Showing papers in "Innovation Policy and the Economy in 2010"

The Divide between Subsistence and Transformational Entrepreneurship

Abstract: Executive Summary This paper argues that it is crucially important to differentiate between two very distinct sets of entrepreneurs: subsistence and transformational entrepreneurs. Recent evidence suggests that people engaging in these two types of entrepreneurship are not only very distinct in nature but that only a negligible fraction of them transition from subsistence to transformational entrepreneurship. These individuals vary in their economic objectives, their skills, and their role in the economy. Most important, they seem to respond very differently to policy changes and economic cycles. Yet most development policies aimed at fostering entrepreneurship focus on subsistence entrepreneurship in the hope of creating transformational entrepreneurs. I argue that unless we understand the differences between those two types of entrepreneurs more clearly, many policy interventions may have unintended consequences and may even have an adverse impact on the economy.

File Sharing and Copyright

Abstract: Executive Summary The advent of file sharing has considerably weakened effective copyright protection. Today, more than 60% of Internet traffic consists of consumers sharing music, movies, books, and games. Yet, despite the popularity of the new technology, file sharing has not undermined the incentives of authors to produce new works. We argue that the effect of file sharing has been muted for three reasons. (1) The cannibalization of sales that is due to file sharing is more modest than many observers assume. Empirical work suggests that in music, no more than 20% of the recent decline in sales is due to sharing. (2) File sharing increases the demand for complements to protected works, raising, for instance, the demand for concerts and concert prices. The sale of more expensive complements has added to artists’ incomes. (3) In many creative industries, monetary incentives play a reduced role in motivating authors to remain creative. Data on the supply of new works are consistent with the argument that f...

Incentivizing Innovation: Adding to the Tool Kit

Abstract: Executive Summary Intellectual property rights (IPR) create incentives for research but impose static efficiency losses and other costs. In this essay, we discuss recent proposals of other mechanisms for rewarding innovation and argue that incremental experimentation with mechanisms that supplement rather than replace IPR can help to test and refine these mechanisms without undermining existing institutions. Prizes, such as those recently offered by the X‐Prize Foundation, have been successful in spurring research but have typically targeted demonstration projects rather than innovations capable of being used at scale. To spur the creation of products for widespread use, the design of prizes could be usefully extended by conditioning rewards on a market test, as in the recent $1.5 billion pilot Advance Market Commitment (AMC) for a pneumococcus vaccine.

University Licensing: Harnessing or Tarnishing Faculty Research?

Abstract: Executive Summary The central issue we consider is whether university patent licensing, afforded by the Bayh‐Dole Act, has diverted universities away from their basic research mission. The act, passed in 1980, was intended to stimulate the transfer of federally funded research to industry. While statistics on licensing activity suggest that it has served this purpose, they have also fueled debates as to whether licensing has also led faculty to abandon basic research agendas. We show that, quite to the contrary, when realistic complexities of the research environment are taken into account, it is just as natural to expect basic research productivity to have been enhanced by licensing. Our evidence on disclosure, funding, and publications (their nature and impact) of faculty in 11 universities lends credence to the notion that, rather than diverting faculty research, licensing is part of a flurry of activities that can be associated with fundamental discoveries from fairly basic research.

The “I”s Have It: Immigration and Innovation, the Perspective from Academe

Abstract: Executive Summary Considerable attention has focused in recent years on the role the academy plays in fostering innovation. Here we demonstrate that the foreign born are a large and growing component of the U.S. university community. They compose more than 25% of the tenure‐track faculty, make up approximately 60% of the postdoctoral population, and represent more than 43% of the doctoral degrees awarded in science and engineering. Almost 50% of the latter come from the three countries of China, India, and South Korea. The foreign born contribute to the productivity of the university. For example, 44% of the first authors of U.S. papers in Science are foreign. There is some evidence that the foreign born contribute disproportionately to exceptional contributions in science and engineering and, at least at elite universities, that their marginal product is higher than that of the native born. They also constitute approximately one‐third of the placements of new PhDs with U.S. firms—a major mechanism by whi...

The Global Location of Biopharmaceutical Knowledge Activity: New Findings, New Questions

Abstract: Executive Summary Location possibilities for biopharmaceutical firms are expanding, driven by factors such as falling natural and political barriers to trade and communication, extension and strengthening of patent protection through institutions including the World Trade Organization, and growing supplies of skilled labor and related infrastructure in large, relatively low‐cost countries. This paper examines the causes and consequences of this global expansion of knowledge discovery by biopharmaceutical firms. We first discuss the empirical evidence on the extent and nature of this process. We then examine whether this global spread of biopharmaceutical R&D supports or hurts host country knowledge activity. We conclude that foreign knowledge discovery by biopharmaceutical companies tends to complement, not substitute for, home country activities, and we therefore anticipate no significant reduction in U.S. R&D employment or expenditure in this sector due to “globalization” per se. The same cannot be said...