MERIT1 Does collaboration improve innovation outputs? Anthony Arundel & Catalina Bordoy MERIT, University of Maastricht Forthcoming in Caloghirou, Y., Constantelou, A. and Vonortas, N. Knowledge Flows in European Industry: Mechanisms and Policy Implications, Routledge

MERIT2 1. Collaboration & innovation theory Cooperation plays a central role in innovation (Georghiou, 1998) Technological collaboration as the ‘dominant form’ of producing knowledge (Antonelli, 1999) Collaboration improves the transfer of tacit knowledge (Senker, 1995)

MERIT3 2. Empirical evidence Patent citations, data on research partnerships (CATI), and external R&D funding show that collaboration is widespread –Problems: is collaboration growing, as predicted? –Is it only prevalent in specific sectors and in R&D intensive firms?

MERIT4 2.1 Empirical evidence 1997 CIS: Only 28% of innovative manufacturing firms developed one or more product innovations between through collaboration. Public-private co-publications have been declining between

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7 3. Collaboration outcomes If collaboration is beneficial, then: 1.Should lead to more innovations or more economically valuable innovations.  Higher profits  Higher share of sales from innovative products But, firms in sectors with high ‘competitive push’ may collaborate simply to stay in business.

MERIT8 3.1 Empirical evidence for outcomes 1.Quality of the firm’s innovations (proxied by the ‘innovativeness’ of the firm) -All research finds a positive correlation between collaboration and more innovative firms -BUT: these studies can’t directly link collaboration to the quality of the firms innovations

MERIT9 3.1 Empirical evidence for outcomes 2. Collaboration & the innovation sales share –Ambiguous results: both positive and negative –Best evidence in favour: Mohnen & Thierren (2003) Use 1999 Canadian Innovation Survey, find a positive relationship between any collaboration and the innovation sales share (control for firm size, sector, R&D status, government subsidies, use of public science).

MERIT10 Summary of evidence so far Collaboration (and other external knowledge sourcing) positively correlated with innovativeness of firms. Majority of firms give greater importance to their in-house innovative activities. Public-private sector collaboration may have leveled off. Survey research rarely permits a direct link between collaboration and the innovation sales share.

MERIT11 4. The advantage of the KNOW survey Includes the question: What percentage of your firm’s new or improved products (processes) were introduced using any of the following methods? 1. Buying in ________% 2. In-house development________% 3. Collaboration ________% 100%

MERIT12 4. Two research questions 1.What factors influence the use of collaboration as an innovation method? 2.Does collaboration influence the innovation sales share? In the last year, percentage of sales from products that were significantly improved or new to your firm in the last three years

MERIT13 5. KNOW survey methodology Spring 2000 in the UK, Denmark, the Netherlands, France, Germany, Italy & Greece Four sectors relevant here: Food & beverages, Chemicals (excl. pharmaceuticals), Telecom equipment, Computer services. Random sample of firms with and employees Crude response rate of 25.3%, 507 useable responses – over 70% adjusted in some countries

MERIT14 6. Characteristics of respondent firms Small firms Mid-size firms Number349 (69%) 158 (31%) Perform R&D in last year94% Research project with a PRO in last 3 yrs 47%61% Employees with an academic degree 28%20%

MERIT Distribution of innovation methods

MERIT Innovation sales share No significant difference by country: range from 32.2% in Netherlands to 40.4% in Denmark Significant differences by sector: Food: 21.9% Chemicals:29.9% Telecom equip:47.9% Computer services:51.0%

MERIT17 7. Econometrics 1.What factors influence any use of collaboration? –Logit model where dependent variable = 1 when collaboration used, zero otherwise 2.Does collaboration influence the innovation sales share? Non-linear logit model where dependent variable can range from zero to 1 (‘S’shaped)

MERIT Basic regression form y i = exp (β’x i + ε i ) 1 + exp (β’x i + ε i )

MERIT Independent variables Sector dummies & country dummies Firm size (log of employees) Innovative capability –Performs R&D on a continuous basis –R&D employment share of all employees Outward looking approach: regularly reads scientific or business journals to find ideas for innovation. Patents or lead-time advantages as the firms most important appropriation strategy

MERIT Independent variables Potential collaboration –Independent versus part of a group –Any expenditure on external R&D –R&D projects with public research organisations –Received of a subsidy for innovation Model for innovation sales share includes the collaboration product share

MERIT Four versions of each model 1.Full set of independent variables (358) 2.Reduced set to maximize firms (428) 3.Independent firms only (195) 4.Group firms only (161) Only give significant results for 1 & 2.

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MERIT24 8. Conclusions Most innovations developed in-house, but collaboration is more important for process than for product innovation. Buying-in almost as prevalent as collaboration, which shows that these two methods need to be carefully identified in surveys.

MERIT Conclusions Probability of collaborating: –Strong country effects –Increases with external opportunities to collaborate

MERIT Conclusions Innovation sales share –Collaboration has no effect, in contrast to expectations –External knowledge sourcing is important, but via journals (open science?) –Strong sector effects, weak country effects –No effect from patents, but lead time advantages strongly positive

MERIT Study limitations 1.Time constraint: sales share based on innovations developed in previous 3 years 2.Only surveyed small and mid-size firms 3.Only surveyed four sectors 4.No data on quality of the innovations 5.No data on cost of in-house development versus collaboration 6.No data on other outputs, such as profits