Knowledge spillovers and R&D subsidies to new,emerging technologies

Is knowledge spillover a rationale for supporting R&D on new, emerging technologies more than R&D on other technologies? In this paper, I analyze whether innovation externalities caused only by knowledge spillovers differ between technologies of different maturity. I show that R&D should not be subsidized equally across industries when the knowledge stocks differ. This is because knowledge spillovers depend on the size of the knowledge stock and the elasticity of scale in R&D production. R&D in the emerging technology should be subsidized more when the elasticity is smaller than one. However, R&D in the mature technology should be subsidized more when the elasticity is larger than one.     

Technological opportunity and the growth of knowledge: A Schumpeterian approach to measurement

A model of endogenous growth, based on Schumpeter's notion of trustified capitalism, is developed and applied to firm-level data for the period 1973–1991. The model relates the market value of a firm to its current profits and to its R&D expenditures. The relationship depends upon the expected rate of knowledge growth, the expected value of an innovation and the elasticity of the R&D production function. Over the sample period, investors expected knowledge to grow at an average rate of 5 percent, a measure which reflects both process innovations and new product discoveries. Elasticities of the R&D production functions are estimated for thirteen industry groups and interpreted as measures of technological opportunity. There is no evidence of secular decline in technological opportunity over the sample period, but there is some evidence of diminishing returns to R&D intensity. Variations in technological opportunity over time are not correlated across industries. In contrast, the expected rates of knowledge growth at the industry level are highly correlated with the aggregate expected rate.     

Environmental regulations and innovation activity in UK manufacturing industries

We examine the relationship between environmental regulations and innovation, using data from UK manufacturing industry during 2000-2006. We estimate a dynamic model of innovation behaviour, and explicitly account for the likely endogeneity of our measure of the stringency of environmental regulations (pollution abatement costs). Our results indicate that while on the one hand environmental R&D and investment in environmental capital are stimulated by greater pollution abatement pressures, on the other hand there is not a positive impact of environmental regulation on total R&D or total capital accumulation. We find some evidence that this is because more stringent environmental regulations directly lower the optimal expenditure on non-environmental innovations. In addition, we find that environmental R&D may crowd out non-environmental R&D, although there is no evidence that environmental capital crowds out non-environmental capital.     

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.     

Myopia and R&D/production complementarities

Summary The simple economics of a firm's decision to begin an in-house program of R&D is more complicated than appears at first blush. We utilize a multi-period search theoretic model to consider this decision when the firm's state of technological progress is fully described by a real-valued variable. By investing in R&D at the beginning of a period, the firm obtains an innovation whose value is revealed at the end of the period. Whereas there is a fixed cost of implementing a new innovation, the benefits include not only an increase in the flow rate of profits but also an increase in the efficiency of the firm's R&D efforts. Thus, an explicit complementarity between production and R&D is included. Because of this complementarity, a myopic decision rule—adopt an innovation only if the discounted value of the increase in the flow rate of profits (due to this one innovation) exceeds the fixed cost of adoption—is rarely optimal; furthermore, once begun the firm will not terminate its R&D program. Thus, a failure to account for this complementarity will lead to the oft-mentioned American under investment in R&D.This research was supported in part by the UCLA Price Institute in Entrepreneurial Studies.     

Human capital and firms’ innovation: evidence from emerging economies

ABSTRACT

We explore the relationship between human capital and firms’ innovation in emerging economies. Most papers consider the formal knowledge developed in R&D laboratories as a major source of innovation. However, a critical portion of knowledge required for innovation resides in human resources and is created outside any formalised R&D activity. We consider that, to improve their technological capabilities, firms should invest in different forms of human capital, namely highly educated workforce and experienced managers, but also in strategic human resource (HR) practices aimed at developing human capital by increasing employees’ firm-specific technical skills and competences. Besides looking at the type of innovation outcomes, we place greater emphasis on the strategies of innovation development, as these should signal an improved firms’ ability, not just to innovate, but to put their own creative effort in the development of innovation. Our results contrast with the traditional view of firms in emerging economies as mainly relying on the external acquisition of innovations, by showing their actual ability to develop new technologies. In this respect, HR practices aimed at fostering employees’ learning and autonomy at work appear more important than the educational attainment of workers, whilst the experience of managers does not seem effective.     

An investigation over inbound open innovation in SMEs: insights from an Italian manufacturing sample

ABSTRACT

Building on the Open Innovation (OI) framework, the purpose of this paper is to examine the R&D inbound model of small and medium enterprises (SMEs). Specifically, we focus on the impact of different horizontal R&D collaborations on product innovation and innovation performance. Hypotheses are tested using a Probit/Tobit regression on an Italian sample of 2591 manufacturing SMEs. Our analysis shows that collaborating with different horizontal R&D partners brings to different innovation outcomes. In particular, R&D collaboration with universities has a positive impact on product innovation, but not on innovation performance. Whereas, R&D collaboration with research centres and other private companies has a positive impact on both product innovation and innovation performance. Our findings provide implications for SMEs managers and entrepreneurs who have to decide between R&D partners for their innovation strategy. Avenues for future research are discussed.     

Testing a model of UK growth: A role for R&D subsidies

R&D is a main driver of growth, whether by generating new ideas for production or increasing technological transfer. However, R&D itself is risky and faces numerous barriers which may reduce its marginal return. Direct R&D subsides are intended to counteract such barriers, but whether they lead empirically to increased economic growth is unclear. In our structural model of the UK, subsidies offset the frictional costs associated with R&D, incentivising innovation and so stimulating productivity growth. We estimate and test this structural model by indirect inference, a method not previously used in work on R&D. We find that even temporary cuts to R&D funding have long-lasting impacts on UK economic growth. The power of the test allows us to calculate tight accuracy bounds for our results and for policy reform impacts calculated using the model. These findings are of high relevance to the ongoing debate around the future UK innovation environment.     

Knowledge appropriability, firm size, and growth

Empirical evidence shows that the number of patents per R&D dollar declines with firm size. In this paper, we propose a Schumpeterian growth model that accounts for this evidence. We analyze an economy with firms that engage in cost-reducing innovation resulting from the accumulation of both codified and tacit knowledge: the former occurs through the purchase of patents, while the latter is the result of R&D conducted in-house by firms. We study the relation between knowledge appropriability and market structure, and we show that a shift from patents to in-house research occurs as firm size gets larger. Since innovation statistics concentrate mainly on patents, this process of research reallocation results into an under-estimation of innovative activity and is responsible for the declining ratio of patents to R&D expenditure. Survey data on UK-based firms provide support to our results.     

Link between innovation and productivity in Canadian manufacturing industries

Empirical studies commonly use research and development (R&D) to measure innovation and often find, especially in Canada, no strong link between productivity and innovation. In this article, we model innovation as an unobservable latent variable that underlies four indicators: R&D, patents, technology adoption, and skills. We find that these indicators are reasonably good measures of innovation for aggregate manufacturing. However, except for skills, the reliability of the indicators for innovation differs among individual industries. Our innovation indexes, based on the latent variable model, show that most manufacturing industries became more innovative over the 1980–1997 period. The pace of innovation in the electrical and electronic products industry accelerated during the 1990s. In addition, we show that the new measure of innovation has a positive and statistically significant impact on productivity. It takes from 1 to 3 years, depending on the industry, for innovation to generate an impact on productivity.     

Explanatory factors for participation in formal standardisation processes: Empirical evidence at firm level

In contrast to the long tradition of empirical research into the innovation activities and R&D collaboration of companies, the issue of standardisation has been analysed mostly in theoretical approaches. This paper presents an empirical analysis of the participation of German companies in formal standards development organisations. It becomes clear that company size has a significant positive effect on the probability of a participation in standardisation. We focus further on two aspects, on R&D as input and export intensity as performance indicator, in order to explain the likelihood to join formal standardisation processes. Both the R&D intensity and the export activities exhibit an inverse U relationship. Obviously, even participating in standardisation processes requires a certain absorptive capacity, but R&D and export intensive companies expect more disadvantages, like unintended knowledge spill-overs, from joining formal standardisation processes and, therefore, stay away. In addition, export activities increase the likelihood to join formal standardisation processes up to a certain level, although companies with very high export shares expect less benefit from joining formal standardisation processes. Finally, some policy conclusions are derived.     

Not just financial support? Another role of public subsidy in university–industry research collaborations

Management of university–industry research collaboration (hereafter UIC) is the key to its success. In this respect, government can play an essential role in UIC. A public subsidy for research and development (hereafter R&D) is not only an important financial support for UIC but may also serve as a useful means of promoting trust among UIC members, resulting in higher innovation performance. However, few empirical studies have investigated the role a public R&D subsidy plays in promoting trust in UIC. To this end, by using original survey data, this study examines empirically whether a public R&D subsidy for UIC contributes to trust formation and, thus, to higher innovation performance based on trust. Our findings suggest that a public R&D subsidy promotes trust formation, which then increases the innovation performance of UIC participants, partially mediating the more direct effects of R&D subsidy on innovation performance.     

Occupational choice and entrepreneurship: effects of R&D subsidies on economic growth

Most R&D-based growth models fail to explicitly account for the role of entrepreneurs in economic growth. By contrast, this study accounts for this factor and constructs an overlapping-generations model that includes entrepreneurial innovation and the occupational choice of becoming an entrepreneur or a worker. For the role of entrepreneurs, even a policy intended to encourage innovation can negatively affect economic growth. For the effect of such policies, I focus on the role of R&D subsidies. I show that while R&D subsidies promote entrepreneurs’ R&D activities, they increase workers’ wages by boosting labor demand. Thus, it is more attractive to be a worker, which reduces the number of entrepreneurs. Subsidies can have both a negative and positive effect on growth, which results in an inverted U-shaped relationship between R&D subsidies and growth. In addition, a growth-maximizing R&D subsidy rate exists, although this rate is too high to maximize the welfare level of any one generation. When individuals are heterogeneous in their abilities, R&D subsidies reduce intra-generational inequalities.     

The role of human capital and innovation in economic development: evidence from post-Malthusian Prussia

The effect of human capital on growth involves multiple channels. On the one hand, an increase in human capital directly affects economic growth by enhancing labor productivity in production. On the other hand, human capital is an important input into R&D and therefore increases labor productivity indirectly by accelerating technological change. In addition, different types of human capital such as basic and higher education or training-on-the-job might play different roles in both production and innovation activities. We merge individual data on valuable patents granted in Prussia in the late nineteenth-century with county-level data on literacy, craftsmanship, secondary schooling, and income tax revenues to explore the complex relationship between various types of human capital, innovation, and income. We find that the Second Industrial Revolution can be seen as a transition period when it comes to the role of human capital. As in the preceding First Industrial Revolution, “useful knowledge” embodied in master craftsmen was related to innovation, especially of independent inventors. As in the subsequent twentieth century, the quality of basic education was associated with both workers’ productivity and firms’ R&D processes. In a final step, we show that literacy had also a negative effect on fertility which increased with innovation. In general, our findings support the notion that the accumulation of basic human capital was crucial for the transition to modern economic growth.     

中国研发投入的动态演化

R&D investment is enterprises’ strategy based on the market demand on innovative products and its production capacity for them. Enlarging market demand would spur the enterprises’ R&D input and the enhancement of technology state in production ability could have a complex effect on less developed countries’ R&D expenditure. With the measurement of China’s technology state compared to the United States and Japan, this paper explores with the state space model the dynamic effects of determinants on China’s R&D expenditure with the data during 1987–2006. The result illustrates that the growing national income, a proxy of domestic market demand, impedes the further R&D investment in China due to the enormous demand for necessities dominated by lower income class, and the income inequality is the major incentive for R&D investment via the higher pricing on the wealthy group, and that the improvement of technology state reduces the innovation risk and plays an important role in stimulating R&D expenditure.      

Evidence on the impact of R&D and ICT investments on innovation and productivity in Italian firms

Both research and development (R&D) and information and communication technology (ICT) investment have been identified as sources of relative innovation underperformance in Europe vis-à-vis the USA. In this article, we investigate the R&D and ICT investment at the firm level in an effort to assess their relative importance and to what extent they are complements or substitutes. We use data on a large unbalanced panel data sample of Italian manufacturing firms constructed from four consecutive waves of a survey of manufacturing firms, to estimate a version of the CDM model of R&D, innovation, and productivity [Crépon–Duguet–Mairesse 1998. Research, innovation and productivity: An econometric analysis at the firm level. Economics of Innovation and New Technology 7, no. 2: 115–58] that has been modified to include ICT investment and R&D as the two main inputs into innovation and productivity. We find that R&D and ICT are both strongly associated with innovation and productivity, with R&D being more important for innovation, and ICT investment being more important for productivity. For the median firm, rates of return to both investments are so high that they suggest considerably underinvestment in both these activities. We explore the possible complementarity between R&D and ICT in innovation and production, but find none, although we do find complementarity between R&D and worker skill in innovation.     

Boundary spanning leadership,resource mobilisation,and performance of university-industry R&D projects: a study in a Japanese university

Acquisition of university knowledge has grown significantly for firms to complement an internal knowledge base of technological innovation. Recognising the significance, an increasing body of literature has analysed the performance of university-industry R&D projects by adopting managerial and social approaches. Despite the important role played by project leaders, existing research paid scant attention to the critical ability and quality of successful project leaders in acquiring university knowledge. To address these limitations, this study performed a survey of firms that collaborated with the Ritsumeikan University in Japan and investigates the influence of boundary spanning leadership of project leaders in firms on both knowledge and commercial performance of R&D projects. Furthermore, it also evaluates the mediation effect of university resource mobilisation that links boundary spanning leadership and project performance.     

Mergers and innovation: evidence from a panel of US firms*

Mergers lead to larger firms and a less competitive market structure, but their effects on innovation are not clear. Mergers may improve innovation incentives by promoting economies of scope and scale, R&D activities, and increasing the ability to deal with uncertainties. However, mergers may also discourage innovation by reducing competition, increasing costs, and decreasing production and R&D efficiencies. In this study, we investigate merger impacts on innovation using a panel data consisting of four different data sets on publicly traded US manufacturing firms from 1980 to 2003. Our proxy for innovation is based on citation-weighted patent stocks. In our estimation model, we control for endogeneity using instrumental variables and factors such as market share, size, industry, and time. We find that mergers are positively and significantly correlated with firms’ innovation. Our findings also indicate that merger effect on innovation is heterogeneous across industries, increases with market share, and is greater in the long run. Our findings are robust to alternative measures of innovation.     

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.     

Role of human resource practices in absorptive capacity and R&D cooperation

This paper reconceptualises absorptive capacity as a strategic human resource construct and analyses its role in determining R&D cooperation and innovation in firms. In spite of widespread consensus on the role of absorptive capacity in innovation, the literature has so far concentrated only on traditional R&D and human capital based indicators of absorptive capacity. Furthermore, most firm-level studies investigating this relationship are cross-sectional in nature and there is need for longitudinal evidence. Employing the IAB Establishment Panel Survey on about 1200 private sector establishments in Germany during 2007–2011, we apply a structural model that links firms’ human resource practices, R&D collaboration strategies and finally their innovation outcome. Findings from the first stage of the empirical analysis suggest that adoption of employment practices positively affects horizontal, institutional and consulting-based R&D cooperation, while compensation programs positively affect only horizontal R&D cooperation. In the second stage, the effect of cooperative R&D conditioned upon human resource practices on innovation performance is examined. Results indicate that firms having institutional and consulting-based R&D cooperation relationships are more often associated with higher incremental product, process and new-to-market innovation, whereas the effect is relatively weaker in case of horizontal R&D cooperation.