Adegbesan, J. Adetunji and Ricart, J.E., "What Do We Really Know about When Technological Innovation Improves Performance (and When it Does Not)?" (January 2007). IESE Business School Working Paper No. 668 Available at: http://www.iese.edu/research/pdfs/DI-0668-E.pdf

Abstract:
Most approaches to innovation bear the implicit assumption that increased innovativeness leads to improved organizational performance. Thus, more attention has been focused on innovativeness than on innovation performance; on novelty than on value. However, recent empirical evidence calls into question the unqualified optimism surrounding innovation, and leads us to ask what we really know about when technological innovation improves performance. In this paper, we seek to make a contribution by presenting the results of an exhaustive review of extant knowledge on the outcomes of technological innovation. Our synthesis of the literature allows us to relate in one parsimonious model the drivers and moderators of the antecedents, technical outcomes, and performance outcomes of technological innovation and technological change. We also make sense of the proliferation of terms, and consequent terminological ambiguity, which characterizes a lot of work on technological innovation. Finally, in the light of the model presented and recent developments in work on firm capabilities, we indicate possible avenues for further development of this critical area of research.

Brouwer, Erik, Poot, Tom and van Montfort, Kees, "The Innovation Threshold" (February 2007). TILEC Discussion Paper No. 2007-008 Available at: http://arno.uvt.nl/show.cgi?fid=59505

Abstract:
In this paper, we propose an economic model to analyse the sales out of new products. This model accounts for the fact that even among firms for which R&D is a permanent activity, a fraction of firms does not have sales of innovative products during a two-year observation period. We propose a model in which the fixed costs of introduction is a major concern in the decision making process. In a structural model we estimate the fixed costs of the market introduction of new products and explain subsequent sales of innovative products. We examine a indicator of innovative output, i.e. sales of products 'new to the firm'. We estimate fixed costs thresholds using data from the Dutch part of the Community Innovation Survey (CIS) from 1998. R&D intensity, competition and market structure have a positive impact on sales of new products. The most important factors to decrease the fixed costs threshold of introduction are product related R&D investments, R&D subsidies and knowledge spillovers.

Carrier, Michael A., "Two Puzzles Resolved: Of the Schumpeter - Arrow Stalemate and Pharmaceutical Innovation Markets" . Iowa Law Review, Vol. 93, 2008 Available at: http://www.uiowa.edu/~c091642/pdf/Carrier%20Two%20Puzzles%20Resolved.pdf

Abstract: One of the most heated discussions in economics in recent years has concerned the relationship between market structure and innovation. After a half-century of debate and innumerable studies, the consensus is that there is no clear answer to the question. On a concrete level, the uncertainty underlies the most fundamental critique of “innovation markets,” or markets for research and development (R&D). After all, if concentration leads to innovation, then antitrust challenges are not appropriate even for mergers that lead to monopoly.

In this Article, I closely parse the economic studies to arrive at a more nuanced answer that highlights factors determining the ideal market structure. I show that both competition and size play a role in pharmaceutical innovation. In addition, analysis of the pharmaceutical industry rebuts the most cogent critiques of innovation markets.

The Article also includes the first empirical analysis of pharmaceutical innovation market cases. This is particularly instructive because nearly every challenge to such mergers has arisen in the pharmaceutical industry. For each of the nine cases, I examine the pre-merger treatment for particular conditions, the number of participants in the market and stage of FDA review, and the current market picture. I conclude that approximately half of the agency challenges were justified.

Finally, I propose a new test to apply to innovation markets. The test examines (1) concentration among firms reasonably likely to reach the market, (2) anticompetitive theories of innovation suppression, and rebuttals based on (3) rivals' entry, (4) efficiencies, and (5) a “Schumpeterian” need for size. The test thus replaces the current ad hoc approach with a comprehensive framework based on the Merger Guidelines. It also breaks new ground in considering not just the number of firms engaged in R&D but also the stage (both preclinical and clinical) of FDA review.

The debates concerning innovation markets and the relationship between market structure and innovation present some of the most challenging issues in economics and antitrust. My analysis of the economic studies and pharmaceutical innovation market mergers promises to solve two crucial, interrelated, puzzles.

Forman, Chris, Goldfarb, Avi and Greenstein, Shane M., "Understanding the Inputs into Innovation: Do Cities Substitute for Internal Firm Resources?" (January 2007). Available at: http://www.colorado.edu/Economics/seminars/greenstein.pdf

Abstract: We examine whether there is a tradeoff between employing internal (firm) resources and purchased external (local) resources in process innovation. We draw on a rich data set of Internet investments by 86,879 U.S. establishments to examine decisions to invest in advanced Internet technology. We show that the marginal contribution of internal resources is greater outside of a major urban area than inside one. Agglomeration is less important for firms with highly capable IT workers. When firms invest in innovative processes they act as if resources available in cities are partial substitutes for both establishment-level and firm-level internal resources.

Litan, Robert E., Mitchell, Lesa and Reedy, E.J., "Commercializing University Innovations: Alternative Approaches" (May 16, 2007). Available at SSRN: http://ssrn.com/abstract=976005

Abstract: For much of the past century, universities and university-based researchers have played a critical role in driving technological progress, from the fortification of Vitamin D in the 1920s to the creation of Google in the 1990s. In the process, universities have been a strong catalyst for U.S. economic growth. But a perennial challenge related to university-driven innovation has been ensuring that university structures help – not hinder – innovation and the commercialization of innovations. Multiple pathways for university transfer exist and can be codified to provide broader access to innovation, allow a greater volume of deal flow, support standardization, and decrease the redundancy of innovation and the cycle time for commercialization. The proposed changes focus on creating incentives that will maximize social benefit from the existing investments being made in R&D and commercialization on university campuses.

Messica, Avi and Agmon, Tamir, "The Prerequisites for Technology Innovation" (March 7, 2007). Available at: http://static.scribd.com/docs/jlotl5m370nck.pdf

Abstract: This report discusses the prerequisites for growth through the formation or the strengthening of innovative high technology sector, especially in small to medium size countries. It is based on analysis of the Israeli Hi-Tech experience over the past fifteen years and by interviews with local industry professionals and entrepreneurs as well as variety of data sources. Emphasis was put on strategic aspects and system level considerations for public policy makers. We find that the prerequisites for viable and flourishing high technology sector comprise of the following major components: creating or leveraging on a local comparative advantage at the firm or sector level, the availability of professional high-risk capital, and reduced tangible and intangible international trade costs by forming a suitable habitat, infrastructure-wise. We recommend focusing first on the investors rather than on the entrepreneurs. We argue that the Israeli experience is valid for countries that are interested in setting up or strengthening their innovative high technology sector. The findings and conclusions are in some contradiction to the policies that are currently practiced by some of the governments and regional organizations around the world.

Yong, Grace and Ho, Kong Weng, "Innovation, Imitation and Entrepreneurship" . Singapore Economic Review, Forthcoming Available at: http://www.hss.ntu.edu.sg/egc/wp/2006/2006-07.pdf

Abstract: This paper analyzes the gradual shift in the technological paradigm of an economy as it approaches the world technology frontier. The model developed in this paper consists of firms which employ skilled workers as an important input in technological advancement, but the novel feature here is the entrepreneur, who is the brain of technological progress. The entrepreneur has to decide to undertake either imitative or innovative activities, of which decision both affects and is affected by the country's distance to frontier. Specifically, the entrepreneur needs to have a minimum ability threshold level in order to carry out innovation. This endogenous threshold level falls as the economy moves closer to the technological frontier, enabling more entrepreneurs to be engaged in an innovation-based strategy, and consequently, moving the economy from a technological structure that is based on imitation of foreign technologies to one where domestic innovation dominates. The transitional dynamics of the model shows that there exists a steady state distance from the world frontier that countries will eventually converge to. We also find that it is possible for countries under certain conditions, to be trapped in a regime carrying out only imitation of world technologies.