An Econometric Analysis of the Role of Knowledge in Economic Performance

We conduct a regression analysis of the effects of knowledge on aggregate economic performance using data from the United Nations Development Program (UNDP) and the World Bank for four groups of countries during 1995–2001. Our results indicate that knowledge is a key driver of economic growth for each group of countries. More importantly, we find that variation in economic performance among these groups may be related to the timing of investment in education, R&D, and information technology, as well as economic policies that affect trade and foreign direct investment.     

The role of R&D and input trade in productivity growth: innovation and technology spillovers

Productivity improvements generally are driven by technology innovation and its spillovers. This study explores the role of R&D investment and intermediate input trade in productivity growth using country-industry-level data for 25 advanced and emerging economies. This paper confirms that R&D investment and intermediate input import/export (both intra- and inter-industry) with technologically advanced economies play important roles in productivity growth in non-frontier countries. We further find that the productivity gains of technology spillovers via input trade channels are likely larger for countries/industries where technology converges to the frontier. These findings imply that the recent slowdown in R&D investment and intermediate input trade in some advanced economies may contribute to declining productivity growth. The potential productivity improvements from R&D investment and free trade as well as the importance of domestic capacity in facilitating technology spillovers should be recognized.

     

Estimating intersectoral technology spillovers for Brazil

This paper aims to evaluate the main intersectoral R&D flows in the Brazilian economy, determining their direction and magnitude. Unlike other studies that focus exclusively on rent spillovers flows of R&D, this paper also calculates spillovers with total spending on innovation in addition to R&D expenditure. In the case of developing countries, where R&D is of lower relative importance, we assume that technological effort is measured more accurately if it is considered as different types of innovative expenditure. We used data from the Technological Innovation Survey, conducted by the Brazilian Institute of Geography and Statistics with the support of Ministry of Science and Technology and data from an input–output matrix for the Brazilian economy, calibrated by Laboratório de Analises Territoriais e Setoriais—LATES of the Federal University of Juiz de Fora. The analysis is from the year 2011 and covers 32 sectors of economic activity resulting from the compatibility of the two databases. The main results show a mapping of the intersectoral flow of knowledge embodied both by the total expenditure on innovation and by in-house R&D to Brazil for the year 2011. It is important to highlight the wealth of detail of such a mapping, as it characterizes not only by sectoral interdependence of these aspects, but it also shows the direction of flows, the sectoral hierarchy in terms of “donation” of technical knowledge and the intersectoral flows in terms of technological intensity.     

The structure and dynamics of the global network of inter-firm R&D partnerships 1989–2002

Research and development (R&D) partnerships are formed to share the risks and benefits of R&D. At the macro level, they result in a globe-spanning network that can be a valuable source of international knowledge spillovers. This network is the subject of a considerable body of literature. Often-made claims are that R&D collaboration is an important activity in a competitive environment, but that the importance of international partnerships has declined over time. Furthermore, it is claimed that collaborations are disproportionally concentrated within the developed economies. However, this literature fails to account for variations in the sizes of underlying firm populations between countries and over time. We argue that these population sizes create an opportunity structure of available collaboration partners for firms, and that ignoring variations in this structure potentially leads to erroneous conclusions about the structure and dynamics of the R&D network. To address this problem, we study the structure and dynamics of the global R&D network on an international and cross-industry scale using longitudinal data for 1989?C2002. We integrate data on public firms and their R&D partnerships and confront earlier findings with our data and a set of methods, which enables us to correct for the structure and dynamics in the firm population. While our study confirms previous findings concerning the worldwide trend in collaborative activity, it also shows that results on individual countries need correction. In particular, the importance of R&D collaboration for US companies is overestimated, while their openness towards foreign partners is underestimated.     

University and inter-firm R&D collaborations: propensity and intensity of cooperation in Europe

This paper investigates the determinants of firms’ decision to cooperate in R&D with universities and the intensity of the cooperation effort, in relation to the engagement in inter-firm R&D collaborations. Using novel survey data for seven EU countries between 2007 and 2009, our analysis accounts for unobservable factors influencing R&D cooperation forms and addresses the main endogeneity issues. We find that internal knowledge, appropriability conditions and incoming spillovers explain a large variation of the probability and of the intensity of R&D collaborations of European firms with universities (and comparably with unaffiliated companies).     

Assessing the relationship between R&D subsidy,R&D cooperation and absorptive capacity: an investigation on the manufacturing Spanish case

Private companies want to eliminate outgoing spillovers while policymakers seek to maximize them. With subsidized R&D cooperation agreements both agents partially achieve their objectives. For this reason, in Europe, policymakers grant subsidies for R&D activities with the condition of establishing R&D cooperation agreements. This study explores the relationship of complementarity between R&D subsidy, R&D cooperation and absorptive capacity in the context of its contribution to labor productivity of enterprises. The data used comes from the Technological Innovation Panel (PITEC), managed by the Spanish National Statistics Institute. We selected manufacturing companies in the period 2008–2013. We evaluate the existence of complementarity through the systems approach and the interaction approach. The econometric technique that we used to estimate the coefficients of our empirical model was maximum-likelihood random effects. As a consequence of the low absorptive capacity of Spanish manufacturing firms we find that R&D subsidies and R&D cooperation agreements are not complementary variables, i.e., receiving public subsidies as a result of establishing R&D cooperation agreements has a lower impact on productivity than the sum of the individual impacts of R&D cooperation and R&D subsidies. In consequence, this result calls into question the convenience of using subsidized R&D cooperation agreements as a tool for promoting innovation in EU countries as there are notable differences between the companies in these countries in terms of absorption capacity.     

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.

Measuring the economic impact of research joint ventures supported by the EU Framework Programme

The objective of this paper is to analyse the effects of international R&D cooperation on firms?? economic performance. Our approach, based on a complete data set with information about Spanish participants in research joint ventures supported by the EU Framework Programme during the period 1995?C2005, establishes a recursive model structure to capture the relationship between R&D cooperation, knowledge generation and economic results, which are measured by labour productivity. In the analysis we take into account that the participation in this specific type of cooperative projects implies a selection process that includes both the self-selection by participants to join the consortia and the selection of projects by the European Commission to award the public aid. Empirical analysis has confirmed that: (1) R&D cooperation has a positive impact on the technological capacity of firms, captured through intangible fixed assets and (2) the technological capacity of firms is positively related to their productivity.     

Capturing Technological Opportunity Via Japan's Star Scientists: Evidence from Japanese Firms' Biotech Patents and Products

Using detailed data on biotechnology in Japan, we find that identifiable collaborations between particular university star scientists and firms have a large positive impact on firms' research productivity, increasing the average firm's biotech patents by 34 percent, products in development by 27 percent, and products on the market by 8 percent as of 1989–1990. However, there is little evidence of geographically localized knowledge spillovers. In early industry formation, star scientists holding tacit knowledge required to practice recombinant DNA (genetic engineering) were of great economic value, leading to incentives motivating their participation in technology transfer. In Japan, the legal and institutional context implies that firm scientists work in the stars' university laboratories in contrast to America where the stars are more likely to work in the firm's labs. As a result, star collaborations in Japan are less localized around their research universities so that the universities' local economic development impact is lessened. Stars' scientific productivity is increased less during collaborations with firms in Japan as compared to the U.S.     

Industrial R&D Laboratories: Windows on Black Boxes?

This paper provides an overview of the survey-based literature on industrial Research and Development (R&D) laboratories, beginning with the work of Edwin Mansfield. Topics covered include R&D projects, new products, and new processes; the appropriability of intellectual property; the limits of the firm in R&D; and spillovers of knowledge from other firms and universities into the laboratories. I discuss the value of collecting information from industrial R&D managers, who participate in a wide range of R&D decisions and are the natural best source of information on these decisions. I also emphasize gaps in our knowledge concerning R&D from past studies, such as the private and social returns to R&D, the nature of firms' R&D portfolios, and other topics. The paper closes with a discussion of the benefits from building a national database on R&D laboratories that could be shared among researchers and that could take this area of research to a new and higher level of achievement.     

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.

Firm heterogeneity,absorptive capacity and technical linkages with external parties in Italy

While it is widely acknowledged that internal R&D is a fundamental source of the ability to absorb, select and use external knowledge, severe data limitations prevent from capturing differences across firms in this respect. Using a novel dataset supplied by the Italian Bureau of Statistics, we highlight that, when controlling for internal R&D efforts, not all firms are equally prone to gain access to external technology, and to the knowledge provided by universities in particular. We find that firms which do not only perform R&D activities but also belong to a group exhibit a higher propensity to access external knowledge by either contracting out R&D or cooperating with external parties, as compared to independent firms that are not organized into groups. This premium persists when controlling for different measures of internal R&D efforts. Furthermore, the differential in the propensity to access external knowledge is particularly high in the case of R&D performers belonging to foreign groups, i.e. Italian affiliates of foreign owned companies; and it is even higher in the case of the few Italian firms that have R&D activities abroad. The relative dis-advantage of independent firms, which represent the bulk of the Italian industry and include most small and medium sized enterprises, appears to be less of an obstacle in the case of linkages with universities, especially when R&D contracting out is considered.     

Underinvestment in Public Good Technologies

Although underinvestment phenomena are the rationale for government subsidization of research and development (R&D), the concept is poorly defined and its impact is seldom quantified. Conceptually, underinvestment in industrial R&D can take the form of either a wrong amount or a suboptimal composition of R&D investment. In both cases, R&D policy has not adequately modeled the relevant economic phenomena and thus is unable to characterize, explain, and measure the underinvestment. Four factors can cause systematic underinvestment in R&D-intensive industries: complexity, timing, existence of economies of scale and scope, and spillovers. The impacts of these factors vary in intensity over the typical technology life cycle, so government policy responses must be managed dynamically. In addition to understanding the causes of underinvestment in R&D, the magnitude of the deficiency relative to some “optimum” must be estimated to enable a ranking of technology areas with respect to expected net economic benefits from a government subsidy. Project selection criteria must therefore be based on quantitative and qualitative indicators that represent the nature and the magnitude of identified market failures. The major requirement for management of R&D policy therefore is a methodology that regularly assesses long-term expected benefits and risks from current and proposed R&D portfolios. To this end, a three-stage process is proposed to effectively carry out R&D policy analysis. The three stages are (1) identify and explain the causes of the underinvestment, (2) characterize and assess the investment trends and their impacts, and (3) estimate the magnitude of the underinvestment relative to a perceived optimum in terms of its cost to the economy. Only after all three stages of analysis have been completed can the underinvestment pattern be matched with the appropriate policy response.     

Country level efficiency and national systems of entrepreneurship: a data envelopment analysis approach

This paper tests the efficiency hypothesis of the knowledge spillover theory of entrepreneurship. Using a comprehensive database for 63 countries for 2012, we employ data envelopment analysis to directly test how countries capitalize on their available entrepreneurial resources. Results support the efficiency hypothesis of knowledge spillover entrepreneurship. We find that innovation-driven economies make a more efficient use of their resources, and that the accumulation of market potential by existing incumbent businesses explains country-level inefficiency. Regardless of the stage of development, knowledge formation is a response to market opportunities and a healthy national system of entrepreneurship is associated with knowledge spillovers that are a prerequisite for higher levels of efficiency. Public policies promoting economic growth should consider national systems of entrepreneurship as a critical priority, so that entrepreneurs can effectively allocate resources in the economy.     

The economics of collective knowledge and technological communication

Technological knowledge can be understood as a collective good when it is the outcome of the integration between internal to the firm investments in R&D and learning and the absorption of competencies and technologies provided by external organizations (such as, other firms, universities, R&D centers). Technological communication is a crucial strategy in such dynamic interaction between the firm and the system. Only under effective conditions of technological communication the private and social benefits derived from the exploitation of spillovers are higher than the private losses due to partial inappropriability. The article presents a simple microeconomic framework to understand knowledge production and distribution, integrating the effects and conditions of technological communication within a knowledge production function. The interaction between internal investments in R&D and learning, partial inappropriability, the conditions for the access to external knowledge and the exploitation of spillovers explains increasing returns in the production of knowledge.

The role of openness in explaining innovation performance in a regional context

We investigate the role of search strategy in shaping firms’ innovation performance. Firms use a wide range of external actors and sources to help them achieve and sustain innovation. In particular, the extension (breadth) and the relevance (depth) of such sources determine firms’ ability to extract and exploit knowledge and new ideas and, thus, to be innovative. Using a sample of firms in a regional context active in R&D, we built separate measures of breadth and depth for local (on a regional scale) and global (outside the regional context) search. This allows us to investigate whether localized or global knowledge spillovers are in place. We find that a wider set of partners increases coordination costs, while greater depth in search strategies contributes to innovation. We find that a more diversified search strategy at the local level (greater breadth of search) results in significant payoffs in terms of innovation, while diversifying the partnership with Italian partners has a smaller, although still positive, effect. In contrast, the benefits of depth of innovation are greatest at the global level. In addition, a broader set of information sources for R&D projects has a significant positive effect on innovation. Finally, firms that resort to R&D subsidies are less innovative.     

Innovation capacity and economic development: China and India

Decomposing the GDP growth from 1981 to 2004, this paper finds that innovation capacity has contributed significantly to the economic growth of China and India, especially in the 1990 s. Outputs of the national innovation system, measured by patents and high-tech/service exports, demonstrate the considerable progress China and India have made in innovation capacity. The enhanced innovation capacity of China and India is primarily due to their heavy investment in the inputs of innovation system, i.e., R&D expenditure and R&D personnel, in recent decades. This paper emphasizes the role that the governments have played in promoting innovation capacity and their contribution to economic development. Both governments have transformed their national innovation systems through linking the science sector with the business sector, providing incentives for innovation activities, and balancing import of technology and indigenous R&D effort. Using case studies of domestic biotech firms in China and India, this paper also offers micro-level insights on innovation capacity and economic development: (1) innovation capacity has become essential for domestic firms?? market success and (2) global institutional factors and national government policies on innovation have considerable influence on the choice of innovation at the firm level, i.e., to conduct indigenous R&D or to import foreign technology.     

Policy Issues for R&D Investment in a Knowledge-Based Economy

The Internet Revolution induced an unbalanced perspective on future economic growth strategies. Because information technology (IT) largely constitutes an infrastructure upon which other economic activity is based, its economic role is to facilitate the productivity of investment in a wide range of products and services that meet final demand. Other economies around the world can and are investing in the same infrastructure, so the efficiency advantages now being realized by the U.S. economy will be fleeting unless U.S. R&D efforts produce a new and broad range of innovative products and services that take advantage of this infrastructure. A deep and diverse technology-based manufacturing sector must be a core objective of a national R&D strategy. United States manufacturing contributes $1.5 trillion to GDP, employs 20 million workers, accounts for more than 70% of industrial R&D, and constitutes the main source of technology for the larger service sector. While knowledge-based services are the largest source of economic growth for the U.S. economy, their long-term performance is highly dependent on synergies with a domestic manufacturing sector. These synergies will be even more important in the future because services are increasingly exposed to foreign competition. Knowledge-based services can be supplied from anywhere in the world—as long as these foreign sources can rapidly access and assimilate the necessary technology components. This caveat is the critical point for economic growth policy. Considerable research supports the argument that hardware and software components are most efficiently supplied to services by a manufacturing sector that is geographically close and institutionally integrated with the service applications. Policy debates have raged for decades over the nature and magnitude of underinvestment in manufacturing R&D. The need to resolve the relevant policy issues has increased, as industry is funding less of the long-term, high-risk research that creates the technology platforms supporting new industries and future economic growth. Unfortunately, only about a third of U.S. manufacturing is high-tech by conventional definitions. Some of the remaining industries develop technologies internally, but most purchase a large proportion of their technology from the high-tech sector. Because a technology acquisition strategy can be more easily imitated by foreign competitors, traditional industries are much more susceptible to exchange rate variations, global economic cycles, and secular shifts in foreign competition. Thus, with global technological capabilities relentlessly increasing, the long-term prospects for the moderate and low R&D-intensive portions of U.S. manufacturing are not good. This paper presents a conceptual framework and available data as inputs for the analysis of Federal R&D investment strategies. Such strategies must recognize the full range of public and private technology assets constituting a national innovation system. A developed and efficient innovation system has characteristics making imitation by foreign competitors difficult and thereby enables sustained competitive advantage.     

Venture’s economic impact in Australia

We empirically compare the contributions of venture capital (VC) and private equity backed firms, including those backed by government subsidized innovation investment funds (IIFs), in the Australian economy by analyzing employment, R&D, patents, time to IPO, and market capitalization from market inception to August 2012. Overall, the data highlight a central role for VC and IIF investment in facilitating R&D, innovation, and economic growth. Our IIF findings highlight the success of government sponsorship of VC under the Australian program design, which is sharply in contrast with the lack of success of government venture programs in other countries.     

Shaping the path to inventive activity: the role of past experience in R&D alliances

In this paper, we investigate a recurrent organizational event—R&D strategic alliances—and analyze its multidimensional effect on inventive activity; in particular, we examine the quality of the inventive process outcome. In so doing, we address the still-unresolved issue of the impact of past experience in explaining performance differences between firms in the realm of alliance inventiveness. Our results offer new insights concerning the crucial drivers of invention quality and technological breakthroughs. As expected, results suggest that—in the area of R&D—alliances formed by experienced partners are more likely to produce inventions that effectively synthesize technological knowledge from more diverse domains. In fact, experienced alliance partners are more likely to generate useful inventions with a greater innovative impact on others’ subsequent inventions—knowledge that can be built upon. Surprisingly, results are indeterminate with regard to whether innovation via R&D alliance increases invention’s degree of applicability across diverse scientific and technological fields that might cite its patent.