Innovation, Catch-up and Sustainable Development

Scientific knowledge is crucial to opening up new possibilities for major technological advances. However, the role of science has not been regarded as important in the innovations leading to modern steelmaking. In addition, how did science begin to play an important role? Mokyr focuses on the “Industrial Enlightenment,” which has its origins in the Baconian program of the seventeenth century. This paper examines the process through which modern steelmaking emerged and clarifies the role of science and “Industrial Enlightenment.” When much time elapses between scientific and technological advances, the role of science is often not regarded as important and sensational innovations such as the Bessemer process are emphasized. However, this is not a proper evaluation. The role of “Industrial Enlightenment” on the supply side must also be recognized as significant in the emergence of modern steelmaking technology.

The relatedness between knowledge components within the science domain is widely discussed in the economic, innovation, and management literature. The same is true for the technology domain. Yet, the relatedness between knowledge components across these knowledge domains has received considerably less attention. This chapter aims to introduce the concept of knowledge relatedness between science and technology (S&T), which have been disentangled as two distinct corpora. We approach S&T relatedness from two perspectives: content relatedness (with four indicators: similarity, complementarity, commonality, difference) and temporal relatedness. We then test our ideas with novel empirical material from the field of DNA nanoscience and DNA nanotechnology. We find that the relatedness between S&T scores relatively low, which may explain the relative lack of commercial activity in this field. In light of their indirect complementarity, we recommend that funding “bridging areas” could lead to simultaneous progress in S&T.

Responding to research questioning the significance of external factors such as industry and country in explaining the patterns of innovation-related activities, we examine the effects of factors both internal and external to the firm. Analyzing CIS data, we find that external factors are more helpful in explaining innovation strategies than internal factors. Our econometric model can quite adequately predict innovation strategies, implying that firm-specific factors might not dominate other factors as strongly as suggested by some prior studies.

New solutions in artificial intelligence and machine learning require researchers to study, in greater depth, the nature, and dynamics of emerging industries like biotechnology or pharmaceuticals. With his pioneering work, Luigi Orsenigo has demonstrated, in great detail, how new technologies create technological opportunities, change appropriability conditions, and cumulativeness in these emerging industries. Rooted in the evolutionary economics tradition, this approach is better suited in explaining the patterns of innovation, technological change, and the growth in very dynamic industries. In this context, our article reviews the evidence of Luigi Orsenigo’s contribution to the economics of innovation, to the tradition of history-friendly models, and to the discussion on the sectoral system of innovation. It concludes by pointing at some unresolved questions in these traditions and new fruitful alleys for future researchers.

This study examines the impacts of national innovation systems (NIS) and economic complexity index (ECI) on economic growth. A composite index of NIS is developed by using US patent data as a weighted sum of three, four or five variables among the following: concentration of assignees, localization, originality, diversification, and cycle time of technologies. Growth regressions confirm the significant and robust impacts of NIS3a, NIS4a, and NIS5 indices on economic growth. The common feature of these NIS indices is that they have the same component variables as their ingredients, and these are originality, cycle time, and technological diversification. NIS3a is the most parsimonious and powerful among all indices. The robustness of ECI is questionable because ECI loses significance after adding government expenditure and terms of trade variables into the regression model. Results confirm the overall importance of NIS in economic growth and justify policy efforts to improve NIS. This research is one of the first to generate a robust NIS index by using patent data only without many data requirements and free from the problem of cross-country comparability of underlying variables.

Regulation has been identified as an important determinant of the innovation activities of companies, industries, and entire economies. As such, this paper investigates the potential effects of regulation on the innovative performance of firms in China. We identify an inverted U-shaped relationship between regulation and product innovation performance. That is, in China, regulation plays a positive role in promoting innovation: the more actively firms deal with regulations within certain threshold levels, the better their product innovation performance is. However, after reaching the threshold, the relationship reverses. Further, actively coping with regulations facilitates firms’ access to financial resources, which in turn promotes product innovation. Meanwhile, output distortion significantly impedes product innovation performance. However, regulation does not show a measurable impact on output distortion.

The economic literature reveals that the relationship between patents and Foreign Direct Investments (FDI) depends on industries and countries’ features. Our research considers the pharmaceutical industry in China. This choice stems from a contradictory observation: China is known for its important imitation capacities, but at the same time, it is becoming one of the most attractive destinations to technology intensive FDI, for instance, pharmaceutical FDI. To explore whether patent protection plays a role in attracting pharmaceutical FDI in China we conduct a documentary analysis over the 1980–2015 period. Data is compiled from specialized press and international and national economic institutions (such as the World Trade Organization-WTO and the Chinese Intellectual Property Office—SIPO). Using these statistics, we construct a composite index measuring the pharmaceutical patent protection in China (PPP index) to analyze its correlation with inward pharmaceutical FDI. For a better reliability of the results, the study considers only the forms of FDI that are—according to economic literature—the most sensitive to patent protection, i.e., drugs producing and/or research and development (R&D) FDI. Our analysis suggests that enhancing drug patent protection could have had a positive impact on inward pharmaceutical FDI in China, especially R&D subsidiaries. However, this impact is conditioned by the existence of other advantages for FDI location such as the development of technology parks and the knowledge-based human capital policy. Hence, drug patent protection would be a determinant for attracting pharmaceutical FDI provided that it is a part of a strong innovation system and active innovation policies.

In the catch-up literature, more attention has been paid to the rate rather than the direction of technological change. This paper presents and implements a novel methodology to identify and measure the effects of the direction of technological change in terms of technological congruence and its effects on total factor productivity (TFP). Evolution of the match between technology direction and the idiosyncrasies of its endowments and factor markets is a key factor in country growth. We elaborate its implications for the theory of induced technological change, and apply it to an empirical analysis of Italy’s economic history from 1861 to 2010. The results confirm the important role of the introduction of biased technological change in the assessment of the levels of technological congruence and TFP, and for supporting the long-run convergence of an early-late-comer. N13 N14 O33

Taking Southeast Asian emerging economies as an empirical case, this study explores how the reverse salients that have emerged during the transitional process may be overcome efficiently and effectively. In particular, three action-oriented case studies derived from a heuristic research approach are presented to show how Taiwan is empowering its universities and public research institutes to act as innovation niche seeders for Southeast Asian economies, thereby compensating for the weakness of their socio-technical systems (i.e. the reverse salients). Presently, the government-led policies of Southeast Asian countries are largely oriented towards incentivizing foreign multinational corporations to lead the development of domestic production networks. This strategy allows these countries to acquire the necessary resources for an economic transition in the era of digitalization, although at the expense of developing their own innovation niches. This study presents the urgency of a need for a new approach, and a new avenue for emerging countries to develop an effective and efficient governance model. The proposed model would allow external institutional mechanisms, such as universities and public research institutes, to act as critical intermediaries providing an alternative solution for the dilemmas faced by small and medium-sized enterprise-centric emerging countries. Policy implications for building sustainable socio-technical regimes in Southeast Asia’s transitional emerging countries are also discussed.

The diffusion of innovative activities has been very fast in China since the mid-1990s. The literature nonetheless suggests that internationally-relevant innovation may have delayed gaining embeddedness in some places, depending on the strategy it was “seeded”. This paper posits that different degrees of embeddedness are linked with different local patterns of innovation and investigates these linkages across Chinese prefectural cities. Four research hypotheses are stated, one for each indicator identified in the literature to investigate technological catching up. The empirical exercise is set as an ordered logistic regression of data rearranged from the OECD Patent Databases for the period 1981–2009. The results show that embeddedness is positively linked with innovation that increasingly relies on its own local past and negatively linked with innovative activities more concentrated across patent owners. The evidence of a nexus with originality and technology cycle time is less clear and requires appropriate investigation in future research. At the state of the art, the main hint is that embeddedness is gained where the knowledge paths increase in complexity.

The main purpose of this study is to examine the impact of patent rights and utility model on both economic growth and firm performance. The research hypothesis is tested using the Generalized Method of Moments (GMM) technique. Empirical findings imply that the impact of intellectual property rights protection on economic growth depends upon the level of development. While patent protection positively effect on economic growth for developed countries, utility model protection positively effect on economic growth for developing countries. Using Turkish firm-level data as a case study, analysis results show that patent protection and utility model do not contribute to firm performance in Turkey.

The greening of business is now widely recognized as firms take the lead from reluctant governments in making sustainable operations profitable. The greening of business may be contrasted with the “business of greening” – in the sense that greening may be associated with the emergence of smart green platforms that propagate and expand as they creatively destroy industries that are rooted in a fossil fuelled past. Such considerations bring into focus the evolutionary economic dynamics of greening, involving business concepts like emergence of platforms and networks, the capture of increasing returns, the role of manufacturing, mass production and learning curves, which help to account for green innovation and green growth as drivers of the global green shift. This is a perspective that is distinguished from “zero growth” and “natural capitalism” approaches to greening; and it is one that is as applicable as much to China and emerging industrial powers as to advanced industrial countries. Fundamentally, greening is characterized as the emergence of green business platforms which create new possibilities for green growth as they propagate, driven by supply-side dynamics as much as by demand-side dynamics involving changed consumer behavior, as in the rise of the sharing economy. Fundamentally it is cost reduction (via learning curves) and capture of increasing returns that open up opportunities for new business strategies that creatively destroy the old business models associated with fossil fuels and resource wastage.

About 20 years ago Klepper (1997) has shown that the life cycle theory, initially introduced for products, can also be applied to the development of industries. The industries that were examined to establish this theory were marked by relatively stable market conditions that are typically driven by innovation. However, research on the transition of the energy system has shown that markets for new energy technologies are driven by political support. As yet an analysis of the industry life cycle of an industry which has developed under politically driven market conditions has not been conducted. Therefore this paper examines the development of the global wind energy industry and the relevance of national markets in a globalized world. The study is founded on a large empirical database. A comparative analysis of various international and national developments was conducted using descriptive statistical methods. The findings show that the global development derives from the sum of individual national developments. It reveals a strong influence of national markets on the development of their respective wind energy industry. Therefore these findings provide relevant insides for the political debate on market support mechanisms in wind energy.

Since the 1990s, agri-biotech multinationals have introduced a radical innovation in the form of seeds derived from genetically modified plant varieties or GMVs. However, on the basis of the ‘precautionary principle’ that advocates ensuring a higher environmental protection through preventative decision-taking, many countries have banned the cultivation of GMVs within their territories. Thus, the objective of the present paper is to attempt to explore the rationale for application of the precautionary principle. This is done through development of an evolutionary model of farmers’ technology choice incorporating intrinsic features of agriculture such as the technological obsolescence of seed varieties, impact of environmental degradation engendered by new seed technology adoption and farmers’ compliance choice vis-à-vis sustainability guidelines. Further, instead of a unique representative farmer, two types of farmers are considered. The first type is driven by short term profit maximization, while the second type aims to be sustainable, by maximizing profit over the life time of the technology. Integrating the above elements and considering two possible rules for application of the precautionary principle, the paper explores the conditions under which the precautionary principle can be implemented. It demonstrates that, even under complete and perfect information the need to exercise such caution depends principally on four factors: the economic gains from GMVs, the possibilities for sustaining the production of the conventional variety in the post-GMV period via compliance, the distribution of farmers over types and the compliance-contamination burden.