Browsing by Subject "R&D"

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  • Kortelainen, Mika (2007)
    Bank of Finland Research Discussion Papers 9/2007
    We present a two country DGE model and estimate it using Bayesian techniques and euro area and US quarterly data for 1977 2004. In analysing the current accounts we find that a lower US rate of time preference or a higher dollar risk premium could render the deficit sustainable, but that these could push the interest rate to the zero bound. Secondly, we find that fiscal policy is not sufficiently effective to improve the current account although the zero bound is not hit. Key words: current account, zero bound, policy coordination JEL classification numbers: E61, F32
  • Takalo, Tuomas; Tanayama, Tanja (2008)
    Bank of Finland Research Discussion Papers 19/2008
    Published in Journal of Technology Transfer, Volume 35, Number 1, February 2010: 16-41
    We study the interaction between private and public funding of innovative projects in the presence of adverse-selection based financing constraints. Government programmes allocating direct subsidies are based on ex-ante screening of the subsidy applications. This selection scheme may yield valuable information to market-based financiers. We find that under certain conditions, public R&D subsidies can reduce the financing constraints of technology-based entrepreneurial firms. Firstly, the subsidy itself reduces the capital costs related to innovation projects by reducing the amount of market-based capital required. Secondly, the observation that an entrepreneur has received a subsidy for an innovation project provides an informative signal to market-based financiers. We also find that public screening works more efficiently if it is accompanied by subsidy allocation. Keywords: adverse selection, innovation finance, financial constraints, R&D subsidies, certification JEL classification numbers: D82, G28, H20, O30, O38
  • Schmöller, Michaela; Spitzer, Martin (2021)
    European Economic Review May ; 2021
    Published in BoF DP 21/2019 ("Endogenous TFP, business cycle persistence and the productivity slowdown in the euro area")
    This paper analyses the role of endogenous total factor productivity dynamics in explaining business cycle persistence as well as the missing (dis-)inflation and productivity puzzles in the euro area. We show by means of an estimated medium-scale DSGE model in which TFP evolves endogenously as the result of costly investment in R&D and technology adoption that the endogenous slowdown in total factor productivity can explain the depth and persistence of the output drop and the weak recovery following the double-dip recession in the euro area. Our results suggest that a decrease in R&D efficiency and innovation is key in explaining the pre-crisis euro area productivity slowdown, while as of 2008 a crises-induced drop in technology adoption constitutes the most important factor. We document a flattening of the Phillips curve relationship under the endogenous TFP mechanism, resulting from the interaction between inflation and productivity dynamics. The endogenous reaction in TFP dampens the inflation response over the business cycle and can thus help explain both the moderate fall in euro area inflation during its crises and its sluggish increase in the subsequent recovery.
  • Funke, Michael; Yu, Hao (2009)
    BOFIT Discussion Papers 10/2009
    In this paper we analyse the impact of R&D on total factor productivity across Chinese provinces. We introduce innovations explicitly into a production function and evaluate their contribution to economic growth in 1993 - 2006. The empirical results highlight the importance and the interaction between local and external research. The evidence indicates that growth in China is not explained simply by factor input accumulation. Keywords: China, R&D, R&D Spillovers, patents, regional economic growth, semiparametric estimators JEL-Classification: C14, O47, R11, R12
  • Grönqvist, Charlotta (2009)
    Suomen Pankki. E 41
    Tiivistelmä 4 Acknowledgements 5 Introduction 9 Essay 1: The private value of patents by patent characteristics: evidence from Finland 43 Essay 2: Why does the private patent value differ by assignee? 61 Essay 3: Do the assignee's characteristics affect the private value of patents? 97 Essay 4: The optimal patent length is shorter than 18 years 131
  • Schmöller, Michaela; Spitzer, Martin (2019)
    Bank of Finland Research Discussion Papers 21/2019
    Published in European Central Bank Working Paper Series 2401/2020 https://www.ecb.europa.eu/pub/research/working-papers/html/index.en.html
    This paper analyses the procyclicality of euro area total factor productivity and its role in business cycle amplification by estimating a medium-scale DSGE model with endogenous productivity mechanism on euro area data. Total factor productivity evolves endogenously as a consequence of costly investment in R&D and adoption of new technologies. We find that the endogeneity of TFP induces a high degree of persistence in the euro area business cycle via a feedback mechanism between overall economic conditions and investment in productivity-enhancing technologies. As to the sources of the euro area productivity slowdown, we conclude that a decrease in the efficiency of R&D investment is among the key factors generating the pre-crisis productivity slowdown, while starting from the Great Recession an increase in liquidity demand is identified as the most important driving force. The endogenous technology mechanism further exerts a dampening effect on the inflation response over the business cycle which helps rationalizing both the negligible fall in inflation during the Great Recession and the sluggish increase of inflation in the subsequent recovery.
  • Takalo, Tuomas; Tanayama, Tanja; Toivanen, Otto (2008)
    Bank of Finland Research Discussion Papers 7/2008
    Published in Review of Economics and Statistics, March 2013, Vol. 95, No. 1, Pages 255-272
    This paper studies the welfare effects of R&D subsidies. We develop a model of continuous optimal treatment with outcome heterogeneity where the treatment outcome depends on applicant investment. The model takes into account heterogeneous application costs and identifies the treatment effect on the public agency running the programme. Under the assumption of a welfare-maximizing agency, we identify general equilibrium treatment effects. Applyiing our model to R&D project-level data we find substantial treatment effect heterogeneity. Agency-specific treatment effects are smaller than private treatment effects. We find that the rate of return on subsidies for the agency is 30-50%. Keywords: applications, effort, investment, R&D, selection, subsidies, treatment programme, treatment effects, welfare JEL classification numbers: 038, 031, L53, C31
  • Pekkala Kerr, Sari; Kerr, William R. (2017)
    Bank of Finland Research Discussion Papers 3/2017
    We study the prevalence and traits of global collaborative patents for U.S. public companies, where the inventor team is located both within and outside of the United States. Collaborative patents are frequently observed when a corporation is entering into a new foreign region for innovative work, especially in settings where intellectual property protection is weak. We also connect collaborative patents to the ethnic composition of the firm s U.S. inventors and cross-border mobility of inventors within the firm. The inventor team composition has important consequences for how the new knowledge is exploited within and outside of the firm.
  • Akcigit, Ufuk; Kerr, William R. (2013)
    Bank of Finland Research Discussion Papers 28/2013
    We study how exploration versus exploitation innovations impact economic growth through a tractable endogenous growth framework that contains multiple innovation sizes, multi-product firms, and entry/exit. Firms invest in exploration R&D to acquire new product lines and exploitation R&D to improve their existing product lines. We model and show empirically that exploration R&D does not scale as strongly with firm size as exploitation R&D. The resulting framework conforms to many regularities regarding innovation and growth differences across the firm size distribution. We also incorporate patent citations into our theoretical framework. The framework generates a simple test using patent citations that indicates that entrants and small firms have relatively higher growth spillover effects. JEL Classification: O31, O33, O41, L16 Keywords: Endogenous Growth, Innovation, Exploration, Exploitation, Research and Development, Patents, Citations, Scientists, Entrepreneurs
  • Acemoglu, Daron; Akcigit, Ufuk; Bloom, Nicholas; Kerr, William (2013)
    Bank of Finland Research Discussion Papers 22/2013
    We build a model of firm-level innovation, productivity growth and reallocation featuring endogenous entry and exit. A key feature is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using detailed US Census micro data on firm-level output, R&D and patenting. The model provides a good t to the dynamics of firm entry and exit, output and R&D, and its implied elasticities are in the ballpark of a range of micro estimates. We find industrial policy subsidizing either the R&D or the continued operation of incumbents reduces growth and welfare. For example, a subsidy to incumbent R&D equivalent to 5% of GDP reduces welfare by about 1.5% because it deters entry of new high-type rms. On the contrary, substantial improvements (of the order of 5% improvement in welfare) are possible if the continued operation of incumbents is taxed while at the same time R&D by incumbents and new entrants is subsidized. This is because of a strong selection effect: R&D resources (skilled labor) are inefficiently used by low-type incumbent firms. Subsidies to incumbents encourage the survival and expansion of these firms at the expense of potential high-type entrants. We show that optimal policy encourages the exit of low-type firms and supports R&D by high-type incumbents and entry. JEL No. E2, L1, O31, O32 and O33 Keywords: entry, growth, industrial policy, innovation, R&D, reallocation, selection.
  • Acemoglu, Daron; Akcigit, Ufuk; Alp, Harun; Bloom, Nicholas; Kerr, William (2018)
    American Economic Review 11 ; November
    We build a model of firm-level innovation, productivity growth, and reallocation featuring endogenous entry and exit. A new and central economic force is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using US Census microdata on firm-level output, R&D, and patenting. The model provides a good fit to the dynamics of firm entry and exit, output, and R&D. Taxing the continued operation of incumbents can lead to sizable gains (of the order of 1.4 percent improvement in welfare) by encouraging exit of less productive firms and freeing up skilled labor to be used for R&D by high-type incumbents. Subsidies to the R&D of incumbents do not achieve this objective because they encourage the survival and expansion of low-type firms.
  • Takalo, Tuomas; Tanayama, Tanja; Toivanen, Otto (2013)
    Bank of Finland Research Discussion Papers 2/2013
    Published in International Journal of Industrial Organization, Volume 31, Issue 5, September 2013, Pages 634–642
    We extend the theoretical basis of the empirical literature on the effects of R&D subsidies by providing an estimable model of strategic interaction among subsidy applicants, and public and private sector R&D financiers. Our model incorporates fixed R&D costs and a cost of external finance. We derive the optimal support rule. At the intensive (extensive) margin the costs of external funding reduce (increase) the optimal subsidy rate. We also establish necessary and sufficient conditions for the existence of additionality. It turns out that additionality at the intensive margin is less likely with large spillovers. Our results suggest that the relationship between additionality and welfare may not be straightforward. Keywords: R&D, entrepreneurial finance, R&D subsidies, innovation policy JEL classification numbers: O38, O31, L32, H25, G28
  • Tkatshenko, Aleksei (1993)
    IDÄNTALOUKSIEN KATSAUKSIA. REVIEW OF ECONOMIES IN TRANSITION 6/1993
  • Takalo, Tuomas (2013)
    Bank of Finland Research Discussion Papers 1/2013
    Published in Journal of Reviews on Global Economics, Volume 1, 2012, Pages 157-167
    Economic interest in innovation policy largely arises from the fundamental importance of innovation to social welfare and from inefficiencies in innovation in a competitive market environment. As a result, a wide variety of public innovation policies are used in practice. This study reviews the economic justifications for public innovation policies and compares the existing policy tools, paying particular attention to the Finnish innovation policy environment. Key Words: Innovation policies, innovation, R&D, incentives, market failures JEL Classification: O38, O34, O31, G28, H25
  • Zhu, Pingfang; Li, Lei; Lundin, Nannan (2005)
    BOFIT Discussion Papers 5/2005
    This paper examines the impact of R&D expenditure and technology import on the level and the growth of productivity, as well as on the general economic performance in manufacturing firms with various ownership structures in Shanghai, China.The empirical analyses are based on the firm-level information of a sample of manufacturing firms for the period 1998-2003. We find clear-cut evidence indicating that firms with foreign participation have a productivity advantage over their domestic counterparts.The expenditures on technology import not only have a direct and positive effect on productivity, but also indirectly enhance the absorptive capacity of firms to facilitate in-house R&D activities.This is particularly true for firms with foreign participation, or for firms in sectors with relatively high technical standards.Furthermore, R&D expenditure and technology import may also have positive effects on profitability and export performance, depending on the ownership structure of the firm and the technical standard in the sector. JEL classification: L52, O32, O38 Keywords: Science and Technology policy, Science and Technology investment, R&D
  • Kauko, Karlo (2000)
    Suomen Pankki. E 18
    The innovation activities of companies has long been a topic of interest in economics. Game theory models of oligopoly have since the start of the 1980s played a central role in the economics of innovation.In this study three game theory duopoly models are presented and each is used to analyse the firm's R&D activities. The first model is used to examine the variables that affect the incentives of banks providing payment services to develop an interbank payment system. A customer of a large bank may be in an advantageous situation in that most of his payments will be effected in that bank's internal payment system, which is more reliable and otherwise superior to the interbank system. A key result derived from the model is that provision of payment services free of charge to customers often results in a distortion of banks' incentives to develop the system. A smaller bank will overinvest in the system in order to improve its relative competitive position. Because system improvement would only weaken the large bank's superior position, it will not have a strong incentive to improve the system.Since only one of the model's two banks is investing in the quality of the system, the investments will generally not be cost-effective. If fees are charged for payment services, the distortions in incentives are less serious, even though it is often the case that both banks overinvest in the system. When model results are compared to historical situations regarding payment systems, a number of consistencies are found. The second model deals with the possibilities of a national government to influence domestic companies' investments in product development via patent laws that discriminate against foreign companies. If two countries have discriminatory patent laws in order to promote domestic companies' investments in product development, the results may well turn out to be offsetting. If just one of the two countries discriminates against foreign patent applicants, this may result in either more or less R&D effort by domestic companies, depending on the situation. The third model is used to study patenting decisions by a company that has made an innovation. A company can monopolize its innovation by either patenting it or keeping it secret. Patenting is the only viable option if a competitor independently comes up with the same innovation. A patent application, by contrast, is a public document, the contents of which are useful to others who would like to develop substitute products. Patenting is thus not advantageous unless the competitor is likely to come up with the same innovation independently. This means that a company will be the more inclined to patent an innovation, the more its rival invests in R&D. A risk-averse company is more inclined to patent than a risk-neutral one. This model is generally supported by empirical findings. Key words: innovation, oligopoly, banking, patenting
  • Takalo, Tuomas; Tanayama, Tanja; Toivanen, Otto (2017)
    Bank of Finland Research Discussion Papers 30/2017
    We conduct a welfare analysis of R&D subsidies and tax credits using a model of innovation policy in corporating externalities, limited R&D participation and finanial market imperfetions. We estimate the model using R&D projet level data from Finland. The optimal R&D tax credit rate (0.24) is lower than the average R&D subsidy rate (0.36). The intensive, not the extensive margin of R&D is important for poliy. Tax credits and subsidies inrease R&D investments and spillovers compared to laissez-faire but to levels below the first best. R&D support policies don't improve welfare.
  • Hasan, Iftekhar; O'Brien, Jonathan; Ye, Pengfei (2013)
    Bank of Finland Research Discussion Papers 23/2013
    This study investigates whether institutional bond blockholders (i.e., bond funds that hold more than 5% of a firm's outstanding bonds) impede firm innovative activities, and if they do, through which channels. We find that long-term bond blockholders do not discourage firms from conducting innovative activities. Short-term bond blockholders, however, significantly reduce both firm investments in R&D and the innovative quality of these investments. Furthermore, their negative impact is stronger than the negative impact of short-term stockholders. Our results cannot be fully explained by short-term bondholders' a priori investment preferences and are robust to possible endogeneity concerns. Overall, they suggest that the option of the 'Wall Street walk' allows bondholders to exert considerable influence on firms' risk-taking decisions. JEL Classification: G23, G31 Keywords: Bondholder; Innovation; Investment Horizon; Wall Street Walk
  • Kilponen, Juha; Santavirta, Torsten (2007)
    Bank of Finland Research Discussion Papers 10/2007
    We show theoretically that a proportional R&D subsidy accelerates innovation activity at all degrees of competition in the modern Schumpeterian growth model, but less so at high degrees of competition. We then use company-level data on patenting activity, product market competition and R&D subsidies of Finnish firms during 1990 2001 to test the theoretical prediction. The empirical findings can be summarized as follows. Firstly, we find relatively strong evidence in favour of the inverted U-shape between competition and innovation. Secondly, we find some evidence that a direct R&D subsidy increases innovative activity at all but very high degrees of competition. This can be interpreted so mean that the R&D subsidy reinforces the Schumpeterian effect due to the negative cross-effect of R&D subsidy and competition. This is evident from the finding that an increase in the R&D subsidy steepens the inverted U relationship when competition is fierce. Keywords: competition, innovation, R&D subsidies, patents
  • Kilponen, Juha; Virén, Matti (2008)
    Bank of Finland Research Discussion Papers 13/2008
    Published in Empirica, Volume 37, Number 3, July 2010, pp. 311-328
    We estimate a standard production function with a new cross-country data set on business sector production, wages and R&D investment for a selection of 14 OECD countries including the United States. The data sample covers the years 1960-2004. The data suggest that growth differences can largely be explained by capital deepening and an ability to produce new technology in the form of new patents. The importance of patents is magnified by the openness of the economy. We find some evidence of increasing elasticity of substitution over time, all though the results are sensitive to assumptions on the nature of technological progress. Keywords: growth, R&D, production function, patents JEL classification numbers: O40, E10, O43