Expanding the R&;E tax credit to drive innovation,competitiveness and prosperity

The research and experimentation (R&E) tax credit has long been the subject of criticism. Some argue that if the goal is more research and innovation, it’s better to increase direct federal funding of research. Others argue that the credit is not effective, that companies would do the research in any case. Some object the very notion of using tax policy to influence private sector behavior, preferring instead a more “neutral” tax code. Still others, including Tassey in this volume, point to what they see are a host of design flaws in the current credit, including that its incremental nature reduces its effectiveness. I will argue here that most of these arguments are mistaken. To promote innovation in a global economy both direct funding and indirect tax incentives are needed. The credit, while it can be improved, has been shown to be effective in stimulating research. Moreover, far from distorting the market, the credit corrects for a market failure where firms are unable to capture all of the benefits of corporate research, leading them to under invest in research. Finally, while reform and expansion are needed, it would be a mistake to shift to a completely flat credit. However, several important changes should be made including doubling the current value of the credit, modifying the Alternative Simplified Credit to become incremental, and expanding the flat credit for collaborative R&D.

“We really don’t want to move,but...”: identity and strategy in the internationalisation of industrial R&;D

In Norway, as in many other high-cost OECD countries in a geographical and cultural periphery, policy-makers seem to have given up attempts at attracting large numbers of foreign R&D investments. Instead, a major focus of innovation policies is to help companies internationalise yet with an aim to maintain or even increase their level of R&D and other innovation activities nationally. Based on case studies of eight Norwegian companies and their motives for and experiences with internationalisation of R&D, this article questions this policy. From the perspective of the companies, many factors explain how, why and where they carry out their R&D activities.      

Organisational change and innovation system dynamics: the reform of the UK government defence research establishments

Since the end of the Cold War, ministries of defence in Europe and the United States have sought new models for the management of government defence research laboratories. The United Kingdom’s reform and subsequent privatisation of its government defence research establishments (GDREs) represents one of the most radical policy responses. This paper considers the UK case through the lens of innovation systems theory and uses defence labs reform to examine the impact of organisational change on the dynamics of an innovation system. The potential policy implications for the management of government defence research laboratories are also considered.

Location choices within global innovation networks: the case of Europe

Rapid growth in internationalization of corporate R&D has spurred considerable interest since the 1990s. Foreign R&D is still mainly driven by the expansion of international production, but technology sourcing has become an increasingly important driver of dispersion. Actually, differences across sectors and companies tend to obscure the mix of motivations behind the development of global innovation networks. This paper distinguishes the various drivers of the international dispersion of corporate R&D in order to elaborate a typology of foreign R&D units, including in emerging countries. This typology is used to discuss the emergence of differentiated global innovation networks and the location choices by type of R&D unit. It is applied to foreign R&D projects in Europe in high and low cost countries between 2002 and 2005. It is then used to discuss the weakening attractiveness of the European Union for R&D activities and the relevant policies that countries can design to attract different types of units.

Technological innovation within the Spanish tax administration and data subjects' right to access: An opportunity knocks

In this paper, we analyse the data subjects' right to access their personal data in the context of the Spanish Tax Administration and the legal consequences of the upcoming General Data Protection Regulation. The results show that there are still difficulties related to the scope of this right, the establishment of proper storage criteria, and in the procedures used by the data controllers to provide accurate information to the data subjects. This situation highlights the necessity to incorporate such technological innovation as metadata labelling and automatic computerised procedures to ensure an optimum management of the data subjects' access to their tax related personal information.     

Foreign investment innovation: a review of selected policies

Whereas foreign investment innovation (FII) has become increasingly common, after decades of debate it is still unclear whether it is desirable for the home country or for the company’s host country. This paper reviews articles from three complementary economic and business traditions which investigate this phenomenon and propose policies based on facts: the economics of technological change tradition, the international business (IB) tradition, and the line of research on international technology transfers. Articles in line with these strands of theory complement each other because they approach different aspects of complex events while explaining FII and its effects on host and home countries. Host countries obtain maximum benefits from FII when affiliates import foreign technology, purchase their inputs in the host country and enjoy product and technological autonomy vis-à-vis the parent. Different types of MNEs, affiliates and foreign R&D units have different potentials for transferring technology to host countries and provide different scope for policies. The authors recommend that governments encourage direct vertical linkages between MNEs and domestic suppliers who could reap the benefits from foreign knowledge. However, some important success factors remain exogenous to governments. As for indigenous MNEs, it is a matter of controversy whether governments should always stimulate them to conduct research in foreign locations or, alternatively, incentive them to stay at home. The need for additional evidence is still considerable in many respects.

Geographic and technological R&;D spillovers within the triad: micro evidence from US patents

This paper aims at assessing the magnitude of R&D spillover effects on large international R&D companies’ productivity growth. In particular, we investigate the extent to which R&D spillover effects are intensified by both geographic and technological proximities between spillover generating and receiving firms. We also control for the firm’s ability to identify, assimilate and absorb the external knowledge stock. The results estimated by means of panel data econometric methods (system GMM) indicate a positive and significant impact of both types of R&D spillovers and of absorptive capacity on productivity performance.

Advancing measures of innovation in the United States

This paper introduces major themes addressed in this special issue, which is based on NSF's Division of Science Resources Statistics (SRS) workshop Advancing Measures of Innovation—Knowledge Flows, Business Metrics, and Measurement Strategies, held on June 6-7, 2006 near Washington, D.C. The first two sections describe the workshop and provide a brief background on R & D and innovation metrics. The last section introduces the papers. They are based on selected workshop presentations along with additional invited papers.

Creative internationalization: widening the perspectives on analysis and policy regarding international R&D activities

Internationalization in R&D is further growing; it is changing its geographical balance, as it is shifting somewhat to the Far East, and its nature, increasing the global quest for talent and good research conditions as well as for low cost R&D. This paper focuses on the European perspective, i.e. it discusses current challenges Europe faces vis-à-vis trends in industrial R&D, but the findings and arguments are more general ones. It argues that our perspective on internationalization is still shaped too much by a zero sum-rationale, whereby one location wins R&D capacity that another location loses. It develops a cost–benefit matrix in order to capture the overall costs and benefits of international R&D activities more broadly. The paper argues that more creativity is needed, that our perspective needs to be broadened to tackle all variables conditioning international activities in R&D (including local conditions of demand and discourse) and to stress the importance of the absorption of global knowledge by as many actors within an innovation system as possible. On the basis of recent survey data the paper furthermore concludes that public research should be thought of as a trans-national transmission belt of knowledge and as the prime factor that shapes the attractiveness and effectiveness of a location for business R&D. Finally, it is argued that policy schemes geared towards international R&D need to accept and tackle the issue of co-ordination of governance and to take advantage of the flexible possibilities offered at the European level, beyond the logic of the European Framework Programme.

Strategic spin-off: a new incentive contract for managing R&D researchers

Innovation is a strategic challenge for high-tech companies and as such, justifies large investments in R&D. After exploring the limits of the underlying postulates of the organizational management of innovation (the necessary specialisation of researchers, the possibility of human discontinuity of innovation and possibility of controlling researchers), the objective of this paper is to show that the relationship between managers and researchers is characterised by asymmetric information (Laffont , J. J. (1985). Economie de l’incertain et de l’information, Economica.) to the benefit of the researchers. This asymmetry supposes the setting up of management practices which incite researchers to optimise the company’s interests, but this can only be done to at the expense of management control. In R&D activities, the informational asymmetry in agency relationship can be overcome by incentive managerial practices (Jensen, M. C., & Meckling, W. H. (1976) Theory of the firm: managerial behavior, agency cost, and ownership structure. Journal of Financial Economics, 3(4), 305–360.). The relationship between the manager (principal) and the researcher (agent), can be resolved by setting up the practice of strategic spin-off. This practice which enables a researcher to create a company based on work that he himself has carried out within the R&D department of his “mother” company, constitutes both an economic incentive (through the status of shareholder) and a symbolic one (through the status of entrepreneur). The incentive is strong for the researcher both to reveal his information and to obtain financial value from his research. Implementing this incentive contract means putting into place certain managerial and organisational practices designed to accompany the researcher–entrepreneur: (training, incubator, venture-capital structure etc.). The practice of strategic spin-off is beginning to emerge in high tech enterprises. This is why we have chosen to make an in-depth case study of the French company most involved in strategic spin-off, namely France Telecom.

Sowing seeds of change for the digital world – A response to ‘Digital opportunity: A review of intellectual property and growth’

Professor Ian Hargreaves released his independent report entitled Digital Opportunity – A Review of Intellectual Property and Growth on 18 May 2011. Hargreaves advocates strategic change and policy initiatives for the intellectual property framework in both national and international contexts. Ten recommendations are proposed, including reform of copyright licencing procedures, implementation of a digital copyright exchange, and legislative exceptions to copyright infringement, along with restructuring of systems for the grant and enforcement of patents. In this article, the authors discuss Hargreaves’ recommendations and consider how intellectual property law and policy may be used to facilitate innovation and economic growth in the modern digital world.