How to leverage the impact of R&D on product innovation? The moderating effect of management innovation

Although research and development (R&D) is a key indicator of (technological) innovation, scholars have found mixed results regarding its effect on product innovation and firm performance. In this paper, we claim that variations in R&D effectiveness can be explained by changes in a firm’s social system, in particular in its management innovation. It is still unclear how management innovation influences R&D effectiveness in terms of product innovation. In this study, we address this theoretical and empirical gap in the innovation literature. Our theoretical arguments and findings from a large-scale survey among Dutch firms show that R&D has a decreasingly positive relationship with product innovation, particularly for firms with low levels of management innovation. However, in firms with high levels of management innovation, this relationship becomes more J-shaped, especially in small and medium-sized firms. Our findings also appear to indicate that management innovation may be more important for competitive advantage than just R&D. Overall, our insights reveal that management innovation is a key moderator in explaining firms’ effectiveness in transforming R&D into successful product innovation.     

The impact of R&D on factor-augmenting technical change – an empirical assessment at the sector level*

The aim of the paper is to quantify endogenous factor-augmenting technical change driven by R&D investments in a panel of 11 OECD countries over 1987–2007. This paper contributes to the scant empirical evidence on the speed, sources and direction of technical change for various sectors and production factors. Assuming cost-minimization behavior, a CES framework is used to derive a system of equations that is estimated by a GMM system estimator. The estimated factor-augmenting technology parameters show that in most sectors, technical change was labor-augmenting and labor-saving. Statistically significant effects of manufacturing and services R&D were found on factor-augmenting technical change (with the highest R&D elasticities found in the high-tech manufacturing and transport, storage and communication sectors). Whereas ‘in-house’ R&D stimulates total factor productivity, R&D spilled over to other sectors has a capital-augmenting effect accompanied by a higher use of labor. The results of this study provide a starting point for incorporating endogenous factor-augmenting technical change in impact assessment models aimed at broad policy analysis including economic growth, food security or climate change.     

Analysing Production Technology and Risk in Organic and Conventional Dutch Arable Farming using Panel Data

This paper compares the production technology and production risk of organic and conventional arable farms in the Netherlands. Just–Pope production functions that explicitly account for output variability are estimated using panel data of Dutch organic and conventional farms. Prior investigation of the data indicates that within variation of output is significantly higher for organic farms, indicating that organic farms face more output variation than conventional farms. The estimation results indicate that in both types of farms, unobserved farm‐specific factors like management skills and soil quality are important in explaining output variability and production risk. The results further indicate that land has the highest elasticity of production for both farm types. Labour and other variable inputs have significant production elasticities in the case of conventional farms and other variable inputs in the case of organic farms. Manure and fertilisers are risk‐increasing inputs on organic farms and risk‐reducing inputs on conventional farms. Other variable inputs and labour are risk increasing on both farm types; capital and land are risk‐reducing inputs.     

Farm-gate tomato price negotiations under asymmetric information

This article provides an empirical analysis of farm‐gate tomato price negotiations under asymmetric information. Regression models are estimated to analyze when and by how much sellers stick to their initial ask prices and what explains the variation in the initial ask–offer price spread. Detailed information on 66 farm‐gate tomato transactions and daily tomato wholesale price data from the central vegetable market in Addis Ababa are used for the analysis. Estimation results show that farmers are less committed to their initial ask price when the buyer speaks out the transaction price first, when their quality perceptions of the tomatoes being transacted differ from those of the buyers, and when their tomato farm is at a large distance from the main road. Sellers stick more to their initial ask price when they know that the central market price is high. The initial ask–offer price spread decreases when the buyer speaks out the initial negotiation price first, but increases in the difference in quality perception between buyer and seller, and in the quantity of tomatoes being transacted.     

The effect of climate change on optimal wetlands and waterfowl management in Western Canada

Warmer temperatures and a decrease in precipitation in the 21st century could severely deplete wetlands in the prairie pothole region of western Canada. In this study, we employ linear regression analysis to determine the casual effect of climate change on wetlands in this region, with temperature, precipitation and the standardized precipitation index (SPI) used to predict the effect of potential climate change on wetlands. We then use a waterfowl-wetlands bioeconomic model to solve for socially optimal levels of duck harvests and wetlands retention under current climate conditions and various climate change scenarios. The model maximizes benefits to hunters plus the amenity values of ducks to non hunters and the non-market ecosystem benefits of wetlands. Results indicate that climate change could decrease wetlands by between 7 and 47%, and that the optimal number of wetlands to retain could decrease by as much as 38% from the baseline climate.     

Balancing Bio-Energy Cropping Benefits and Water Quality Impacts: A Dynamic Optimization Approach

The relationship between bio-energy feedstock production and water quality has received little attention from economists. Here, an optimal control model is used to determine the optimal amount of land to convert to the production of energy feedstocks, specifically ethanol corn, taking into account potential impacts on water quality. Based on comparative static analyses of an optimal control model, and a numerical application, we find that the optimal proportion of land to shift into bio-energy production from a baseline use, such as the Conservation Reserve Program, depends on key model parameters, specifically the rate of degradation of the pollutant and the link between the intensity of bio-energy feedstock production and the rate of change in the pollutant stock. Yet, there is a limit to how much land should optimally be converted as society must trade-off its desire to mitigate climate change against its willingness to accept a decline in water quality. Le lien entre la production de matières premières bioénergétiques et la qualité de l’eau a attiré peu d’attention de la part des économistes. Nous avons utilisé un modèle de contrôle optimal pour déterminer les superficies optimales à convertir à la production de matières premières énergétiques, en particulier le maïs destinéà la production d’éthanol, en tenant compte des répercussions potentielles sur la qualité de l’eau. D’après une simulation numérique et des analyses de statique comparative obtenues à l’aide d’un modèle de contrôle optimal, nous en sommes venus à la conclusion que les superficies optimales à convertir à la production de matières premières bioénergétiques à partir d’un instrument de référence, tel que le Conservation Reserve Program (Programme de réserve des terres sous conservation), dépend des paramètres clés du modèle, particulièrement du taux de biodégradation des polluants et du lien entre l’intensité de la production de matières premières bioénergétiques et le taux de variation du stock de polluants. Il existe tout de même une limite quant aux superficies à convertir étant donné que la société doit faire un choix entre son désir d’atténuer le changement climatique et son acceptation d’une diminution de la qualité de l’eau.     

Conservation Payments under Risk: A Stochastic Dominance Approach

Conservation payments can be used to preserve forest and agroforest systems. To explain landowners' land-use decisions and determine appropriate conservation payments, it is necessary to focus on revenue risk. Marginal conditional stochastic dominance rules are used to derive conditions for determining the conservation payments required to guarantee that the environmentally preferred land use dominates. An empirical application to shaded coffee protection in the biologically important Chocó region of West Ecuador shows that conservation payments required for preserving shaded coffee areas are much higher than those calculated under risk-neutral assumptions. Further, the extant distribution of land has strong impacts on the required payments.     

Sustainable consumption in Vietnam: an explorative study among the urban middle class

The middle class of Vietnam is growing and so is their consumption, especially in urban areas. This is due to the effects of rapid economic growth, industrialization and increasing wealth in combination with a young, growing population. This paper aims to understand current consumption patterns and consumption categories that can provide a start for sustainable lifestyles among the Vietnamese middle class. Data was collected in the capital Hanoi, in the north of Vietnam. The current level of awareness, knowledge and attitude was explored on five specific consumption topics: energy, transport, water, waste, and food. A combination of quantitative and qualitative data was collected: 5 focus groups, 5 in‐depth interviews and a survey among 158 Vietnamese urban middle class consumers. The results are discussed according to the MOA model that explains behaviour as a function of three components: Motivation, Opportunity and Ability. The research concludes that awareness and knowledge of the urban middle class in Vietnam on sustainable consumption is generally low. However, the motivation to live healthy lifestyles and protect the planet for their future generations is rather high. In order to support more sustainable lifestyles, the awareness of environmental issues needs to be increased; knowledge needs to be made available and accessible (ability); and role models need to set an example for the urban middle class of Vietnam. Furthermore, health in combination with food is the most important reason for people to pursue a sustainable lifestyle (motivation) and the need to change was expressed. However, a general distrust towards business and governmental actors was also found. Therefore, opportunities for bottom‐up initiatives for sustainable food consumption must be explored in the future. This could support in engaging the middle class of Vietnam in sustainable lifestyles.     

Use of Public Perceptions of Groundwater Quality Benefits in Developing Livestock Management Options

In this study, a dichotomous choice model is used to determine the compensating welfare measure for water quality improvements stemming from livestock waste management in the Abbotsford region of southwestern British Columbia. The benefits of improving water quality are compared with the net costs of composting manure on a large scale, the option for handling livestock wastes preferred by the provincial government. The results indicate that the costs of composting manure exceed the revenue from selling manure (compost) plus the off-site damages avoided.     

Comparing Fuzzy and Probabilistic Approaches to Preference Uncertainty in Non-Market Valuation

In seeking to value environmental amenities and public goods, individuals often have trouble trading off the (vague) good or amenity against a monetary measure. Valuation in these circumstances can best be described as fuzzy in terms of the amenity being valued, perceptions of property rights, and the numbers chosen to reflect values. In this paper, we apply fuzzy logic to contingent valuation, employing a fuzzy clustering approach for incorporating preference uncertainty obtained from a follow-up certainty confidence question. We develop a fuzzy random utility maximization (FRUM) framework where the perceived utility of each individual is fuzzy in the sense that an individual’s utility belongs to each cluster to some degree. The model is then applied to a Swedish survey that elicited residents’ willingness to pay for enhanced forest conservation and to a Canadian survey of agricultural landowners that elicited their willingness to accept compensation for a tree planting program. Both the WTP and WTA measures we obtain using the fuzzy approach are well below those obtained using standard probability methods. Based on goodness of fit measures and Monte Carlo experimentation, a case can be made for using a fuzzy preference approach for modeling preference uncertainty as opposed to incorporating respondent uncertainty within the random utility maximization framework.