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Archana Pillai ICFAI University, Hyderabad, INDIA

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Presentation on theme: "Archana Pillai ICFAI University, Hyderabad, INDIA"— Presentation transcript:

1 Innovative Capacity and Knowledge spillovers - A cross country analysis
Archana Pillai ICFAI University, Hyderabad, INDIA (Whitman School of Management, Syracuse University, New York) May 10, 2007 Globelics Academy, Lisbon, Portugal

2 National Innovation Systems
Focuses on the description of organizations, patterns of activity (contributing to innovative behavior), identifies institutions and actors which interact with one another to carry out innovative activity (Edquist, 1997) Studies in NIS in the cross country frame are: Descriptive studies (Liu and White, 2001 for China) Performance-comparison studies (Porter and Stern, 2002 for GCR) Low and mid-income country studies (Viotti, 2002 – Brazil and South Korea) December 11, 2019

3 Relevance of the Study World Investment Report 2005
FDI in R&D investments in emerging economies India and China are leading nations Fishing out hypothesis Increased globalization Greater access to newer influences Competitive pressures Increased movement of labor December 11, 2019

4 Roots in Economic Theory
Endogenous technological change (Romer, 1990) Integration into world markets will increase growth via knowledge spillovers Grossman and Helpman, 1994 Endogenous innovation mandates monopoly profits and returns to be fully appropriable (but spillovers exist) Knowledge is cumulative with each idea building on the last December 11, 2019

5 Cross-country performance studies
Porter, Stern and Furman (2002) – Research Policy for OECD Coe and Helpman (1995) – European Economic Review – ‘International R&D spillovers’ Coe, Helpman and Hoffmaister (1997) – The Economic Journal - ‘North-South R&D spillovers’ December 11, 2019

6 Innovative Capacity Country’s potential to produce a stream of commercially relevant innovations Measured using Patents (Griliches, 1990) Patent Statistics as Economic Indicators Other measures No. of scientific and technical articles published High-tech exports Royalty received Total Factor Productivity December 11, 2019

7 Knowledge Spillovers Externalities from R&D which are generated in the research process and which is publicly accessible (Cohen and Levinthal, 1989) Knowledge spills over the boundaries of a nation and becomes available to the rest of the world (is a quasi-public good and is non-rival in nature) Romer, 1990 Knowledge existing outside is linked to a nation through integration with the world – trade and foreign investment (International spillovers) December 11, 2019

8 Absorptive Capacity Ability to recognize the value of new external knowledge, assimilate it and apply it for commercial purpose. (Cohen and Levinthal, 1989) It plays a mediating role – it makes nations aware of existence of spillovers and benefits that accrue to a nation depend on its absorptive capacity December 11, 2019

9 Research Objectives To measure innovative capacity of nations and compare across the clusters of nations To identify the factors that facilitate innovation at the global level To outline a framework for knowledge spillover analysis across countries December 11, 2019

10 Classification into homogenous groups
Income (based on GNI per capita done by the World Bank) High (10726$ or more) Middle (876$-10725$ ) Low (875$ or less) Stages of development (by United Nations) Developed nations Emerging economies Least developed nations Geographic region December 11, 2019

11 Classification.. Innovation Index (KAM of the World Bank)
Ranks nations on the basis of a composite score of R&D expenditures, patents granted by the USPTO and number of researchers and technicians with scores from 0-10 Categorized into Leaders (7 and above), Followers (4-7) and Laggards (less than4) December 11, 2019

12 Income - Innovation Cross- tabulation
Innovation Total 1 2 3 23 5 30 Income 6 9 7 22 4 12 20 36 33 26 29 88 December 11, 2019

13 Data Sources Time frame
World Development Indicators Online (World Bank) USPTO International Trade Centre (UNCTAD/WTO) World Bank’s Knowledge Assessment Methodology’s Innovation Index Time frame December 11, 2019

14 Identifying the determinants of IC
Innovative capacity = f (Core Inputs, Spillover, [Input*Channel], Control) Where IC is measured using patents, no. of articles published, high-tech exports, Royalty received and TFP Core Inputs include R&D intensity, number of researchers and technicians and a nation’s own stock of knowledge (R&D stock, patent stock and article stock) December 11, 2019

15 Control represents the control variables
Innovative capacity = f (Core Inputs, Spillover, [Input*Channel], Control) Where Spillover represents the direct spillover from the trading partners and rest of the world Input*Channel represents the indirect spillover that accrue to a nation from its absorptive capacity Control represents the control variables December 11, 2019

16 Spillovers defined.. Direct Spillovers
R&D stock (MTP and RoW) Patent stock (MTP and RoW) Article stock (MTP and RoW) Indirect Spillovers (Absorptive Capacity) R&D intensity*FDI/GDP, R&D intensity*Royalty paid, S&T*FDI/GDP S&T*Royalty paid December 11, 2019

17 Control Variables… Sectoral Concentration ratio (Value added in mfg and services/value added in agriculture) International Telecom traffic (Intl Outgoing Minutes per subscriber) Internet users (per 1000 people) December 11, 2019

18 Construction of R&D stock
Where is the number of lags and  is the rate of obsolescence; R is the R&D intensity (R&D expenditure as a percentage of GDP) The rate of obsolescence is arbitrarily assumed between 5% to 25% December 11, 2019

19 Distributed Lag Model…
Where Yt is Patent & Xt is R&D Intensity No of lags is based on Mean or Median lag Rate of usefulness is determined by λk December 11, 2019

20 β λ Lag Determination & Rate of Usefulness for R&D stock
Estimates of Koyck type transformation Leaders Followers Laggards β 0.2035 3.72E-08 λ 0.6505 0.4575 0.3582 Rate of Usefulness into the past k λk 1 0.65 0.46 0.36 2 0.42 - Median Lag 1.61 0.89 0.68 Mean Lag 1.86 0.84 0.56 Coeff of beta and lambda are sig at 1% level except beta for Laggards which is sig at 5% level December 11, 2019

21 Thank you December 11, 2019


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