

Despite increasing interest in ambidextrous innovations, mainstream literature has excluded discussions on developing and combining exploratory innovation (ERI) and exploitative innovation (EII) in the small- and medium-sized enterprise (SME) sector. This issue from the SME perspective is worth addressing. Recent studies have conceptually argued the importance of the top management team (TMT) in managing ambidextrous innovations. Building on this argument, we explore how the top manager external social relationships foster ambidextrous innovations and whether internal social relationships among senior executives can be used to integrate such innovations. The results show that (a) distinct external managerial relationships cause differential innovations for SMEs, and (b) internal social capital among top managers could be used effectively to manage ambidextrous innovations. This research indicates that SMEs engaging in both high ERI and EII perform better when they focus on the balancing benefits of TMT internal social capital and the bridging benefits of TMT external social capital.     

Impact of organizational innovation on product and process innovation

The purpose of this paper was to test the effect of organizational innovation on product and process innovation (while controlling for endogeneity). Our hypothesis was that organizational innovation should have a significant and positive impact on technical (product or process) innovation. We control for endogeneity by using a Poisson estimator that accommodates a binary endogenous regressor. We test 10 potential instruments using a battery of test criteria and settle on five. All results are presented using the five instruments to avoid expectation bias. In general we find that organizational innovation does impact technical innovation positively. With the 2009 data we find that the mean of the average treatment effect for product innovation is roughly 1.7 times that of process innovation. For the 2009–2012 data we find that the impact on product innovation is roughly 1.5 times that of process innovation. For the 2012 data, we had anomalous results for process innovation, such that organizational innovation reduced the number of process innovations by 2.3 per year. In terms of Canadian government policy, the results lend support to the view that technical innovation is not the only innovation that matters. The right policy mix may encourage firms to experiment with and adopt more organizational innovations to enhance technical innovation.     

New product and service launching in new ventures: a multilevel approach to innovation antecedents

Macro-economic policies such as public financing seek to push the development and introduction of innovations; however, entrepreneurs also need support in their ‘day-to-day’ activities to improve their capability to launch innovations. As this micro-level perspective is rarely studied, we analyze both the micro and macro levels by examining the effects of the entrepreneurs’ individual intention to innovate and public financing. Additionally, we include the meso level, representing entrepreneurs’ network. Entrepreneurs are embedded in social spheres in which they capture resources and identify opportunities. But not all entrepreneurs are equally well supported, and some tend to be completely isolated. We thus focus on multilevel factors explaining new product or service launching in new ventures. Drawing on data of 48,251 French new ventures, we reveal that innovation intention and public financing positively impact new ventures’ product and service innovation launching, while entrepreneurs’ isolation has a negative effect. We also highlight two interaction effects that enhance the multilevel effects of innovation antecedents.     

Country governance,corruption, and the likelihood of firms’ innovation

Using a sample of firms from the World Bank Enterprise Survey for the period 2006–2016 in emerging and developing countries, we find that corruption has a negative impact on the likelihood of innovations, thus supporting the “sanding-the-wheels” hypothesis. Our empirical results also show that corruption at the firm level, in the manufacturing industry, and in regions with the worst governance or that are more corrupt has a significant negative effect on innovation. In addition, country governance plays a particularly important role in innovative activity for corrupt firms. The policy implication is that the government or authority should strengthen the positive role of government effectiveness, rule of law, regulatory quality, and control of corruption in order to improve firms’ innovation within an environment of corruption.     

Entrepreneurial innovations,competition and competition policy

We construct a model where an entrepreneur can innovate for entry or for sale. It is shown that increased product market competition tends to increase the relative profitability of innovation for sale. Increased competition not only reduces the profits of entrants and the acquirer of the inventions in a similar fashion, but also reduces the profit of non-acquirers. Therefore, incumbents' valuations of innovations are less negatively affected by increased competition, and the incentive for innovation for sale can increase with increased competition. Moreover, a stricter, but not too strict, merger policy is shown to increase the incentive for innovations for sale by ensuring the bidding competition for the innovation.     

As times goes by. A dynamic impact assessment of the innovation policy and the Matthew effect on Argentinean firms

ABSTRACT

The objective of this paper is to analyse the impact of public funds for innovation on firm’s capabilities, innovative dynamics and economic performance. A large stream of literature about the evaluation of public funds is focused on testing the existence of additionality effects on investments and results. This paper aims to provide evidence about other dimensions of the firm that public policy can alter, with focus on the time window between the treatment and the impact, and the role of the Matthew effect (recurrence) in this process. The empirical exercise is based on a dynamic panel data made of 1465 firms (3337 observations) that applied to the Argentinean Technological Fund (FONTAR), which is the main public fund for innovation in Argentina, between 2007 and 2016. Results show short-term effects of accessing to FONTAR on firms’ capabilities, medium-term effects on innovation efforts and long-term effects on productivity. Even though the effect on productivity is larger among recurrent firms, the differences among recurrent and non-recurrent firms are not conclusive in case of capabilities and innovation efforts. All in all, this research provides evidence about the ‘when’ of public policy and the need to look beyond input additionality effects when analysing its impact.     

Lead markets and regulation: a framework for analyzing the international diffusion of environmental innovations

Environmental regulations are often intended to stimulate the generation and adoption of eco-efficient innovations. An important argument in the public debate is also the creation of new markets for environmentally benign products, processes and services in other countries and the generation, as a result, of export opportunities for the pioneering country (lead markets). Research on lead markets has not, however, focused on environmental innovations to date. We therefore extend the lead market model to environmental innovations and take particular account of the peculiarities of such innovations, in particular, the public good character of environmental benefits and the role of regulations. This approach is applied to two case studies: wind energy and fuel-efficient passenger cars. In both cases, the innovation was initially adopted in one country. Other countries subsequently adopted the same innovation design favored by the lead market which, in turn, developed into a large exporter in the wind generation and car industries, respectively. We discuss the regulations employed and the reasons for the international success of the innovations induced by them. Our findings demonstrate that when supported by global demand or regulatory trends, strict regulation results in the creation of lead markets. Finally, we provide recommendations on how our model could be used for further research and in the development of a coordinated environmental and innovation policy.     

Product innovation,process innovation and export propensity: persistence,complementarities and feedback effects in Spanish firms

Drawing on a longitudinal data of Spanish manufacturing firms, this study explores the persistence of technological innovation and exports, their potential complementary relations and feedback effects. Empirical results suggest the presence of both true and spurious state dependence in all three activities. True state dependence in technical innovation and exports implies intertemporal spillovers relevant to the evaluation of innovation and export policy measures. However, given that results also suggest spurious state dependence, firm-specific characteristics should be taken into account in promoting technological innovations and exports. In addition, we find a strong complementarity between product and process innovation both through a contemporaneous effect and via unobserved firm characteristics. However, concerning complementarity between innovation and exports, results suggests complementarity only through contemporaneous effects. Finally, we find no support for the causal link from past product and process innovations to current export activities.     

Invention, innovation, and economic evolution

This paper provides a synopsis of logic and adventure in the process of fundamental innovation. The contemporary viewpoint of R&D management would have us believe that innovation is a rational process subject to prediction, regulation, and control. The alternative viewpoint is advanced here that innovation is neither merely a mechanical nor solely a goal-driven process. In reality, innovative systems are inherently untidy systems. The most important clue to any possible uniformity in the behavior of such systems is to be found in their very multiformity. Thus, the process of innovation is first and foremost a self-organizing process. This theory, based on the author's work of the past several years in this area, has led to identification and explanation of several lawlike relationships in the origin of fundamental technical breakthroughs, transfer of technical knowledge, and long-term economic evolution. There are a number of important implications of these regularities for technology and science policy during 1980s and beyond. First, success in innovation critically depends upon pursuing several small-scale experimental projects at the same time. Thus popular attempts to avoid duplication in R&D activity constitute what is really a penny-wise but pound-foolish policy. Second, nothing is more important in the future than to promote greater decentralization in the conduct of R&D enterprise. Third, one way out of the current worldwide economic stagnation is to be found in the development of a few, already available, fundamental innovations such as those in the microelectronics, solar energy, and biotechnology fields rather than in the eternal search for more technical breakthroughs. Thus the need in the future is not so much for disproportionate increase in basic research in relation to technological development effort as it is for striking a congruence between various components of R&D activity.     

Cutting-edge technology

In recent years there has been a growing belief that materials constitute a generic technology of revolutionary significance, ranking alongside information techno- logy and biotechnology. Our main aim is to examine the plausibility of this claim. In so doing we indicate what is distinctive about changes i n materials science and technology, and report on recent forecasts of potential change. Our second aim is briefly to discuss corporate and public policy on materials innovation i n a number of advanced countries. We present some preliminary jindings from interviews conducted with prominent UK materials producers and users. We conclude that there have been some important incremental and radical innovations i n materials technology. But because the diffusion of innovative materials and processes into different industry sectors and products has been uneven, i n terns of their current and likely future impact on the economy as a whole these changes cannot yet be described as revolutionary. The future impact of materials technology will depend not just on the materials innovation strategies of companies and governments, but on their ability to overcome users' conservatism and to convince them of the design and quality improvements that are possible.