the control of technology alliances an empirical analysis of the biotechnology industry we examine the determinants of control rights in biotechnology alliances through three case studies and a quantitative analysis aghion and tirole 1994 argue that control rights will be assigned so as to maximize the value of the final output as long as the r d firm has sufficient financial resources consistent with this framework the allocation of control rights to the r d firm increases with the firm s financial resources the empirical evidence regarding the relationship between control rights and the stage of the project at the time the alliance is signed is more ambiguous

nationalizing to liberalize credibility in trade liberalization abstract the credibility problem in trade liberalization has been studied in terms of asymmetric information between government and the private sector with resolution through reputational or signaling equilibria this paper in contrast recognizes the genuine time inconsistency problem with trade liberalization in countries where institutional underdevelopment implies tariffs are the major source of revenues the welfare implications of the resulting credibility problem are analyzed it is further shown that government policies can help resolve the problem government investment in the exportables sector is presented as an optimal commitment strategy that can lead to full credibility of the otherwise time inconsistent optimal tariffs

the geographical dimension of innovation collaboration networking and innovation in norway this paper looks at the geographical dimension of firm networking in norway by examining the impact of manager level firm level and regional level variables on the decisions of firms to collaborate with partners at different levels of geographical distance using data stemming from a survey of 1604 businesses in five norwegian city regions we model firms use of partners located within the region elsewhere in the country and abroad respectively the results indicate that collaboration is affected in different ways by variables related to all three levels at the level of the manager trust is an important predictor of regional and national collaboration but has no significant effect on the formation of international partnerships which are fundamentally associated with factors such as education and the open mindedness of managers at the regional level r d expenditure tends to increase collaboration between regional actors but reduces the likelihood of engagement with international partners education by contrast has the opposite effect it encourages international collaboration at the expense of local links the results highlight the need to balance policies for boosting regional social capital and r d with investments in education and fostering open mindedness as a means to prevent lock in and develop innovation enhancing global pipelines

credible public policy abstract credible public policy is defined in a way that incorporates competitive equilibrium behavior for households and subgame perfect nash equilibrium behavior for the government it is shown that the set of all equilibrium outcome paths for credible policies can be constructed by using arguments analogous to those of abreu 1988 for repeated games the results are then extended to systems with state variables simple models of monetary policy and capital taxation are studied by way of example

academic research underlying industrial innovations there has been no systematic study of the characteristics of the universities and academic researchers that seem to have contributed most to industrial innovation nor do we know how such academic research has been funded this paper based on data obtained from sixty six firms in seven major manufacturing industries and from over two hundred academic researchers sheds new light on the sources characteristics and financing of academic research underlying industrial innovation the findings should be of interest to economists concerned with technological change and to policymakers attempting to increase the economic payoff from the nation s academic research copyright 1995 by mit press

the role of transnational dimensions in emerging economy technological innovation systems for clean tech the technological innovation system tis framework and its system functions have become a popular analytical tool for the study of clean tech innovation there is increasing attention for the role of emerging economies in global clean tech innovation but the applicability of tis to emerging economies cases is not entirely straightforward a key issue is the limited geographical considerations in particular transnational dimensions in tis whereas earlier perspectives on innovation in emerging economies have stressed the role of such transnational dimensions this paper elaborates transnational tis actor networks and institutions categorizes these in relation to tis functions and describes their potential to induce or block tis development in emerging economies we draw on insights from the perspectives of national learning systems international technology transfer and global production networks for this purpose we conclude that the potential effects of these transnational dimensions may be accurately grasped by the existing list of system functions lending credence to its further application of the tis framework on emerging economy case studies policy makers in emerging economies should recognize these transnational dimensions and seek to optimize their potential effect on domestic tis development taking in to consideration a realistic assessment of its role in the global tis

silicon envy how global innovation clusters hurt or stimulate each other across developed and emerging markets the authors examine intercluster dynamics among rival global clusters on monthly counts of patents startups and new product commercializations between 1999 and 2014 while controlling for numerous exogenous variables results show that rival innovation clusters facilitate rather than hinder each other s growth due to resources complementarities reverse fertilization occurs from emerging to developed clusters contrary to the received wisdom this study is the first to show intercluster dynamics as important drivers of cluster growth to explain the counterintuitive findings the authors draw upon the coopetition view which suggests mutually beneficial growth across all rival clusters rather than zero sum gains

the relationships between science technologies and their industrial exploitation an illustration through the myths and realities of the so called european paradox abstract this paper discusses first the properties of scientific and technological knowledge and the institutions supporting its generation and its economic applications the evidence supports the broad interpretation that we call the stanford yale sussex synthesis second such patterns yield important implications with respect to the so called european paradox i e the conjecture that eu countries play a leading global role in terms of top level scientific output but lag behind in the ability of converting this strength into wealth generating innovations some descriptive evidence shows that contrary to the paradox conjecture europe s weaknesses reside both in its system of scientific research and in a relatively weak industry the final part of the paper identifies a few normative implications much less emphasis should be put on various types of networking and much more on policy measures aimed at strengthening both frontier research and european corporate actors

user innovators and local information the case of mountain biking in a study of innovations developed by mountain bikers we find that userinnovators almost always utilize local information information already in their possession or generated by themselves both to determine the need for and to develop the solutions for their innovations we argue that this finding fits the economic incentives operating on users local need information will in general be the most relevant to user innovators since the bulk of their innovation related rewards typically come from in house use user innovators will increasingly tend to rely on local solution information as the stickiness of non local solution information rises

a model of currency depreciation and the debt inflation spiral abstract this paper shows how a government that cannot make credible policy commitments might manage its exchange rate and fiscal stance in a world of rational expectations the dynamic game model developed here potentially can generate diverse patterns of macroeconomic behavior patterns that differ as a result of assumed differences in government objectives under some types of government the ongoing strategic interaction between the public and private sectors leads to a disinflationary outcome other governments may push the economy into a spiral of rising debt and inflation

why are some independent inventors heroes and others hobbyists the moderating role of technological diversity and specialization abstract despite a substantial body of research investigating the market significance of inventions by independent inventors relatively little attention has been devoted to understanding their technological significance a recent study conducted by dahlin k taylor m fichman m 2004 today s edisons or weekend hobbyists technical impact and success of inventions by independent inventors res policy 33 1167 1183 on the tennis racket industry shows that independent inventors are a heterogeneous group which includes both heroes who contribute substantially to technological progress and hobbyists who make only a marginal contribution what is not asked and therefore not explained is why this distinction arises in this paper we focus on the type of prior technological knowledge in terms of technological specialization and diversity applied by independent inventors and their corporate counterparts as a factor explaining differences in technological impact our empirical setting is the field of medical equipment technology we find that independent inventors are more sensitive to the negative effects of technological diversity than their corporate counterparts furthermore our study reveals that technological specialization pays off more for independent inventors than for their corporate counterparts therefore those independent inventors who apply low degrees of diversity and high degrees of specialization are capable of reaching the same level as or even outperforming their corporate counterparts thus becoming heroes based on our findings we discuss implications for research and corporate practice

user industry spinouts downstream industry knowledge as a source of new firm entry and survival recent scholarship on entrepreneurship suggests that the pre entry know how of start ups embodied in their founders affects not only entry but also performance although prior work focuses on new entrants from the focal industry i e employee spinouts and academic organizations i e university spinoffs this study identifies and examines a hybrid category of start ups from downstream user industries which we call user industry spinouts we draw from the literature on evolutionary theory user innovation and industrial dynamics to propose that given the unique combination of knowledge inherited by these entrants their choices at entry and their ability to survive in the focal industry will differ with respect to other start ups we do this by extending existing work on new firm creation to investigate entry and performance in different product markets our findings based on a dataset of start ups in the semiconductor industry over a 10 year period 1997 2007 show that user industry spinou

sources procedures and microeconomic effects of innovation fabio arcangeli paul david frank engelman christopher freeman massimo moggi richard nelson luigi orsenigo nathan rosenberg michele salvati g n von tunzelman two anonymous referees and the participants at the meeting of the committee on distribution growth and technical progress of the italian national research council cnr rome november 16 1985 have helped with various redraftings a particularly grateful acknowledgment is for the insightful and patient help of moses abramovitz this work has been undertaken at the science policy research unit spru university of sussex as part of the research program of the designated research centre sponsored by the economic and social research council esrc earlier support to the research that led to this paper by the italian national research council cnr is also gratefully acknowledged the statistical research has been undertaken with the assistance of stephano brioschi ilaria fornari and giovannu prennushi

new silicon valleys or a new species commoditization of knowledge work and the rise of knowledge services clusters this paper explores knowledge services clusters kscs as a distinct and increasingly important form of geographic cluster in particular in developing countries kscs are defined as geographic concentrations of lower cost skills serving global demand for increasingly commoditized knowledge services based on prior research on clusters and services offshoring and data from the offshoring research network orn major properties and contingencies of ksc growth are discussed and compared with both high tech clusters and low cost manufacturing clusters special emphasis is put on the ambivalent effect of commoditization of knowledge work on ksc growth it is proposed that kscs attract most client projects if service commoditization is medium whereas higher or lower commoditization either increases global competitive pressure or lowers demand and economies of scale and scope ksc attractiveness is further related to the perceived availability of skills at relatively low costs and cluster connectedness with client economies through corporate networks and professional communities findings not only advance current debates on clusters global services sourcing and the geography of knowledge production but also have important policy implications

foreign direct investment as a way to guide the innovative process towards sustainability abstract in 1972 for the first time the term sustainable development was coined at the stockholm conference and in 1987 the brundtland report established the sustainability innovation binomial since then extensive research into sustainability oriented innovation has been conducted focused during the last decade on smes and recognizing these as the main actor of sustainable development for which foreign direct investment fdi is considered from a research and institutional point of view as a vital source although academic literature presents conflicting conclusions in this context this paper aims to perform a microeconomic analysis of how fdi influences the innovative process of smes and how this can lead to a process oriented towards sustainability to this end a panel of 4667 smes has been analyzed spanning a sample period between 2004 and 2013 through a binary logit model which compares and contrasts smes with fdi and equivalent smes without fdi over time and therefore exposed to a changing economy the most significant results are that fdi is attracted mainly by factors associated with technological supply which when coupled with being of medium size and located in a manufacturing sector of medium high technology generates positive spillovers these depend to a large extent on public funding which allows these companies to be more innovative and makes it more likely they focus their innovative process on sustainability

an investigation of the gains from commitment in monetary policy this paper proposes a simple framework for analyzing a continuum of monetary policy rules characterized by differing degrees of credibility in which commitment and discretion become special cases of what we call quasi commitment the monetary policy authority is assumed to formulate optimal commitment plans to be tempted to renege on them and to succumb to this temptation with a constant exogenous probability known to the private sector by interpreting this probability as a continuous measure of the lack of credibility of the monetary policy authority we investigate the welfare effect of a marginal increase in credibility our main finding is that in a simple model of the monetary transmission mechanism most of the gains from commitment accrue at relatively low levels of credibility in our benchmark calibration a commitment expected to last for only 6 quarters is enough to bridge 75 of the welfare gap between discretion and commitment this seems to justify the well known concern of monetary policy makers about their credibility even in a world with limited access to commitment technologies

does sticky information affect the locus of innovation evidence from the japanese convenience store industry abstract scholars have long discussed the locus of innovation and its determinants there is empirical evidence that innovations can be developed by those holding any of a number of functional relationships to them such as manufacturers users or materials suppliers past studies have considered two factors important in predicting the functional locus of innovation one is expected profit of a player involved in the innovation and the other is stickiness of innovation related information although some studies have shown empirically the link between an innovator s expected profits and the locus of innovation no research has yet been conducted to test the hypothesized relationship between stickiness of innovation related information and the locus of innovation in the study reported upon here i explore relationships between these two variables via a study of 24 innovations for the japanese convenience store industry my study shows empirically that stickiness of innovation related information does have the hypothesized relationship to the functional locus of innovation i discuss implications of these findings and some directions for future research

sustainable plans and debt abstract this paper presents a simple general equilibrium model of optimal fiscal policy similar to that of lucas and stokey j monet econ 12 1983 55 93 except that we let the government default on its debt we consider sustainable equilibria in which both government and private agent decision rules are required to be sequentially rational we concentrate on trigger mechanisms which specify reversion to the markov equilibrium after deviations by the government and show that such mechanisms cannot support equilibria with positive debt we go on to show by way of examples that there can be more complicated trigger mechanisms which support positive debt journal of economic literature classification numbers e61 e62

time consistent taxation by a government with redistributive goals abstract in a dynamic economy whose government is interested in both equity and efficiency time consistency problems arise even if the government has access to nondistortionary tax instruments moral hazard in production leads to a nondegenerate distribution of income which the government would like to flatten ex post self enforcing social agreements can mitigate the tendency toward excessive redistribution we investigate the nature of the distortions caused by the time consistency problem and show that in the constrained optimal equilibrium usually a linear tax schedule is imposed this remains true if renegotiation of the social agreement is possible journal of economic literature classification numbers c7 c73 e6 h21

the benefits and costs of strong patent protection a contribution to the current debate abstract today s conventional wisdom is that strong patent rights are conducive to economic progress yet not long ago students of the patent system took a more nuanced position arguing that often strong patents were not necessary to induce invention and entailed significant economic costs several empirical studies have supported this position however the current advocacy invokes theories of the positive benefits of patents that were repressed in the earlier more negative analyses this essay reviews these theories and the empirical evidence that might bear on them the authors conclude that there is reason for concern that the present movement towards stronger patent protection may hinder rather than stimulate technological and economic progress

recursive monetary policy games with incomplete information abstract this paper provides recursive methods for analyzing the credible equilibria of an incomplete information monetary policy game the policy game is one in which a discretionary government has a short run temptation to engage in a surprise monetary expansion it also has the opportunity to imitate a government that always implements the ex ante optimal monetary policy actions we derive an algorithm for computing the set of credible equilibrium payoffs we use this algorithm to explore the idea that incomplete information monetary policy games of this kind have fewer equilibria and less indeterminacy than their complete information counterparts

pareto efficient income taxation with stochastic abilities abstract this paper studies pareto efficient income taxation in an economy with finitely lived individuals whose income generating abilities evolve according to a two state markov process the study yields three main results first when individuals are risk neutral in any period the only individuals whose earnings are distorted are those who currently are and have always been low ability in addition the degree to which these perpetual low ability types have their earnings distorted decreases over time converging to zero if the time horizon is long enough second the earnings distortions are continuous with respect to the degree of risk aversion at the risk neutral solution third pareto efficient income tax systems can be time consistent even when the degree of correlation in ability types is large the condition for time consistency suggests a novel theoretical reason why the classic equity efficiency trade off may be steeper in a dynamic environment than previously thought

a dynamic analytic approach to national innovation systems the ic industry in taiwan the paper attempts to develop a mathematical model of the national innovation system nis of taiwan particularly with regard to its integrated circuit ic industry the method utilised is that of system dynamics sd drawing on both questionnaire in depth interviews and computer simulation the paper aims to increase insights into the dynamic processes of the taiwanese ic industry system of innovation and understand the interdependence and interaction among capital flows human resource flows knowledge and technology flows and product flows in the nis the paper concludes with some simulations of policy alternatives confronting the ic industry and the taiwanese government

academic research and industrial innovation the purpose of this study is to estimate the extent to which technological innovations in various industries have been based on recent academic research and the time lags between the investment in recent academic research projects and the industrial utilization of their findings because no attempt to my knowledge has been made to estimate the social rate of return from academic research we also make some rough and tentative estimates of this sort while the results are subject to many limitations discussed below they should be of interest to public policy makers concerned with science and technology as well as to

demand structure and technological change the case of the european semiconductor industry abstract this article proposes that the structure of demand is one of the major factors that affect the rate and direction of technological change and the evolution of high technology industries both over time and across countries this article presents an analysis of the semiconductor industry in europe the united states and japan although particular emphasis is placed on the european case the decline of the european industry 1960s from a position equal to that of the american industry 1950s can to a large extent be explained by the dominance of electronics consumer goods demand rather than public procurement or computer demand in the structure of demand in these countries the later technological convergence of electronics final markets 1970s played a major role in the commitment of the european semiconductor industry to lsi technology this commitment however came too late to allow the european industry to catch up with its american and japanese counterparts

real income and wealth of the elderly the recent white house conference on aging graphically demonstrated public concern over the welfare of the growing elderly segment of the u s population how is this group faring economically have they suffered from the stagflation of the last decade or have they been sheltered from economic harm by a combination of government programs and fortuitous asset holdings how vulnerable were they as a group to the inflation of the 1970 s we answer some of these questions by focusing on the economic welfare of the elderly over the last decade we assess the level and composition of real income and wealth of the elderly we compare their incomes to those of the general population and we compute a measure of their vulnerability to unexpected increases in the price level we note however that there are many other important indicators of the welfare of the elderly such as the increasing life expectancy changing living arrangements and housing trends towards earlier retirement and decreasing intergenerational contact we do not consider these issues so our results do not give a complete assessment of the welfare of the elderly we believe our results provide a good assessment of how their economic position changed over the decade

following or breaking regional development paths on the role and capability of the innovative entrepreneur structural change economic diversification and new path development feature prominently in scientific and policy debates against the backdrop of increasing specialization in the economy this paper reinterprets schumpeterian innovative entrepreneurship as a fundamental process that creates new connections between distinct fields of specialization thereby induces path breaking innovations and structural change it is argued that the transformation capability of innovative entrepreneurs rests essentially on their position s and networks within evolving innovation systems by focusing on micro level processes and transformation capability the paper complements the large body of work on structural barriers unintended consequences supporting institutional arrangements and policy implications are discussed

sectoral patterns of technical change towards a taxonomy and a theory abstract the purpose of the paper is to describe and explain sectoral patterns of technical change as revealed by data on about 2000 significant innovations in britain since 1945 most technological knowledge turns out not to be information that is generally applicable and easily reproducible but specific to firms and applications cumulative in development and varied amongst sectors in source and direction innovating firms principally in electronics and chemicals are relatively big and they develop innovations over a wide range of specific product groups within their principal sector but relatively few outside firms principally in mechanical and instrument engineering are relatively small and specialised and they exist in symbiosis with large firms in scale intensive sectors like metal manufacture and vehicles who make a significant contribution to their own process technology in textile firms on the other hand most process innovations come from suppliers these characteristics and variations can be classified in a three part taxonomy based on firms 1 supplier dominated 2 production intensive 3 science based they can be explained by sources of technology requirements of users and possibilities for appropriation this explanation has implications for our understanding of the sources and directions of technical change firms diversification behaviour the dynamic relationship between technology and industrial structure and the formation of technological skills and advantages at the level of the firm the region and the country

eco innovation in the transition to a circular economy an analytical literature review abstract in the ongoing sustainability debate the circular economy ce has been steadily gaining ground as a new paradigm at the same time eco innovation ei has been recognised as a key element in carrying out the transition from a linear to a circular system of production and consumption however little information can be found concerning whether and how ei can actually facilitate the change to a ce while extensive literature on ei and a growing body of research exploring the ce already exist there is as yet no comprehensive understanding concerning the connections between these two concepts drawing on academic contributions from the fields of ei and ce this analysis seeks to clarify and synthesise findings at the intersection of these two fields the aim is threefold derive literature based working definitions of ce and ei review the role of ei at ce s macro meso and micro levels and characterise ce inducing ei in terms of targets mechanisms and impacts our literature review shows that an ei driven techno economic transition to a ce requires specific solutions i e different forms of ei driven clean congruence at distinct levels of operation generally speaking movement toward a ce is found to be contingent on systemic ei that is not only intense in technology but also involving dynamic and holistic combinations of service innovations and novel organisational set ups

learning the ramsey outcome in a kydland prescott economy abstract we study if adaptive learning by a central bank cb in the kydland and prescott environment can steer the economy to the pareto optimal outcome our cb evaluates its potential strategies regarding the announced and the actual inflation rate through expectations of the performance of these strategies formed thanks to its mental model of the economy this model is forward looking and adaptive at the same time as a starting point we follow arifovic et al 2010 and initially assume that there are two types of agents believers who set their inflation forecast equal to the announced inflation and non believers who form static optimal forecast coupled with a forecast error correction mechanism our results show that the economy can reach near ramsey outcomes most of the time in the absence of believers the economies almost always converge to the ramsey outcome in their experiments with human subjects arifovic and sargent 2003 showed that experimental economies reach and stay close to the ramsey outcome most of the time giving support to the just do it policy recommendation in light of the experimental findings our model is of particular interest as it is the only agent based or adaptive learning model that consistently selects the ramsey outcome in this context

committees as substitutes for commitment in this article policies are negotiated in a committee by playing a dynamic voting game with an endogenous default or status quo policy i show that joining a committee by maintaining a strong agenda setting power is a way for a decision maker to commit to a policy that in absence of committees is not time consistent the disciplinary role of the endogenous status quo and the heterogeneity of preferences within the committee are two crucial ingredients to obtain this result as a motivating example this article focuses on the time consistency of monetary policy

conditional versus unconditional trade concessions for developing countries we consider a small open economy that faces a commitment problem in trade liberalization we examine how the relationship with a large trading partner affects the ability of the small countrys government to sustain free trade through a reputational mechanism if the small country s government is patient enough it can overcome its domestic commitment without the help of the large country unconditional liberalization by the large trading partner has an ambiguous effect on the small country s dynamic incentives liberalization through a reciprocal trade agreement in which the large country lowers its tariffs conditionally on the small country doing the same unambiguously dominates unconditional liberalization by the large country as a way of boosting trade reforms and reinforcing policy credibility in the small country however if capacity in the import competing sector can only be reduced gradually a conditional reciprocal agreement may require an asynchronous exchange of concessions with the large country liberalizing before the small country

reputation and time consistency recent work has shown that reputational arguments based on trigger strategies can sometimes be used to deal with the problem of time inconsistency in government policy this idea was exploited by robert barro and david gordon 1983 in a model of inflation and by v v chari and patrick kehoe 1988 in a model of capital taxation here it is shown that reputational arguments of this sort are widely applicable 2 a general policy model is developed based on an economy that is stationary over time contains identical households and has no endogenous state variables it is shown in general that the infinite horizon version of this model has equilibria in trigger strategies that yield outcomes strictly better than those attainable as equilibria in the one period model

in house versus external basic research and first to market innovations this paper explores to what extent conducting internal basic research as opposed to external basic research i e outsourcing and collaboration with universities encourages firms to bring new products into the market ahead of competitors and contributes to innovation performance the analysis is based on a sample of spanish manufacturing firms over the period 2006 2012 our findings suggest that conducting in house basic research affects firm s propensity to introduce product novelties furthermore performing this activity continuously affects the probability of being product pioneer in low and medium low tech sectors collaboration with universities also helps in introducing new products ahead of competitors but contracting scientific research from universities does not lead to a pioneer strategy results also reveal the absence of complementarities

efficiency and the role of government in energy policy abstract it is well established that the presence of a monopolist producer removes efficiency from the world oil market efficiency in energy resource utilization can nevertheless be the proclaimed objective of an energy policy by an oil importing nation if imported oil is considered a non produced resource available at a given price this article presents an example of such a policy which consists of the institution of price guarantees for energy alternatives and of government subsidies for the development of new energy technologies we illustrate how this policy will attain efficiency and the ratio of benefits to the costs associated with its adoption are calculated

sustaining policy cooperation between economies of different size abstract i consider an example of a two country model featuring national heterogeneity and demonstrate that heterogeneity plays an important role for the countries gains from international policy cooperation and just as important for the incentives to break the cooperative agreement i find that national heterogeneity unambiguously reduces trigger strategies support for policy cooperation in other words the more countries differ the harder it is to sustain policy cooperation

escaping nash inflation an ordinary differential equation ode gives the mean dynamics that govern the convergence to self confirming equilibria of self referential systems under discounted least squares learning another ode governs escape dynamics that recurrently propel away from a self confirming equilibrium in a model with a unique self confirming equilibrium the escape dynamics make the government discover too strong a version of the natural rate hypothesis the escape route dynamics cause recurrent outcomes close to the ramsey commitment inflation rate in a model with an adaptive government

knowledge innovation and productivity gains across european regions capello r and lenzi c knowledge innovation and productivity gains across european regions regional studies this paper studies the relationship between knowledge innovation and productivity in european regions looking for the sources of spatial heterogeneity across regions in the type of knowledge needed for innovation and in the propensity to innovate which mostly depend upon specific and systemic context conditions the conceptual framework of analysis is based on the strong belief that different modes of innovation characterize regions according to the presence absence of some context conditions that allow for the creation and or adoption of knowledge and innovation given the differences in knowledge and innovation intensity that characterize each mode pattern of innovation expectations are formulated on the achievement of productivity gains in regions characterized by different innovation patterns empirical evidence supports the conceptual expectations and shows that in regional innovation

in defence of the linear model an essay this essay discusses the strength and weaknesses of the so called linear model lm of innovation it is a reaction to the habit of criticising it as over simplistic mechanistic or simply blatantly wrong we argue that while some criticisms are of course well grounded many others are instead based on loose interpretations and unwarranted assumptions in order to separate the wheat from the chaff this essay first presents a comprehensive description of the linear model and differentiates it from the caricature many refer to second we discuss the main criticisms put forward and argue that many of them are not at all destructive but can be easily accepted within a refined version of the lm third we discuss the policy implications often derived or said to derive from the lm to argue that the lm itself is distinctively policy neutral other assumptions have to be added to justify alternative policy implications

technology policy for a world of skew distributed outcomes abstract this paper draws implications for technology policy from evidence on the size distribution of returns from eight sets of data on inventions and innovations attributable to private sector firms and universities the distributions are all highly skew the top 10 of sample members captured from 48 to 93 percent of total sample returns it follows that programs seeking to advance technology should not be judged negatively if they lead to numerous economic failures rather emphasis should be placed on the relatively few big successes to achieve noteworthy success with appreciable confidence a sizeable array of projects must often be supported the outcome distributions are sufficiently skewed that even with large numbers of projects it is not possible to diversify away substantial residual variability through portfolio strategies

on the sources and significance of interindustry differences in technological opportunities abstract the set of technological opportunities in a given industry is one of the fundamental determinants of technical advance in that line of business we examine the concept of technological opportunity and discuss three categories of sources of those opportunities advances in scientific understanding and technique technological advances originating in other industries and in other private and governmental institutions and feedbacks from an industry s own technological advances data from the yale survey on industrial research and development are used to measure the strength of various sources of technological opportunity and to discern interindustry differences in the importance of these sources we find that interindustry differences in the strength and sources of technological opportunities contribute importantly to explanations of cross industry variation in r d intensity and technological advance

globalisation of knowledge production and regional innovation policy supporting specialized hubs in the bangalore software industry abstract this paper is concerned with the changing role of regional innovation systems and regional policies in supporting the transition of indigenous firms in developing countries from competing on low costs towards becoming knowledge providers in global value chains special attention is paid to policies supporting the emergence and development of the regional innovation system in this transition process regional innovation systems in developing countries have very recently started to be conceptualised as specialized hubs in global innovation and production networks asheim b coenen l vang lauridsen j 2007 face to face buzz and knowledge bases socio spatial implications for learning innovation and innovation policy environment and planning c government and policy 25 5 655 670 chaminade c vang j 2006a innovation policy for small and medium size smes in asia an innovation systems perspective in yeung h ed handbook of research on asian business edward elgar cheltenham maggi c 2007 the salmon farming and processing cluster in southern chile in pietrobello c rabellotti r eds upgrading and governance in clusters and value chains in latin america harvard university press a specialized hub refers to a node in a global value chain that mainly undertakes one or a few of the activities required for the production and development of a given good or service or serves a particular segment of the global market in global value chains firms in developing countries have traditionally been responsible for the lowest added value activities however a few emerging regional innovation systems in developing countries are beginning to challenge this scenario by rapidly upgrading in the value chain there is however still only a poorly developed understanding of how the system of innovation emerges and evolves to support this transition process and what the role of regional innovation policy is in building the regional conditions that support indigenous small and medium size enterprises smes in this transition process this paper aims at reducing this omission by analyzing the co evolution of the strategies of indigenous smes and the regional innovation system of bangalore india

the suspension of the gold standard as sustainable monetary policy abstract this paper models the gold standard as a state contingent commitment technology that is only feasible during peace monetary policy during war when the gold convertibility rule is suspended can still be credible if the policymaker s plan is to resume the gold standard in the future the dsge model developed in this paper suggests that the resumption of the gold standard was a sustainable plan which replaced the gold standard as a commitment technology and made monetary policy time consistent trigger strategies support the equilibrium private agents retaliate if a policymaker defaults on its plan to resume the gold standard

optimal subsidies to new energy sources abstract this paper broadens previous discussion on the conditions for subsidizing new energy sources several arguments for and against subsidizing new energy sources such as solar energy and synthetic fuels are reviewed and critiqued emphasis is given to vintage subsidies to conventional energy sources net energy analysis and a variety of production externalities a theorem for determining optimal subsidies to new energy sources is developed based on a general theorem proposed by baumol and bradford 2 finally two equity issues are also considered

collective efficiency growth path for small scale industry this study is concerned with the growth of small local industry in developing countries and explores one particular route for understanding and fostering such growth it focuses on the clustering of firms and the competitive advantage which they derive from local external economies and joint action captured in the concept of collective efficiency following a conceptual discussion the article explores the economic and institutional conditions which enhance or hinder collective efficiency this includes a case study which suggests that responding to opportunity and crisis requires shifting from mere reliance on external economies to joint action and from ascribed to earned trust

reorganising global value chains and building innovation capabilities in brazil and india abstract this paper is concerned with global shifts in innovation power it shows that brazil and india are accumulating significant innovation capabilities most explanations concentrate on factors within these rising powers this paper concentrates on explanatory factors which have their origin in the old powers europe and usa in order to understand the build up of innovation capabilities in brazil and india it examines their linkages with firms in europe and usa concentrating on the value chains which connect them it shows how the organisational decomposition of the innovation process emanating from the old powers contributes directly and indirectly to the build up of innovation capabilities in the new powers the empirical evidence comes from the brazilian auto and the indian software industry and the value chains which link them to the united states and germany two very different industries show a core of common findings on processes which contribute to building advanced innovation capabilities in india and brazil

responsible innovation and the innovation of responsibility governing sustainable development in a globalized world earth s life support system is facing megaproblems of sustainability one important way of how these problems can be addressed is through innovation this paper argues that responsible innovation that contributes to sustainable development sd consists of three dimensions 1 innovations avoid harming people and the planet 2 innovations do good by offering new products services or technologies that foster sd and 3 global governance schemes are in place that facilitate innovations that avoid harm and do good the paper discusses global governance schemes based on deliberation as a means to foster such responsible innovation these schemes can provide voluntary soft law regulations that complement and extend national and international hard law regulations and facilitate collective innovation that contributes to sd goals the article addresses the facilitative role of governments and international organizations in overcoming problems of deliberation and offers illustrative examples of such governance schemes

the magnitude of innovation by demand in a sectoral system the role of industrial users in semiconductors abstract how relevant is innovation by demand compared to innovation by other actors in a sector in quantitative terms this is a yet unanswered question the current study fills this major gap in the literature on industry studies by taking a sectoral system perspective this study is able to highlight the magnitude of innovation by intermediate user firms in a high technology sector semiconductors using a combination of different datasets patents co patents r d alliances and new ventures in semiconductors this study proposes a novel quantitative approach to assessing the magnitude of innovative activity by user firms the study reaches several findings first the magnitude of innovation by user firms as measured by patents is high in both absolute and relative terms compared to semiconductor firms and other actors in the sector second the distribution of patents among different demand segments is highly uneven third innovative user firms are highly heterogeneous in terms of size diversification and vertical integration fourth collaboration in r d and co patenting activity in semiconductors take place not just between user firms and semiconductor firms but also among user firms themselves fifth innovative user firms are quite active in entrepreneurial activity in semiconductors and their new ventures on average survive longer than spin offs or other start ups

cheating for the common good in a macroeconomic policy game abstract this paper presents a simple repeated game model of interaction between an optimizing government and the private sector two polar cases are considered a the private sector is represented by a single agent and b there is a continuum of heterogenous atomistic private agents in both cases the government starts each repetition by making a non binding announcement about its future actions the players have complete and perfect information with one exception the private agents do not know whether or not the government will act as announced thus each private agent i either behaves with probability i as if it trusted the announcement or plays with probability 1 i as a stackelberg leader after observing the reaction of the private sector the government implements the actual policy measures finally the private agent s update i as a function of the payoffs received we show that although the government s announcements are never respected acting as if they were true leads to an outcome that simultaneously improves the situation of the government and of those players that trust it compared to the standard equilibrium solutions an overwhelming majority of private agents very rapidly learns to behave as if the announcements were true the other agents also experience higher payoffs due to an herding effect the fact that the announcements are always reneged is crucial for the solution to be pareto improving these results are in stark contrast to the conclusions usually presented in the related economic literature

universities in emerging economies bridging local industry with international science evidence from chile and south africa emerging economies are now becoming more central in global competition to achieve this many countries have invested to develop into knowledge economies universities have a role to play in this transformation both as generators of new knowledge as well as actors that can interact with the local industry and contribute to its innovativeness this paper explores using two case studies in the chilean and south african wine industry how universities connect international science to domestic industry it finds that this connection occurs through a few bridging researchers who display particular characteristics compared with their colleagues bridging researchers are more talented than average researchers both because they publish more in international journals and or because they have received awards for their academic work this finding may have significant policy implications as policies aimed at strengthening the skills of these researchers should be welcomed in catching up industries copyright the author 2012 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

look before you leap market opportunity identification in emerging technology firms entrepreneurs play a fundamental role in bringing new technologies to market because technologies are often configurable to serve a variety of different markets it is possible for entrepreneurs to identify multiple market opportunities prior to the first market entry of their emerging firms and if they elect to do so to therefore have a choice of which market to enter first the empirical results presented in this paper offer three new insights regarding this important early stage choice in new firm creation first they reveal that serial entrepreneurs have learned through prior start up experience to generate a choice set of alternative market opportunities before deciding which one to pursue in their new firm creation second the analysis indicates that entrepreneurs who identify a choice set of market opportunities prior to first entry derive performance benefits by doing so third the positive relationship between the number of market opportunities identified prior to first entry and new firm performance is nonlinear and subject to decreasing marginal return the research literature has yet to acknowledge the notion of multiple opportunity identification prior to entry and the related idea of selecting the most favorable market opportunity for the creation of a new technology firm

the return to independent invention evidence of unrealistic optimism risk seeking or skewness loving examining a sample of 1 091 inventions i investigate the magnitude and distribution of the pre tax internal rate of return irr to inventive activity the average irr on a portfolio investment in these inventions is 11 4 this is higher than the risk free rate but lower than the long run return on high risk securities and the long run return on early stage venture capital funds the portfolio irr is significantly higher for some ex ante identifiable classes of inventions the distribution of return is skew only between 7 9 reach the market of the 75 inventions that did six realised returns above 1400 60 obtained negative returns and the median was negative

science and the diffusion of knowledge abstract scientists social scientists and politicians frequently credit basic science with stimulating technological innovation and with it economic growth despite a substantial body of research investigating this general relationship relatively little empirical attention has been given to understanding the mechanisms that might generate this linkage this paper considers whether more rapid diffusion of knowledge brought about by the norm of publication might account for part of this effect we identify the importance of publication by comparing the patterns of citations from future patents to three groups of focal patents i those that reference scientific peer reviewed publications ii those that reference commercial non scientific publications and iii those that reference neither our analyses strongly implicate publication as an important mechanism for accelerating the rate of technological innovation patents that reference published material whether peer reviewed or not receive more citations primarily because their influence diffuses faster in time and space

a man on the inside unlocking communities as complementary assets abstract since teece s seminal paper explaining who were the gainers from technological innovation increased globalization and the information and communication technology revolution have brought new ways for firms to organize and appropriate from innovation a new more open model of innovation suggests that firms can benefit from sources of innovation that stem from outside the firm the central theme of this paper is how firms try to unlock communities as complementary assets these communities exist outside firm boundaries beyond ownership or hierarchical control because of practices developed by communities to protect their work firms need to assign individuals to work in these communities in order to gain access to developments and to an extent influence the direction of the community using network analysis we show that some software firms sponsor individuals to act strategically within a free and open source software foss community firm sponsored individuals interact with more individuals than interact with them and also they seek to interact with central individuals in the community however we can see differences in how individuals interact depending on whether their affiliation is with a dedicated foss firm or an incumbent in the software industry apparently some firm managers believe they need a man on the inside to be able to gain access to communities

tinbergen and theil meet nash controllability in policy games abstract this paper generalizes the classical theory of economic policy to a static lq strategic context between n players we show how this generalized version of controllability can profitably be used to deal with policy ineffectiveness issues and nash equilibrium existence

preemptive patenting and the persistence of monopoly this article takes a different tack and inquires whether institutions such as the patent system create opportunities for firms with monopoly power to maintain their monopoly power the results apply to other situations such as brand identification spatial location and capacity expansion which share the characteristic that early or preemptive actions may lower the returns to potential competitors

robustness and u s monetary policy experimentation we study how a concern for robustness modifies a policy maker s incentive to experiment a policy maker has a prior over two submodels of inflationunemployment dynamics one submodel implies an exploitable trade off the other does not bayes law gives the policy maker an incentive to experiment the policy maker fears that both submodels and his prior probability distribution over them are misspecified we compute decision rules that are robust to misspecifications of each submodel and of the prior distribution over submodels we compare robust rules to ones that cogley colacito and sargent 2007 computed assuming that the models and the prior distribution are correctly specified we explain how the policy maker s desires to protect against misspecifications of the submodels on the one hand and misspecifications of the prior over them on the other have different effects on the decision rule

elements of a schumpeterian catalytic research and innovation policy in this article we take a fresh look at research and innovation r i hereinafter policy and define a new notion schumpeterian catalytic r i policy such policy style amends and enriches the new mission oriented framework for innovation policy by assigning more weight to the microeconomic dimension of private actors actions and by being more concerned with the temporary nature of interventions we relate our argument to recent empirical trends in productivity dynamics and innovative activities these suggest that an innovation slowdown is taking place and consequently that a renewed interest in the re direction rather than on the intensity of innovative activities is key to the design of r i policy capable to tackle current challenges we use the evidence to build a schematic theoretical framework to inform policy design and we outlined the defining features of our proposed policy style

enhancing energy price stability through consistent and balanced energy technology r d abstract despite the significant decline in energy prices and the large budget deficit the us government must maintain a well balanced energy technology development programme ranging from basic science through to the demonstration of technical feasibility and technology transfer having technology in technical readiness before an energy price shock will moderate economic problems due to the price shock and thereby promote economic stability based on evolving knowledge about the relationships among energy prices technology commercialization and recessions and depressions development of efficient energy technologies must be far better managed by government and the private sector during both normal economic growth and energy crisis

learning benevolent leadership in a heterogenous agents economy abstract this paper studies the potential commitment value of cheap talk announcements in an agent based dynamic extension of the kydland prescott model in every period the policy maker makes a non binding inflation announcement before setting the actual inflation rate it updates its decisions using individual evolutionary learning the private agents can choose between two different forecasting strategies they can either set their forecast equal to the announcement or use an adaptive learning scheme to potentially forecast the true inflation they switch between these two strategies as a function of information about the associated payoffs they obtain through word of mouth choosing always the currently most favorable one while all agents using the first strategy make the same forecast those using the second strategy may generate different individual forecasts in spite of the complexity of the environment the boundedly rational policy maker learns to sustain a situation with a positive but fluctuating fraction of believers this outcome is pareto superior to the outcome predicted by standard theory interestingly enough the actions taken by the policy maker undergo marked qualitative changes as a function of the prevailing heterogeneity among and learning characteristics of the private agents

information acquisition and reputation dynamics we study dynamic incentives and behaviour in markets with costly discovery of past transactions in our model a sequence of short lived customers interact over time with a single long lived firm that privately knows its type good or opportunistic customers must pay to observe the firm s past behaviour we characterize the equilibrium structure that features accumulation consumption and restoration of reputation the opportunistic firm deliberately builds its reputation up to a point where the maximum periods of information acquired by customers do not reveal past opportunistic behaviour and exploits the customers who most trust the firm copyright 2011 oxford university press

small firms social capital and the enhancement of business performance through innovation programmes the paper explores the extent to which social capital is advantageous to small and medium enterprise sme growth social capital is a communal property involving civic engagement associational membership high trust reliability and reciprocity in social networks it is capable of being identified in social political and economic contexts often associated with strong communities however not all strong communities exert the effects of social capital in respect of business activities this paper assesses government programmes to promote collaboration amongst smes for improving innovation capacity by increasing social capital through networking it shows that for a sizeable proportion of programme funded firms in denmark ireland and wales u k social capital building was associated with enhanced business knowledge and innovation performance of particular importance was the opportunity afforded to firms for linkage with external innovation networks and the build up of embeddedness or the institutional basis for the enhancement of social capital as a consequence of discovering the advantages of social capital over a third of respondents planned to continue to develop it in future in many cases funding such activities privately rather than calling on the public purse

benefits from u s monetary policy experimentation in the days of samuelson and solow and lucas a policy maker knows two models of ination unemplo yment dynamics one implies an exploitable trade o the other does not the policy maker s prior probability over the two models is part of his state vector bayes law converts the prior probability into a posterior probability at each date and gives the policy maker an incentive to experiment for two models calibrated to u s data through the early 1960s we isolate the component of government policy that is due to experimentation by comparing the outcomes from two bellman equations the rst of which experiments and learns the second of which learns but doesn t experiment we interpret the second as an anticipated utility model and study how well its outcomes approximate those from the experiment and learn bellman equation the approximation is good for our calibrations the benets from purposeful experimentation are small

sequential equilibria in a ramsey tax model this paper presents a full characterization of the equilibrium value set of a ramsey tax model more generally it develops a dynamic programming method for a class of policy games between the government and a continuum of households by selectively incorporating euler conditions into a strategic dynamic programming framework we wed two technologies that are usually considered competing alternatives resulting in a substantial simplification of the problem

fiscal policy coordination and emu a dynamic game approach abstract this paper examines the case for fiscal policy coordination in a european economic and monetary union emu a two bloc model with two market structures is examined emu producing a single homogeneous good in both blocs emu1 and a two good emu emu2 where each bloc produces a single home good the european central bank sets monetary policy so as to achieve credibly low inflation rates we find that for emu2 as relative prices can change countries have an incentive to improve their terms of trade leading to an inefficient noncooperative outcome which can be avoided by cooperation

do credible domestic institutions promote credible international agreements we examine the relationship between international policy coordination and domestic policy reputation when both are self sustaining we show that domestic policy commitment does not necessarily facilitate international cooperation rather efficient policies may be most easily sustained when governments are unable to pre commit to policy domestically moreover the lack of domestic commitment is more likely to facilitate international cooperation the larger the international spillovers of domestic policies are

time consistency of government financial policy in a small open economy this paper derives sufficient conditions for the time consistency of optimal fiscal policy in a small open economy results depend critically on the debt instruments used by the government if the government employs only conventional debt a sufficient condition for time consistency is that the optimal policy equalizes tax rates across periods if the government also issues consumption indexed debt the optimal policy can always be made time consistent by an appropriate mix of conventional and indexed debt for a specific example a simple rule for indexed debt management can be derived

r d determinants accounting for the differences between research and development the determinants of r d are an important topic of innovation studies the classical schumpeterian hypotheses about the influence of size and market power have been complemented with the role played by industry determinants such as demand pull technological opportunity and appropriability in determining r d investments however r d has always been considered as a whole even though research and development activities differ in many aspects we take advantage of a new panel database of innovative spanish firms pitec to distinguish between research and development efforts of firms we analyze the differentiated role played by traditional r d determinants in driving research and development results show that demand pull and appropriability have a higher effect on development while technological opportunity is more influential for research differences are statistically significant important in magnitude and robust to the use of different indicators for demand pull technological opportunity and appropriability and to several robustness checks

patent quality and research productivity measuring innovation with multiple indicators we analyse the determinants of the decline in research productivity using panel data on manufacturing firms in the us for the period 1980 93 we focus on three factors the level of demand the quality of patents and technological exhaustion we develop an index of patent quality using detailed patent information and show that using multiple indicators substantially reduces the measured variance in quality research productivity at the firm level is inversely related to patent quality and the level of demand as predicted by theory and patent quality is positively associated with the stock market value of firms

r versus d estimating the differentiated effect of research and development on innovation results r d is considered to be the main source of innovation we argue that r d is too broad a measure including activities differing in purposes culture people management and other features however empirical studies have not analyzed them separately mainly due to the lack of data using firm level data the aim of this paper is to estimate the differentiated effect of research and development on different innovation outputs results show that both research and development activities are important however we find that development activities are more important for product innovation while the effect of research activities is higher on process innovation moreover we analyze differences by technological intensity of the sector when analyzing product and process innovations we find evidence supporting the existence of higher payoffs to development and especially to research in low tech sectors when compared with high tech ones