Events

Max Planck Institute for Innovation and Competition, Munich, Room 313

Max Planck Institute for Innovation and Competition, Munich, Room 313

This paper focuses on the relationship between therapeutic value and different measures of market rewards (the number of patents, price, market share, and total revenues) of a new treatment. Using an assessment of therapeutic value provided by the French Haute Authorité de Santé (HAS), I find a weak relationship between most measures of rewards and this assessment of therapeutic value, suggesting that the returns to developing a “me-too” product are not very different from developing treatments with greater therapeutic effects. One interpretation is that the HAS score is a poor assessment of therapeutic value, in which case the use of similar health technology assessments by governments and other payers should be re-examined. Alternatively, if the HAS score is informative, the results suggest countries are spending too much on less innovative products, and that a re-balancing of innovation incentives may be worth considering if therapeutic value is highly related to social welfare.

Contact Person: Zhaoxin Pu

Max Planck Institute for Innovation and Competition, Munich, Room 313

Abstract
Entrepreneurs learn from a variety of sources. One particularly important channel is learning from fellow entrepreneurs. In this study we examine the influence of close geographic proximity on new (to the entrepreneur) technology adoption decisions at one of the largest technology coworking hubs in the United States. To deal with endogenous geographic clustering, we rely on the random assignment of office space to the hub’s 266 startups. Using floorpans to measure geographic distance, we find that close proximity greatly influences the likelihood of adopting an upstream (production) technology also used by a peer firm. This effect, however, quickly decays with distance where startup firms that are more than 25 meters away are no longer influenced by each other. This proximity premium is largest for small firms and when startups are in different industries. Conversely, the distance discount disappears for startups in the same industry and for female-founder startups suggesting these startups rely on alternate mechanisms to overcome the negative effects of distance. We discuss the implications of the balance between concentration and diversity in promoting the diffusion of ideas within a fast-changing entrepreneurial ecosystem.

Contact Person: Fabian Gaessler

Max Planck Institute for Innovation and Competiton, room E 10

Max Planck Institute for Innovation and Competition, Munich, Room 313

Researchers’ scientific excellence determines much of the academic reward system including publication output, career promotion and research funding. In this article, we compare different measures of scientific excellence, adding to the discussion on measuring scientific quality and research performance. We construct several author-author text similarity indicators between a stratified sample of scientists and ‘frontier scientists’, which we identify through academic prizes and prestigious third-party funding (ERC grants). We address the question whether high (low) scientists’ similarity (or distance) to the frontier of knowledge provides a valid measure of scientific excellence in comparison to citation counts.

Contact Person: Dr. Fabian Gaessler

Max Planck Institute for Innovation and Competition, Munich, Room 313

Are the social norms of basic science and the formal rules of the patent system complementary, or conflicting regulations for innovation? In view of the advancing implementation of innovation as the third mission of public basic science, my study investigates scientists’ motivations to patent, as well as their perception of patent-related research impediments. It does so by means of semi-structured interviews among scientists in German public basic research institutes. The reported motives correspond to strategic motives found in industry, but relate to science-specific incentives. Furthermore, the results indicate that while social norms in science compensate potential research impediments created by existing patents, secrecy caused by the intention to patent can create friction with academic norms for cooperation and knowledge sharing. These results are interpreted to indicate that patent functions and effects are not defined by the patent system itself, but at the multiple levels of governance of the socioeconomic system which utilizes patents.

Contact Person: Dr. Fabian Gaessler

Max Planck Institute for Innovation and Competition, Munich, Room 313

Staged financing of start-ups can be achieved with different investor constellations. One is that companies obtain funding from different investors at different stages. Another is that a deep pocketed investor continues investing in the company across multiple stages, usually as part of a syndicate. The valuation of start-ups is influenced by investor constellations, in particular strategic interactions between outside investors and deep-pocketed insiders. Our theory models the investment choices and valuations of start-ups, deriving advantages and disadvantages of deep pocketed investors. The analysis explains the significance of pro-rata investments, and the role of pre-emptive rights.

Contact person: Felix Pöge

Max Planck Institute for Innovation and Competition, Munich, Room 313

To study how governments can improve the quality of patent screening, we develop an integrative framework incorporating four main policy instruments: patent office examination, pre- and post-grant fees, and challenges in the courts. We show that examination and pre-grant fees are complementary, and that pre-grant fees screen more e ectively than post-grant fees. Simulations of the model, calibrated on U.S. patent and litigation data, indicate that patenting is socially excessive and the patent oce does not e ectively weed out low-quality applications. We quantify the welfare effects of counterfactual policy reforms and show how they depend on the quality of the courts (co-authored with Mark Schankerman).

Contact Person: Dr. Fabian Gaessler

Max Planck Institute for Innovation and Competition, Munich, Room E10

Max Planck Institute for Innovation and Competition, Munich, Room 313

US government spending since World War II has been characterized by large investments in defense-related high-tech goods and services and R&D. In turn, this means that the De- partment of Defense (DoD) has had a large role in funding corporate innovation in the US. This paper (i) quantifies the impact of military procurement spending on corporate innovation by publicly listed firms and (ii) shows that DoD impact on innovation was not limited to the winners of defense contracts but instead cascaded through the supply chain of DoD contractors via indirect market size effects, working through firm-to-firm input linkages. We use a database of detailed, historical procurement contracts for all Department of Defense (DoD) prime contracts since 1966. Product-level spending shifts are used as a source of exogenous variation in firm-level procurement receipts. We combine this data with information on the supply chain linkages of publicly listed firms. Our estimates indicate that defense procurement has a positive direct impact on patenting and R&D in- vestment, with an elasticity of approximately 0.07 across both measures of innovation for DoD contractors. Further, our estimates imply that the derived demand for inputs fol- lowing the award of a DoD contract constitutes a large indirect market size effect for the suppliers of DoD contractors. These indirect market size effects in turn induce innovation cascades working up the supply chain. We find that the elasticity of innovation outcomes to indirect DoD market size shocks is about half of that estimated for direct contractors but affects a much larger number of firms, increasing the effect of defense spending on aggregate innovation by at least 20%. (joint work with Vasco M. Carvalho)

Contact Person: Laura Rosendahl Huber