Choosing among alternative technological strategies: an empirical analysis of formal sources of innovation

This work aims to offer a detailed conceptual and empirical analysis of the inter-firm differences in deciding the composition of their technological efforts. Using data for Spanish firms in the period 1990-1996, the study begins with the standard analysis of the determinants of innovative investment, then moves on to the less analysed question of the determinants of the generate versus import alternative and ends with a novel analysis of the characteristics which lead firms to organise research internally as compared to the possibility of contracting R&D services externally. In contrast to standard practice, the econometric approach takes into account the existence of non-linearities in the used data. The results obtained support the conceptual ideas on which they are based.     

Environmental policy vs. public pressure: Innovation and diffusion of alternative bleaching technologies in the pulp industry

In the late 1980s and early 1990s, concern over dioxin in both paper products and wastewater led to the development of techniques that reduced the use of chlorine in the pulp industry. Both regulatory and consumer pressure motivated this change. Unlike previous studies, we use patent data to examine the evolution of two competing bleaching technologies in five major paper-producing countries, both of which reduce the use of chlorine in the pulping process. The use of patent data allows us to focus on the invention stage. However, adoption data are also presented, and by the end of the 1990s, nearly all pulp production in these countries used one of these technologies. While previous studies emphasize the importance of regulation for inducing innovation, here we find substantial innovation occurring before regulations were in place. Instead, pressure from consumers and the public at large to reduce the chlorine content of paper drove invention, prior to the introduction of environmental policies in any of the countries concerned.     

Tax incentives and R&D activity: Firm-level evidence from Taiwan

This paper investigates the effect of tax incentives on R&D activities in Taiwanese manufacturing firms. The propensity score matching (PSM) estimates show that recipients of R&D tax credits appear on average to have 53.80% higher R&D expenditures than that they do without receiving tax credits, while there is no significantly higher growth rate of R&D expenditure. This study further employs the panel instrumental variable (IV) and generalized method of moment (GMM) techniques to control for endogeneity of R&D tax credits and firm heterogeneity in determining R&D expenditure. The R&D tax credit is witnessed to exhibit a significantly positive influence on R&D expenditure and its growth, especially for electronics firms. The marginal effect is moderate, ranging from 0.094 to 0.120. Specifically, the R&D elasticity concerning tax credits tends to increase gradually along with the approaching expiration of R&D tax credits measure, lending a supportive view on its efficacy.     

The impact of firm participation in R&D programmes on R&D partnerships

R&D subsidies designed to encourage innovation efforts by firms may have intended and unintended effects on the way they organize their innovation process. We present empirical evidence on how R&D subsidies affect firms’ R&D cooperation strategies. In particular, we investigate whether receiving public R&D subsidies affect the probability that a firm will set up an R&D partnership with a public research organization (PRO), or with other firms. Our main findings are: (i) public support significantly increases the chances that a firm will cooperate with a PRO, and (ii) public support also increases the likelihood that a firm will establish private partnerships, but to a smaller extent and only when firms have intangible knowledge assets. These results suggest that public R&D programmes trigger a behavioural change in firms’ R&D partnerships, alleviating barriers to cooperation.     

Evaluating the impact of R&D tax credits on innovation: A microeconometric study on Canadian firms

This study examines the effect of R&D tax credits on innovation activities of Canadian manufacturing firms. Over the 1997-1999 period the Federal and Provincial R&D tax credit programs were used by more than one third of all manufacturing firms and by close to two thirds of firms in high-technology sectors. We investigate the average effect of R&D tax credits on a series of innovation indicators such as: number of new products, sales with new products, originality of innovation, etc. using a non-parametric matching approach. Compared to a hypothetical situation in the absence of R&D tax credits, recipients of tax credits show significantly better scores on most but not all performance indicators. We therefore conclude that tax credits lead to additional innovation output.     

Openness and innovation—Home and export demand effects on manufacturing innovation: Panel data evidence for Ireland and Switzerland

Recent studies in the tradition of Schmookler have re-emphasised the potential role of demand in stimulating innovation. Here, we reconsider the role of ‘home’ and ‘export’ market demand in stimulating manufacturing innovation using comparable panel data for two small open economies - Ireland and Switzerland. Our analysis is based on the estimation of reduced form innovation production functions using panel data estimators over the sample period 1994-2005. For a range of innovation indicators, however, we find little evidence of any significant market demand effects, with innovation performance instead determined largely by firm-level capability effects and characteristics. In policy and strategy terms this suggests the continued value of measures to improve innovation capability regardless of market demand conditions. In more methodological terms our results suggest the validity of the usual assumption implicit in modelling innovation outputs that supply-side factors predominate.     

The economic impact of technological procurement for large-scale research infrastructures: Evidence from the Large Hadron Collider at CERN

The Large Hadron Collider at CERN, the European Organisation for Nuclear Research, is the world’s highest-energy particle accelerator. Its construction (1995–2008) required frontier technologies and close collaboration between CERN scientists and contracting firms. The literature on “Big Science” projects suggests that this collaboration generated economic spillovers, particularly through technological learning. CERN granted us access to its procurement database, including suppliers of LHC from 35 countries for orders over 10,000 Swiss Francs. We gathered balance-sheet data for more than 350 of these companies from 1991 to 2014, which include the years before and after that of the first order received. The study assesses, in quantitative terms, whether becoming a CERN supplier induced greater R&D effort and innovative capacity, thus enhancing productivity and profitability. The findings – which controlled for firms’ observable characteristics, macroeconomic conditions, and unobserved time, country, industry and firm-level fixed effects – indicate a statistically significant correlation between procurement events and company R&D, knowledge creation and economic performance. The correlation is chiefly driven by high-tech orders; for companies receiving non-high-tech orders, it is weaker, or even statistically not significant.     

Policy entrepreneurship in the co-evolution of institutions, preferences, and technology: Comparing the diffusion of totally chlorine free pulp bleaching technologies in the US and Sweden

This paper uses the concept of policy entrepreneurship to explain the social processes underlying sustainable technical change in the pulp and paper industry in the 1990s. It presents a detailed case study on the differences in the transition to and diffusion of totally chlorine free (TCF) pulp bleaching methods in Sweden and the USA. This change was sustained in the former, while it was almost absent in the latter. The paper studies the causes for this difference. It looks at the complex coevolution of technology, institutions, and consumer preferences that has taken place in both countries and draws conclusions on how transitions to sustainable paths in production and consumption may be supported by economic and social policy.     

Founders’ human capital and the growth of new technology-based firms: A competence-based view

In this paper, we analyze empirically the relation between the growth of new technology-based firms and the human capital of founders, with the aim of teasing out the “wealth” and “capability” effects of human capital. For this purpose, we take advantage of a new data set relating to a sample composed of 506 Italian young firms that operate in high-tech industries in both manufacturing and services. In accordance with competence-based theories, the econometric estimates show that the nature of the education and of the prior work experience of founders exerts a key influence on growth. In fact, founders’ years of university education in economic and managerial fields and to a lesser extent in scientific and technical fields positively affect growth while education in other fields does not. Similarly prior work experience in the same industry of the new firm is positively associated with growth while prior work experience in other industries is not. Furthermore, it is the technical work experience of founders as opposed to their commercial work experience that determines growth. The fact that within the founding team there are individuals with prior entrepreneurial experiences also results in superior growth. Lastly, we provide evidence that there are synergistic gains from the combination of the complementary capabilities of founders relating to (i) economic-managerial and scientific-technical education and (ii) technical and commercial industry-specific work experiences. We conclude that the human capital of founders of new technology-based firms is not just a proxy for personal wealth.     

Comparing firms’ triadic patent applications across countries: Is there a gap in terms of R&D effort or a gap in terms of performances?

This paper addresses the question of national differences as regard the number of triadic patents applied for by inventors from several OECD countries. The key idea is to determine whether such differences should be attributed to differences in R&D expenditures or rather to some other reasons, mainly institutional or behavioural ones. With this aim in view, both a macro-economic analysis, based on aggregate data for triadic patent counts and R&D expenditures and a micro-economic analysis based on firms’ data from three selected sectors are performed. In both cases, the methodological focus is made on the introduction, the definition and the estimation of a national index of relative efficiency in standard count data models. The main empirical findings are that there is a strong heterogeneity in terms of performance among European countries and a strong intra-country heterogeneity among sectors. This suggests that, in the field of innovation policies, there is a need for “tailored” solutions reflecting the specificities of each innovation system. Moreover, we show that European countries over-perform the United States in some high-tech sectors where the leadership of American firms is traditionally alleged, whereas European firms fail to keep up in more traditional sectors.     

International research networks: Determinants of country embeddedness

Research activities are increasingly global so that embeddedness in international knowledge networks is decisive for inventive and innovative performance. We analyze determinants of countries’ embeddedness in the global photovoltaics knowledge network for the period 1980–2015 and argue that positions in this network are determined by the structure and functionality of national research systems and by instruments within the policy-mix for renewable energies. We show that cohesion and connectedness of the national research system positively affect international embeddedness, whereas centralized systems are detrimental to embeddedness. This indicates that a diffusion oriented research system allows better access to international knowledge flows. Policy instruments, especially demand side instruments, show a positive effect on embeddedness.     

The effectiveness of subsidies revisited: Accounting for wage and employment effects in business R&D

The present paper investigates the effectiveness of public subsidies on business enterprise research in a panel of OECD countries. We contribute to the literature by explicitly distinguishing between the effects of a subsidy on R&D employment and expenditure, thereby accounting for a potential increase in scientists’ wages. We employ instrumental variable regressions to address endogeneity problems of the subsidization. The results indicate that subsidies are effective in generating additional research expenditure. Expenditure for business research increases by roughly 20% more than employment. We take this as evidence that subsidies may raise scientists’ wages given standard production functions.     

R&D internationalization, R&D collaboration and public knowledge institutions in small economies: Evidence from Finland and the Netherlands

This paper investigates domestic and foreign innovating firms’ determinants of R&D collaboration with domestic universities and public knowledge institutes in Finland and the Netherlands. We put particular emphasis on the impact of incoming academic spillovers on the probability to co-operate with these public R&D institutes.Based on data from Community Innovation Surveys we find that foreign firms in the Netherlands are less likely to co-operate with domestic public knowledge institutions than domestic firms, while in Finland no significant difference can be detected. Another result is that incoming knowledge spillovers are an important determinant for R&D collaboration with domestic public knowledge institutions in both countries. In case of foreign firms in Finland, incoming knowledge spillovers affect the probability to co-operate with public knowledge institutions more positively compared to domestic firms. For the Netherlands no substantial difference could be found in this respect. Further, innovating firms in Finland that require academic or basic knowledge do not co-operate significantly more with public knowledge institutions than those that need applied knowledge. At the same time they are willing to share knowledge with public R&D partners. In the Netherlands innovating firms that require relatively more basic than applied knowledge, increase the probability of co-operation with Dutch universities and public knowledge institutions but there is reluctance to share proprietary knowledge with public R&D partners. For both countries no significant difference between foreign and domestic firms with regard to academic knowledge requirements could be found. This raises the issue whether Finnish innovation policies with a strong focus on R&D co-operation provide incentives for strategic behaviour by domestic public partners to put more emphasis on applied research.     

The technological system of production and innovation: The case of photovoltaic technology in China

This research paper studies the Chinese technological system of production and innovation in the field of photovoltaics (PV). It contributes to a better understanding of the emergence and development of the system by utilizing three levels of analysis: the institutional framework of the system, the market dynamics of production and deployment, and the composition of innovation-related activities. The analysis demonstrates the interrelated roles of transnational factors, local government policies, and research and development (R&D) activities undertaken by the main actors in shaping the system dynamics. Tracking the relative position of China in the global PV manufacturing, installation and technological development, the analysis shows a gap between the growth of China’s market share and its modest share of transnational patent applications. This suggests a puzzle, which the paper attempts to answer by inspecting the individual companies in the system against four aspects. First, the dynamic development of their size and performance. Second, the nature of their international involvement through foreign direct investment and mergers and acquisition deals. Third, their technological specialization within the PV value chain over time. Fourth, the spatial scope of their patenting protection endeavours. The analysis recognises four periods of system development driven jointly by market dynamics and government plans. Behind the continuous growth of the system, there were different driving and moderating factors in each period.     

Innovation in UK higher education: A panel data analysis of undergraduate degree programmes

In the UK, higher education is increasingly a marketised service sharing many characteristics with other professional services such as legal, medical or financial services. With marketisation comes competition, and the need for Higher Education Institutions (HEIs) to develop and maintain strong programmes to attract and retain high-class faculty and fee-paying students. Here, we consider the drivers of programme innovation ? i.e. the introduction of new programmes and the withdrawal of existing programmes ? in UK universities. Our focus is on undergraduate programmes as these account for three-quarters of all student enrolments. Using panel data for UK universities we identify significant resource, internationalisation and business engagement effects. Financial stringency and more extensive international market engagement both encourage programme introduction. Collaboration with businesses has offsetting effects depending on the nature of the interaction. The results have both strategic and systemic implications.     

R&D cooperation and failures in innovation projects: Empirical evidence from French CIS data

The second French Community Innovation Survey (CIS) indicates that 14% of R&D collaborating firms had to abandon or delay their innovation projects due to difficulties in their partnerships, an outcome which we term “cooperation failures”. Controlling for sample selection on the cooperation decision, our estimates show that firms collaborating with competitors and public research organizations (PROs), especially when they are foreign, are more likely to delay or stop an innovation project because of difficulties encountered in their R&D partnerships. More surprisingly, firms collaborating with their suppliers also face a higher risk of “cooperation failures”. At least for PROs, firms can reduce the risk of “cooperation failures” through previous experiences in partnerships. Larger firms and group subsidiaries are less likely to face “cooperation failures”, and so do firms in industries with a strong appropriability regime.     

On the innovativeness of foreign affiliates: Evidence from companies in The Netherlands

In examining the distinctive contributions of foreign subsidiaries and domestic firms to innovative performance in Dutch manufacturing, the paper shows that foreign ownership is an important factor in explaining inter-firm differences affecting innovativeness. It characterizes innovativeness by distinguishing between products that are new to the firm (‘imitative’ innovations), and those products that are new to the market (‘real’ innovations). It uses firm-level data for 4780 firms which took part in the Community Innovation Survey (CIS-2) for 1996 in The Netherlands. It concludes that foreign subsidiaries are more innovative, they are more likely to introduce ‘imitative’ as well as ‘real’ innovations compared to domestic firms. In comparison with the population of innovative companies, however, there is greater heterogeneity among foreign subsidiaries, i.e. they are not more likely to introduce ‘real’ innovations if they cannot utilize knowledge transfer from an associated company.     

The impact of the French policy mix on business R&D: How geography matters

Based on a spatial extension of an R&D investment model, this paper measures the macroeconomic impact of the French R&D policy mix on business R&D using regional data. Our measure takes into account not only the direct effect of policies but also indirect effects generated by the existence of spatial interaction between regions. Using a unique database containing information on the levels of various R&D policy instruments received by firms in French NUTS3 regions over the period 2001–2011, our estimates of a spatial Durbin model with structural breaks and fixed effects reveal the existence of a negative spatial dependence among R&D investments in regions. In this context, while a-spatial estimates would conclude that all instruments have a crowding-in effect, we show that national subsidies are the only instrument that is able to generate significant crowding-in effects. On the contrary, it seems that the design, size and spatial allocation of funds from the other instruments (tax credits, local subsidies, European subsidies) lead them to act (in the French context) as beggar-thy-neighbor policies.