Intellectual property rights,non-market considerations and foreign R&D investments

Prior research has focused on how firms use a variety of organizational mechanisms to protect their R&D investments from misappropriation risks in foreign countries. Little is known, however, about how firms can rely on non-market factors to induce preferential treatment by host government authorities, thereby protecting their intellectual property overseas. In this paper, we investigate two such non-market factors, one at the country level, the other at the firm level, that are likely to influence the choice of where firms locate their innovation activities: host country inclination towards the firm's home country and the firm's political capabilities, respectively. We thus examine how IPR policies and non-market factors interact in protecting firm innovation from misappropriation and in making countries more attractive for innovation-related activities. We find support for our predictions in a sample of 1,341 foreign R&D investments made by 163 firms from 14 home countries over the period 2003–2016.     

Defense-related R&D as a model for “Grand Challenges” technology policies

National defense represents a significant share of most OECD governments’ R&D budgets and an even higher share of their mission-oriented R&D spending. This public R&D investment has focused on research and innovation supporting defense missions, and in many cases the military services of these governments have purchased weapons systems incorporating the resulting technologies. Defense-related R&D investment has influenced innovation in the broader civilian economy of several OECD nations, including the United States, the United Kingdom, and France. The scope and nature of this influence remains uncertain and subject to considerable debate. Nonetheless, policymakers throughout the industrialized economies have expressed interest in “applying the lessons” of defense-related and other mission-oriented R&D programs to such challenges as climate change. This paper examines the characteristics of defense-related mission R&D programs in the industrial economies, with particular attention to the subset of nations for which reliable longitudinal data on defense R&D spending are available. I highlight the characteristics that distinguish mission-oriented R&D in this field from mission-oriented R&D in other sectors and to point out some significant differences among OECD economies in the structure of their defense-related R&D programs. The discussion also emphasizes the ways in which the unique structure of defense-related R&D limit its utility as a model for mission-oriented R&D programs aimed at other goals.     

Internationalization of innovation systems: A survey of the literature

While there is a large literature on the internationalization of economic activity (including R&D) at the corporate level, there are not many studies of the degree of internationalization of innovation systems. The few studies that exist show that national innovation systems are becoming internationalized, even if the institutions that support them remain country-specific. To the extent that the far more numerous studies of internationalization of corporate R&D discuss innovation systems at all, they point to the continued importance of national institutions to support innovative activity, even though that activity is itself becoming increasingly internationalized.     

Government policies towards industrial innovation: a review

Existing economic theories show that continuing innovation, diffusion, and technical and managerial improvement are necessary for economic growth and international competitiveness in the industrially advanced countries. But knowledge of why, where and how governments should intervene in the processes of industrial innovations stems more from trial and error than from systematic empirical information of the nature and extent of the hindrances to economically and socially desirable innovations, and of the effectiveness of alternative government policies to remove them. Nonetheless, past empirical studies do offer some clues.Differences amongst industrial sectors. The sources of new technology vary widely amongst inustrial sectors: in the costs of innovation, in the relative importance of outside suppliers of equipment and materials, of large and small firms, and of full-time R & D departments as compared to part-time innovative activities (sect. 7, 8). Similarly, the conditions for successful innovation vary amongst sectors (sect.6). Thus, government policies designed to influence innovation are likely to act with different intensities in different industries.The management of innovation. Nonetheless, there are some features common to innovation in different industries. Considerable costs beyond R & D are often necessary before the innovations reach commercial use (sect.4). And the following managerial characteristics are in general associated with successful innovation: a deliberate policy of seeking innovations; close and careful attention to customer requirements; good personal communications both within the firm and with outside sources of relevant knowledge; a style of management that is ‘organic’ and ‘participatory’ rather than ‘hierarchical’ and ‘authoritarian’; strong project leadership; and a strong engineering capability (sect. 6).R & D managers are still unable to predict the outcome of R & D projects to a useful degree of accuracy and, in the literature on methods of project selection, very little attention is paid to market uncertainties. Furthermore, a greater use of conventional investment appraisal criteria in deciding on R & D projects may re-inforce the already observed tendency in industry towards short-term, low-risk projects, to the neglect of longer-term, high-risk projects (sect. 5).Governments should therefore examine whether the benefits of policies towards education and management advisory services for innovation might outweigh their costs. They may also have a significant role to play in financing longer-term research that is basic to the development of industrial technology (subsect. 12.5).The nature of market and production demands. The direction of industrial innovation is often very sensitive to market and production demands (sect. 3). This fact, together with the high degree of market uncertainty facing innovating firms (sect. 5), suggest that governments can potentially influence both the pace and the direction of industrial innovation through their influence on the scale of industrial, consumer and public service demands. However, this potential influence will become real only if users of innovations are able to specify the innovations that they need, or to evaluate those that they get. This is generally the case for industrial demand, but not in consumer and public service markets, where fashion, insensitivity to users' needs and lack of technical competence often prevail. Government-funded technological institutes and laboratories are ideally placed to provide such technical competence (sub-sect. 12.3).Economic incentives and rewards for innovation. A whole range of economic factors are said to influence the resources, the incentives and the rewards for innovation: for example, the degree of monopoly or the degree of competition, the patent system, the level of profits, the level of taxation, and the level of demand. The empirical evidence on the effects of most of these factors on industrial innovation is either inconclusive or non-existent. However, in the USA a close relationship has been observed between growth of industry sales and growth of industry-financed R & D activities (sect. 10). The rate of growth of demand is also one of the key factors influencing the rate of diffusion of innovations amongst their potential population of users (sects. 11, 12.2).The government-financed scientific and technological infrastructure. Scientific and technological knowledge from outside of innovating firms is often crucial to the completion of successful innovations, and three UK studies show that a significant proportion of this outside knowledge comes from government-financed technological institutes and laboratories, and from the universities (sect. 3). If the same is true in other countries, it should be an essential feature of any government policy towards industrial innovation to know how effectively government-funded laboratories and universities provide supportive knowledge to industry, and how government laboratories should be organised and financed (subsect. 12.4).Direct government-financing of innovative activities in industry. Governments specifically finance R & D activities in industrial firms, although these expenditures are less than those for general industrial development (sect. 13). These R & D activities in industry are relatively more important in France and UK, than in F.R. Germany and the Netherlands.In the four countries, more than 70% of all civilian government R & D activities related to industry are spent on aircraft, space, nuclear energy and electronics (subsect. 14.4). In all these high technologies, governments attempted in the 1960's to implement ‘policies for innovation’, involving government procurement, industrial mergers and attempts at European co-operation, in addition to the financing of R & D (subsect. 14.5). Government expenditures on civilian R & D related to other industrial sectors are very much smaller in all four countries (subsect 14.4).Where should governments intervene? A, number of attempts have been made to develop a formal framework of criteria to assist governments in deciding where they should intervene in industrial innovation. They all run into the following difficulties: dealing with multiple policy objectives; assessing national costs and benefits; comparing with alternative policies, choosing appropriate policy instruments (sect. 17).How should governments intervene? Very little information is available on the effectiveness of various policy instruments that have been used by governments in order to promote innovation in industry. Although it is often possible to measure the inputs into such policies, the measurement of their outputs (or results) is more difficult. Nonetheless, detailed studies would enable some such measurements to be made, and internationally comparable studies would increase the range of experiences and the number of cases that could be examined (sect. 18).Why should governments intervene? A full appreciation of the nature and scale of hindrances to industrial innovation, on which governments should act to remove, requires direct information on what innovations are (or are not) being introduced by industry, and why they are (or are not) being inyroduced. This information can best be obtained from analyses of the behaviour of industrial firms. They would differ from most existing innovation studies that concentrate on asking how firms must behave in order to make successful innovation, by asking what innovations are attempted, and why firms are stimulated to attempt them (sect. 19).     

Selective search, sectoral patterns, and the impact on product innovation performance

The shift toward more open and interconnected innovation activities has been a major topic in recent academic and practitioner discussions. Firms must connect their in-house R&D activities with external partners, such as leading customers or universities, to increase the effectiveness of their innovation activities. Hence, management needs to define where to search for valuable knowledge in its environment. In this paper we argue that knowledge search has to reflect the heterogeneity of various knowledge sources with regard to the knowledge they can provide and how these sources can be activated. We hypothesize that search strategies driven by science, suppliers and the product market will contribute differently to innovation success with new-to-market versus imitated products. Moreover, we explore the effect of these types of knowledge search within different sectoral patterns of innovation. Our empirical analysis rests on a sample of almost 5000 firms from five Western European countries. The results support our hypotheses and highlight the potentials and shortcomings of different types of knowledge search.     

Collaborating across institutional and jurisdictional boundaries: enabling the emergence of a national innovation system through public knowledge management

Public institutions involved in research that aims to strengthen the productivity, profitability and adaptiveness of industries face a multiplicity of challenges when managing for the emergence of cost effective solutions to problems. We reflect upon the learnings of a Government sponsored Visiting Fellow’s programme that we describe as a knowledge management (KM) intervention within Australia’s primary industries Research, Development and Extension (R, D and E) system. Our central concern is to draw upon the learnings of an internet-based initiative in the United States called eXtension to show how ‘traditional’ D and E activities can be transformed. We argue that organisations and networks involved in such D and E activities need to perceive themselves as belonging to systems that are socio-technical in nature. That is, the development and deployment of cross-jurisdictional and cross-institutional innovations are shaped by both the social interactions between people and the systematic use of technology to support distributed learning. We explain how the elements of an integrated model to support public KM can be developed to create the conditions for enhanced innovation. Our findings have relevance to a wide range of other industry sectors considering contemporary service models involving public and private partnerships.     

Intellectual property infringements due to R&D abroad? A comparative analysis between firms with international and domestic innovation activities

This paper aims to analyse the risk of intellectual property (IP) infringements by competitors from abroad and in particular to consider whether this risk is higher for international innovating firms. We distinguish three different types of IP infringements from abroad: the usage of firms’ technical inventions, product piracy, and copying of corporate names and designs. Our analysis rests on the German data from the Europe-wide Community Innovation Survey (CIS). We use a unique data set of about 900 observations, which are retrieved from two survey waves. While the earlier wave contains information about international and domestic innovation activities, the later wave reports IP infringements. In a second analysis, the likelihood of infringements from innovation host countries and no-innovation host countries abroad is examined. Before the empirical analysis, an exploratory study was carried out in China with interviews of German firms with innovation activities in China and with a legal advisor for small and medium-sized German enterprises. The results show that firms with international R&D activities are increasing their chances of losing technological knowledge to their local competitors abroad. R&D activities in countries with weak intellectual property rights increase the risk for all types of IP infringements compared to domestic R&D activities. Infringements by competitors from the host country are driven by the production of new produces in this country. Export intensity is the major driver of infringements from no-innovation host countries. R&D activities in China and North America also increase the risk of an infringement. However, firms that innovate only in their home country experience significantly more product piracy cases than international innovating firms.     

1984: a new push of basic innovations?

With labour market problems pressing national governments to support private innovation, the market mechanism is reinforced as it sets the rate and direction of innovation: (1) in the mix of improvement innovations in established industries, labour-saving technologies are outnumbering the product innovations that offer additional employment and investment opportunities, and (2) basic innovations are rare (stale-mate in technology), but when they occur they tend to occur in ‘clusters’. The competitive nature of allocative decisions on corporate R&D and innovative investment is complemented by the competitive R&D policy of most European countries. As those decisions concern large-scale, highcomplexity technologies, the perspective that the market mechanism tends to produce them in ‘clusters’ poses serious problems of timing, spacing, and — of course — of value judgement about alternative technological developments in the European context. These strategic problems of innovation policy have risen to such a level of potential conflict that they need harmonization.     

Innovation, regional knowledge spillovers and R&D cooperation

We investigate the impact of knowledge spillovers and R&D cooperation on innovation activities in three German regions. We begin by estimating the knowledge-production function in order to test for interregional difference with regard to the efficiency of innovation activities. In a second step, we analyze the contribution of spillovers from R&D effort of other private firms and of public research institutions to explain these differences. The inclusion of variables for R&D cooperation in the model indicates that R&D cooperation is only of relatively minor importance as a medium for knowledge spillover.     

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 role of government in developing the biotechnology industry: a South African perspective

Biotechnology has been identified as one of the key sectors for future economic growth in many countries, with South Africa being no exception. Consequently, the South African government introduced the National Biotechnology Strategy (NBS) in 2001 to modernise the government’s biotechnology institutions and to develop the biotechnology industry, given a changing political and technical environment. An important product of the NBS was the establishment of biotechnology regional innovation centres (BRICs) in 2002, which aimed to develop and commercialise the biotechnology industry. The BRICs, however, were effectively replaced by the creation of the Technology Innovation Agency (TIA) in 2008, which also formed part of the 10-year plan of the Department of Science and Technology (DST). The TIA’s aims are to develop South Africa’s ability to convert local research and development (R&D) into commercial products and services. This paper will explore recent changes in the role of the South African government in its attempts to support and develop the biotechnology industry.     

Impacts of government incentives towards industrial innovation: An analysis of the federal programme funding R&D personnel in the Federal Republic of Germany

Against a background of deteriorating national and international economic conditions, increasing importance is being attached by political administrations to the innovative capacities of small and medium-sized firms with respect to the employment situation and to international competitiveness. Consequently, government support of research, development and innovation in these companies has taken a marked upward turn since the late seventies, both in the Federal Republic of Germany and in other industrialized Western countries.The actual impacts of some of these programmes are at present under study by the Fraunhofer-Institut für Systemtechnik und Innovationsforschung (ISI). This paper is an outline of the results of a study of the largest current programme funding R&D and innovation in small and medium-sized firms by offering grants towards the costs of R&D personnel. The impact analysis is being conducted in two rounds: the first round of studies, which is the subject of this report, took place in 1980/1981 and was designed to examine the discernible short-term effects and characteristics of the programme. The second round is planned for 1983/1984 as a summary of the impacts of the programme over the first five years of its term of effect.The subjects of investigation are the quantitative and qualitative changes in R&D activities caused by the programme in the firms under study and the contribution the programme can make to strengthen innovative and competitive capabilities. The conditions underlying the programme are reviewed critically, especially in order to see whether the barriers to innovation and the weak spots assumed did in fact exist in the firms examined. The administrative management, “free rider”-effects, and factors restricting impacts are investigated along with such questions as whether firms located in peripheral regions were reached by the programme to the same extent as firms in conurbation areas. Furthermore, the reasons for non-participation of firms are analyzed.The example of the federal programme funding R&D personnel thus is used in this impact analysis in an attempt to provide empirical data on the significance, the range, and the limits of such a government instrument promoting R&D and innovation in small and medium-sized firms.     

R&D cooperation and innovation activities of firms—evidence for the German manufacturing industry

The aim of the paper is to investigate in a simultaneous equation framework the role of R&D cooperation in the innovation process—in context with other factors—from two specific aspects. First, analysis focuses on the impact of R&D cooperation on firms’ innovation input and output. Second, analysis is undertaken as to how the number of cooperation partners affects the innovation behaviour of firms. Starting with the discussion of theoretically expected effects of successful R&D cooperation on the innovation activities of firms, the importance of inter-organizational arrangements in R&D is empirically investigated in respect of firms in the German manufacturing industry. The estimation results can be summarized as follows: joint R&D is used to complement internal resources in the innovation process, enhancing the innovation input and output measured by the intensity of in-house R&D or the realization of product innovations. On the input side, the intensity of in-house R&D also stimulates the probability and the number of joint R&D activities with other firms and institutions significantly.     

The influence of Ministry of Defence funding on semiconductor research and development in the United Kingdom

This paper argues that the United Kingdom Ministry of Defence's (MoD) sponsorship of industrial semiconductor research and development (R&D) has, by its very nature, influenced the type of R&D performed, and the directions it has taken, to the extent of limiting its potential for subsequent commercial utilization. While much of the fault appears to lie with the semiconductor industry's response to MoD funding of its R&D, especially its over-reliance on such external support, the paper also suggests that the structure, modus operandi, and funding mechanisms of the MoD department concerned have significantly affected the industry's R&D activities. With these criticisms in mind, while at the same time noting the advantageous features of this department's activities, such as its relative autonomy, brief suggestions for ensuring more coherent and continuous state support for semiconductor R&D, including, for example, the use of innovation-oriented procurement policies, are offered.     

Dimensions of R&D location in the United States

R&D activities in the United States, as in other advanced economies, are geographically concentrated in certain types of locations. This study presents data on the location of four dimensions of R&D in the U.S.: industrial R&D laboratories, scientists and engineers engaged in R&D, scientists and engineers employed by the federal government, and research universities. Industrial R&D is much more concentrated in large urban areas than the other dimensions, and appears to locate more in response to the location of manufacturing activity than to the location of research universities and federal research facilities. The location of R&D employment, which includes government university, and industrial employees, is associated with facilities for all three types of R&D. Because of these factors, R&D in the U.S. is found on a significant per capita basis in 44 of 177 urban areas, most of them in the northeastern portion of the country. When two dimensions, industrial R&D laboratories and R&D employees, are combined as a measure of R&D concentration, the locational pattern is less clustered regionally. Ten urban areas in all regions of the U.S. are identified as important complexes of R&D. Since the location of R&D is a major indicator of comparative advantage for technological activities and the economic potential of urban regions, only a few areas of the U.S. are likely to remain important in the generation of innovations.     

Impacts of internal R&D on firms’ performance and energy consumption: Evidence from Ethiopian firms

In recent decades, with the rapid development of the knowledge economy and science, countries have embraced technical innovation and have gradually increased investment in research and development (R&D). A vast literature indicates that the relationship between R&D and firm performance is highly complex. The evidence suggests that R&D positively influences firm performance, yet findings on the process by which this happens are mixed. Rigorous analyses are required on how R&D investments affect energy consumption. This study explores the impact of R&D investment on the performance and energy consumption of 476 firms in Ethiopia by employing a combination of fixed-effect, propensity score matching, and endogenous treatment effect estimation methods. The empirical results reveal that investment in R&D positively influences both innovation and long-term financial performance but negatively impacts short-term financial performance and energy consumption. The results also show that the impacts of R&D activities vary significantly across different categories of firms, confirming that heterogeneity may be an issue among the firms considered. The results also indicate that the availability of credit is a more important moderating factor in the relationship between R&D investment and firm performance than the legal system is. These results have important implications for firms with growing R&D operations, especially those in developing countries such as Ethiopia. Ethiopian firms should invest more in R&D activities, such as in fundamental and applied research, to improve performance and enhance competitiveness.     

Outward FDI,location choices and innovation performance of emerging market enterprises

Although prior research conceptualizes how knowledge-seeking motivates the internationalization of emerging-market enterprises (EMEs), whether outward foreign direct investment (OFDI) indeed leads to enhanced innovation performance has received limited attention. We address this subject by conceptualizing how Chinese EMEs’ OFDI enhances their subsidiaries’ organizational learning and innovation performance and whether geographic location choices influence this relationship. Our panel data analysis of Chinese EMEs shows that OFDI has a positive effect on innovation performance of Chinese EMEs’ subsidiaries and that this effect is stronger when the OFDI is directed towards developed rather than emerging countries. These findings advance the notion that EMEs can use OFDI as a strategy to globalize R&D and enhance their innovation performance and demonstrate that certain established assumptions regarding organizational learning are not valid for EMEs.     

Internal and external discipline: The effect of project leadership and government monitoring on the performance of publicly funded R&D consortia

R&D consortia have been regarded as an effective means of promoting innovation. Several R&D consortia obtain public financial support, which may affect their governance structure and performance. This study investigates the governance mechanisms of publicly funded R&D consortia and their effects on innovation performance. Few studies have empirically addressed the effect of project monitoring by the government or the role of project leadership in R&D consortia. Focusing on a major support program for R&D consortia in Japan and using a sample of 251 firms that participated in publicly funded R&D consortia from 2004 to 2009, we empirically confirm that to enhance firms’ innovation performance, both project leadership as internal discipline and government monitoring as external discipline matter. Our results show that project leadership directly improves firms’ innovation performance, while firms’ commitment indirectly affects performance. Project leadership and government monitoring also promote commitment. Furthermore, both factors are complementary: consortia members are more willing to accept a project leader’s coordination under stricter government monitoring.     

The effects of owner identity and external governance systems on R&D investments: A study of Western European firms

This paper builds on agency and institutional theory to extend the analysis of the effects of ownership and control on R&D investments by considering the influence of different types of ownership and of institutional corporate governance systems. Our empirical analysis is based on a unique dataset of 1000 firms publicly-traded in six European countries (France, Germany, Italy, Norway, Sweden and the UK). Controlling for industry- and firm-level effects, our findings show that higher shareholding by families is negatively associated with R&D investment. Moreover, widely-held firms invest less in R&D in the United Kingdom than in Continental European countries, thus suggesting the existence of a greater pressure towards the reduction of R&D in market-based governance systems. The results are robust against possible sample selection biases due to firms’ discretional R&D disclosure.     

新型研发机构的财政支持偏好——可视性视角

针对地方政府通常更倾向于支持“看得见”的项目或者短期内能够带来“看得见”政绩的项目这一现象，探究政府对新型研发机构财政补贴的支持偏好，为政府更科学地制定新型研发机构补贴政策、促进新型研发机构高质量发展提供参考。基于可视化视角，以广东省187家新型研发机构为样本，从科研人员职称层次、开展科技成果产业化状况两大维度实证分析地方政府对新型研发机构财政支持偏好及其内在机理。结果发现：财政支持对新型研发机构绩效有显著促进作用，而高级职称科研人员数量、进行了成果产业化对于新型研发机构获得财政经费和项目支持均具有显著促进作用，且在珠三角地区的新型研发机构、高校及科研院主导型的新型研发机构中表现明显。因此，为了更加合理配置创新资源、促进新型研发机构持续创新，建议地方政府注意有针对性地调整优化相关政策支持偏好，引导新型研发机构更加全面发展。