Vertical Organization, Technology Flows and R&D Incentives: An Exploratory Analysis

Despite its importance, the impact of vertical organization on innovation incentives has not been investigated in depth. This paper develops a number of testable hypotheses and then provides a first exploratory empirical analysis, using cross-sectional industry-level data. Two simple stylized facts emerge from the empirical results. First, once a fragmented buyer industry is dependent on a relatively concentrated supply sector, the industry’s own R&D intensity is reduced substantially. Second, vertical technology flows appear to act as substitutes for an industry's own R&D if the receiving industry's concentration is relatively low. Both results are largely consistent with a number of case studies and with theoretical arguments discussed in the paper. ZUSAMMENFASSUNG - (Vertikale Organisation, Technologieflüsse und FuE-Anreize - Eine explorative Studie) Der Einfluß der vertikalen Organisation von Industrien auf Innovationsanreize ist trotz der Bedeutung der Fragestellung noch nicht detailliert untersucht worden. Dieses Papier stellt eine Reihe von testbaren Hypothesen vor und präsentiert eine erste explorative empirische Analyse auf der Basis eines Querschnittsdatensatzes. Zwei empirische Regularitäten können nachgewiesen werden. Zum einen liegt die FuE-Intensität einer Industrie erheblich unter dem üblichen Durchschnitt, wenn die Konzentration der Industrie niedrig ist, aber eine Abhängigkeit von einer konzentrierten Zuliefererindustrie besteht. Zum zweiten scheinen vertikale Technologieflüsse als Substitute für die eigene FuE einer Industrie zu fungieren, sobald die Konzentration der Empfängerindustrie relativ niedrig ist. Beide Resultate sind prinzipiell konsistent mit weiterer Evidenz aus Fallstudien und mit den theoretisch hergeleiteten Hypothesen.vertical structure; research and development; appropriability

Does R&D-infrastructure attract high-tech start-ups?

Our research, based on the ZEW-Foundation Panel East, examines whether high-tech start-ups are mainly founded in scientific and infrastructural well suited regions or not. Estimation results on the level of postcode areas confirm the hypothesis that specific human capital, knowledge spillovers at higher-education institutions are more important for founding a firm in one of the high-tech sectors compared with the effects of other publicly financed institutions. The existence of large companies in the manufacturing sector has a considerable effect for start-up activities in this region in general. Moreover, high-tech start-ups are more concentrated within or near technology and foundation centres. --High Technology Industries,Eastern Germany,Start-ups,entrepreneurs

The Biotechnology Sector: "Bounds" to Market Structure

This paper examines whether it makes sense to consider Sutton's "bounds" approach as a candidate theory for explaining the recent evolution of market structure in the biotechnology sector, and to speculate whether market structure will change if the industry begins to introduce second-generation GM products that are of more direct benefit to consumers. A key result is that the market structure is bounded in the presence of endogenous sunk costs, implying care should be taken when inferring any correlation between R&D expenditure and seller concentration in the biotechnology sector.Biotechnology, market structure, Research and Development/Tech Change/Emerging Technologies, L1, L11,

The influence of strategic patenting on companies' patent portfolios

This paper analyses whether strategic motives for patenting influence the characteristics of companies' patent portfolios. We use the number of citations and oppositions to represent these characteristics. The investigation is based on survey and patent data from German companies. We find clear evidence that the companies' patenting strategies explain the characteristics of their patent portfolios. First, companies using patents to protect their technological knowledge base receive a higher number of citations for their patents. Second, the motive of offensive - but not of defensive - blocking is related to a higher incidence of oppositions, whereas companies using patents as bartering chips in collaborations receive fewer oppositions to their patents. --strategic patenting,patent portfolio characteristics

How to measure patent thickets – a novel approach

The existing literature identifies patent thickets indirectly. In this paper we propose a novel measure based on patent citations which allows us to measure the density of patent thickets directly. We discuss the algorithm which generates the measure and present descriptive results validating it. Moreover, we identify technology areas which are particularly impacted by patent thickets.patenting; patent thickets; patent portfolio races; complexity

Vertical Relations Between Firms and Innovation: An Empirical Investigation of German Firms

The surge in interfirm cooperative agreements can be seen as expressing a way for firms to respond to and to organize market failure, especially in technology markets. The incentives of firms to internalize activities are to avoid the disadvantages, or capitalize on the advantages, of imperfections or disequilibria in external mechanisms of resource allocations. The purpose of this paper is to investigate empirically the occurrence and importance of different modes of vertical relations between innovating firms, suppliers and users, using data from Germany. The analysis is based on a survey conducted by the "Center for European Economic Research" (Mannheim, Germany) among 3122 firms representing 378 different lines of business, mainly in the manufacturing sector. The main results can be summarized as follows: ? 84 % of all innovating firms responded that they have had R&D cooperation agreements with either suppliers or customers or both. This percentage is even higher (99 %) if we consider only those innovating firms that have also had formal R&D departments. The phenomenon of vertical R&D cooperation is therefore widespread among German firms. ? Informal exchange of technical knowledge was perceived as the most important mode of R&D cooperation between innovating firms on one hand and customers and suppliers on the other, followed by formal methods of cooperation such as joint development teams and contractual R&D cooperation. Joint ventures and direct R&D orders to either customers or suppliers were seen as the least important modes of vertical cooperation. ? The occurrence and importance of cooperative agreements between innovating firms, users and input suppliers vary across industries. ? Results of multivariate statistical analysis (correlation, principal components and cluster analysis) suggested that the various modes of R&D cooperation between innovating firms on one hand and customers and suppliers on the other could be reduced to two subgroups: the first one includes formal modes of cooperation, the second one includes only informal exchange of technical knowledge. On this basis patterns of cooperative agreements could be established for firms operating in different industries and for firms using different product and process technologies. --

Saxony's capital Dresden: On the way to become Eastern Germany's first Innovative Milieu?

In this paper, the chances of Saxonys capital city Dresden to become Eastern Germanys first high-tech-region is discussed. A presentation of the theoretical background of innovative milieux is followed by an overview of the regions universities, R&D institutes and other facilities relevant for milieu formation. Afterwards, the establishment of high-tech enterprises in the Dresden area is analyzed. The paper concludes giving a view of the regions further development potential. --

High-quality patents for emerging science and technology through external actors: community scientific experts and knowledge societies

This article explores one type of administrative mechanism to achieve high-quality patents: Article 115 of the European Patent Convention, which permits the inclusion of third parties to provide input to the prior art search and to communicate relevant information to the examiner in charge. Our empirical research analyzes the field of human genetic inventions. The empirical findings here show that third parties usually participate only after patents have been granted. Between 1999 and 2009, only a limited number of human gene patent cases made use of third-party, pre-grant interventions. There is thus an imbalance between third-party participation in the pre- and post-grant phase of patent prosecution, and we urge for greater participation of knowledge communities in the search and examination process. Europe should create a funnel for participation through advisory bodies and learned societies, which would allow judicious consideration of the search and examination, with a resultant improvement in patent quality

How Do Young Innovative Companies Innovate?

This paper discusses the determinants of product innovation in young innovative companies (YICs) by looking at in-house and external R&D and at the acquisition of external technology in embodied and disembodied components. These input-output relationships are tested on a sample of innovative Italian firms. A sample-selection approach is applied. Results show that in-house R&D is linked to the propensity to introduce product innovation both in mature firms and YICs; however, innovation intensity in the YICs is mainly dependent on embodied technical change from external sources, while − in contrast with the incumbent firms − in-house R&D does not play a significant role.R&D, product innovation, embodied technical change, CIS 3, sample selection