Theme 2: Economic/industrial impacts of research
Theme coordinator: Arvid Raknerud from Statistics Norway.
Innovation and economic performance
Within this theme we analyse the impact of R&D and innovation activities on the economic performance of firms. Results from economic research indicate high returns to private R&D investments and -- more importantly -- substantial gaps between private profit-making to the investing firm and social returns – often estimated to be as much as 20-60% (Griliches, 1995; Jones and Williams, 1998). Economic research has identified a number of reasons for such gaps; so-called market failures, which constitute the main rationale for government policies designed to increase private sector R&D.
The most acknowledged market failure related to R&D is the existence of knowledge spillovers (Griliches, 1995; Geroski, 1995; Jones and Williams, 1998; Hall, Mairesse, & Mohnen; 2010. In this case the market does not give investors sufficient incentives to invest in R&D. Public support is thus needed to make up for this shortfall. On the other hand, public support to R&D may crowd out private investments if the firms themselves can fully benefit from their own R&D through product and process innovations or ownership of intellectual property rights. To trigger new innovations, it is therefore important that public support to private R&D is aimed at projects with a higher social than private return.
To craft effective public policies, a better understanding is required of what incentivises firms to innovate, invest in scientific activities and employ scientifically trained personnel. During the last decades, the availability of information on these issues has increased a lot through R&D and innovation surveys (e.g. EU’s Community Innovation Survey (CIS), see Smith 2004). In Norway we are also in a unique situation with regard to the availability of firm-level registry data (e.g., accounts statistics) that can be merged to any other data sets with firm identifiers (e.g. R&D statistics and CIS). Still, how private firms utilise knowledge from internal and external sources is not well understood. Current knowledge is often based on firm-reported uses of knowledge sources for innovation. As a consequence, there is need for development of methods and data sources to capture the impact of private and public R&D on innovation activities and economic performance.
With the above in mind, this working package seeks to answer the following research questions:
- How can we identify research impacts in firms (micro level) and spillovers from research across industries and countries (macro level)?
- What are the capacities, channels and mechanisms through which firms engage with external research organisations?
- How do patterns of impacts differ between industrial sectors?
- What is the role of policy instruments in generating effects of research activities and collaboration?
To address the above questions, OSIRIS will carry out microeconomic and macroeconomic analyses and perform case studies. Our work will address how we can identify the magnitude of research impacts in the private sector from firm-level micro data. At the macro level this work package aims to increase our knowledge about how R&D based innovations at the firm level are spread across industries and sectors. Such spillovers represent the effect of innovations that are useful in another industry or country, see e.g. Hall et al. (2010). International studies find that spillover effects are large and that there are large variations across industries and countries. For example, Griffith et al. (2004) find that roughly half of the impact from R&D in Norwegian manufacturing comes from knowledge spillovers, and a dominating part originate from abroad (Keller, 2004).
In addition to studies based on information collected from firm registry and survey data (such as the R&D statistics and CIS), we will select 3-5 cases of research-based innovations that seemingly has had an impact on firms and industrial development in Norway, and that represent different fields of knowledge. The idea is to pick fairly narrow cases that are still under development. In the case studies, we will collect data from multiple sources (publications, patents, trade journals, other documents, interviews) and will look at the trajectories of diffusion, use and further development of scientific knowledge towards innovations developed in the private sector. The interaction between diverse sources of knowledge (scientific, experiential, and technological knowledge in firms) will be a particular focus.
As a part of this work package we will also conduct a survey integrated into CIS in cooperation with Statistics Norway. The additional survey questions will be designed to obtain in-depth knowledge about how absorptive capacity, interaction with external research as well as the wider policy context impact firms’ innovation and R&D activities, either qualitatively with regard to the type of innovation outcomes or quantitatively through input/output additionality. We will look at how R&D affects outcomes in the form of innovations and value creation, and in terms of what types of research and innovation that are stimulated by different policies.
Geroski, P. (1995): Markets for technology. Knowledge, innovation and appropriability, in Stoneman, P. (Ed.): Handbook of the Economics of Innovation and Technological Change. Oxford: Basil Blackwell
Griffith, R., Redding, S., & Reenen, J. Van. (2004). Mapping the Two Faces of R&D: Productivity Growth in a Panel of OECD Industries. Review of Economics and Statistics, 86(4), 883–895
Griliches, Z. (1995): R&D and Productivity. Pp. 52–89 in Handbook of Industrial Innovation, edited by P. Stoneman. London: Blackwell.
Hall, B. H., Mairesse, J., & Mohnen, P. (2010). Measuring the returns to R&D. In Handbook of the Economics of Innovation (1st ed., Vol. 2, pp. 1033–1082). Elsevier B.V.
Jones, C.I. and J.C. Williams (1998): Measuring the Social Return to R&D. The Quarterly Journal of Economics. 113, 52–89.
Keller, W. (2004): International Technology Diffusion. Journal of Economic Literature. 42, 752-782.
Smith, K. (2004): Measuring Innovation, in J. Fagerberg, D. Mowery, and R. Nelson (eds). The Oxford Handbook of Innovation, Oxford, Oxford University Press, 148–78.