Events

Open source is key to innovation yet is assumed to be done largely through intrinsic motivation. How can we incentivize it? In this paper, we examine the impact of a program providing monetary incentives to motivate innovators to contribute to open source. The Sponsors program was introduced by GitHub in May 2019 and enabled organizations and individuals alike to pay developers for their open source work. We study this program by collecting fine-grained data on nearly 100,000 GitHub users, their activities, and sponsorship events. We first, using a difference-in-differences approach, document two main effects. One, developers who opted into the program, an action that does not itself entail a financial reward, increased their output after the program’s launch. Two, the actual receipt of a financial sponsorship has a long-lasting negative effect on two measures of innovation –repository creation and community-oriented tasks– but not in coding effort. Despite a net positive effect on innovation, sponsorship appears to crowd out intrinsic motivation, shifting effort toward self-promoting activities. Results from a pre-registered survey and experiment reinforce these findings, showing that modest sponsorship (USD 20) deters collaborative contributions compared to no compensation, larger rewards (USD 1000), or company sponsorships.

Contact person: Daehyun Kim

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Open Source AI: Strategic Motives for the Selective Revealing of AI System Components
Presenter: Leonard Hanschur (TUM)
Discussant: Ulrike Morgalla (MPI)

The recent open revealing of numerous AI systems challenges the notion that the exclusivity of an AI system’s data and model constitutes a source of competitive advantage. We explore the mechanisms behind revealing AI and the characteristics of AI systems associated with it. Specifically, we examine two dimensions of the selective revealing of AI systems: Its completeness, describing which components are revealed (none, the model, or model and data), and its degree determined by the license type (proprietary, restrictive, permissive). Employing a mixed-methods approach, we draw on 24 interviews with decision-makers at AI-focused organizations and prior theory to construct hypotheses that we empirically test on a sample of 659 AI systems. We hypothesize, and find supported in the data, that organizations tend to reveal larger and more innovative models to a lesser degree and less completely. Further, we find that data modality shapes revealing completeness, and that model size moderates this association. These findings suggest, in line with our qualitative findings, that revealing AI system components serves to promote their adoption and to establish a lock-in across AI system versions rather than collaborative development. Our study contributes to the academic discourse on open innovation and competitive advantage. For strategists and policymakers, we provide guidance in navigating their pathways toward opening AI.

Strategic Reserves: Shelved Innovation as a Real Option
Presenter: Elisabeth Hofmeister (MPI)
Discussant: Denzel Glandel (ISTO)

I investigate the role of shelved innovation - R&D projects suspended despite promising results - in firms’ strategy, drawing on evidence from the pharmaceutical industry. Initially, I construct a novel dataset linking clinical trials to their published results, enabling the systematic identification of shelved drug development projects. Using the exogenous nature of trial failures, I evaluate whether firms restart shelved projects following project failures in the same market. The results show that firms restart shelved projects in response to late-stage failures in Phase III clinical trials. Further, I find that the decision to restart is moderated by the thickness of the market for technology and the firm’s level of co-specialized complementary assets. Overall, these findings demonstrate that shelved innovation is not merely an incidental byproduct of the R&D process but a strategically managed asset.

Selective Promotion of Complements on Online Auction Platforms: Evidence from the Automotive Industry
Presenter: Alexey Rusakov (ISTO)
Discussant: Tim Hahne (TUM)

Platforms can steer demand by selectively promoting complements in platform markets. But how does selective promotion affect the overall demand when the products are idiosyncratic, such as on auction platforms, and does this effect differ for similar products and a competing platform? By studying a car auction platform with unique cars, we find that promotional car reviews on YouTube positively affect the prices and bid volumes of reviewed cars in the same category. However, the latter effect is largely due to short-term attention spillovers, while the sentiment of the reviews can have unexpected consequences for the bid prices. Moreover, the effect on the competing platform is rather limited and probably only occurs when users first visit the focal platform and then switch to the competing platform.

Contact person: Elisabeth Hofmeister

Pratap Devarapalli, Ph.D., Postdoctoral Fellow, TC Bernie School of Law, University of Queensland, Australia, who visited the Institute as a guest researcher in 2024 , will present his recently published book Bioinked Boundaries – Patenting 3D Bioprinted Tissues, Organs and Bioinks: An US, European and Australian Patent Law Perspective.

In his talk Dr. Devarapalli will especially emphasize the EU perspective.

Moderation: Prof. Dr. Hanns Ullrich

Abstract:
3D bioprinting, a technology that allows for the creation of human tissues and, potentially, entire organs, stands at the cutting edge of innovation in the life sciences. Three-dimensional bioprinting involves the use of bioinks, composed of living stem cells, to print complex organic structures layer by layer, mimicking the architecture of biological tissues. The implications for industrial applications are varied and the potential financial impact and human benefit are staggering. For example, in medicine bioprinted tissues could revolutionise drug testing, eliminate the need for animal models, and aim to offer solutions to the global organ shortage. Bioprinted tissues, much like genetically modified organisms, involve both natural materials and human intervention. However, as with many biotechnological advancements, the legal questions that surround bioprinting  are equally complex. Can a tissue printed from living cells be considered an invention? How much modification is required to transform a biological material into something that qualifies as patentable subject matter? And how should courts and patent offices balance the need to protect innovation with the need to ensure public access to important medical technologies?

In this paper we study alliance formation and non-formation by presenting a model involving two rivals and a third, neutral, player acting as a buffer. Such player may join one of the rivals or stay neutral in our infinitely repeated game with a stochastic conflict between the rivals. Our main goal is to study under what conditions the neutral player would be willing to pay one of the rivals to join and under what conditions the neutral player would extract rents – receive payments from the rivals for agreeing to stay neutral. We characterize all families of symmetric equilibria and study the corresponding comparative statics. For a low conflict probability, the rivals effectively cooperative, in which case the neutral player extracts rents. As the conflict probability increases, the rivals start competing in an attempt to convince the neutral player to join. Lastly, for a high conflict probability, the neutral player seeks to join an alliance even if it requires paying a fee to a rival.

Contact person: Marina Chugunova

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More Information: https://startupinitiative.maxplanckfoundation.org/start-up-school/

The Munich Summer Institute (MSI) is hosted by the Center for Law & Economics at ETH Zurich, University of Lausanne, Cornell University, the Chair for Technology and Innovation Management at TUM, the Chair for Economics of Innovation at TUM, the Institute for Strategy, Technology and Organization (ISTO) at the LMU Munich and the Max Planck Institute for Innovation and Competition.

Further information on the website of the MSI.

The workshop will cover the MSI’s three focus areas:

• Digitalization, Strategy and Organization
• Innovation and Entrepreneurship
• Law & Economics of Intellectual Property, Innovation & Digitalization

Like the Munich Summer Institute, the MSI Ph.D. Workshop will focus on quantitative empirical research. In the workshop, participants will present their working papers, receive comments from senior scholars, and discuss their papers with other participants. The number of participants is limited. Discussants will be senior scholars who participate in the Munich Summer Institute’s main conference.

Program

How does industrial policy affect technological change? To analyze this question, we focus on a period of unprecedented state intervention: the economic system of Nazi Germany. After 1933, the government not only tightened and introduced market restrictions, such as foreign exchange and domestic price controls, but also subsidized private investment in autarky and armament industries on a large scale. While previous research has focused on estimating aggregate investment in these industries and the extent to which private firms were forced to invest by the state, this paper analyzes the impact of these policies on R&D activities and, consequently, on technological change. To analyze the direction of technological change, we use a newly constructed patent dataset that includes a sample of over 80,200 patents filed between 1928 and 1941. We use these data to analyze three main research questions. First, did the promotion of investment in autarky industries (e.g. fuel production or ore mining) and armament industries increase patenting in the technology classes associated with these industries? Second, do we observe an increase in the importance of state-owned enterprises or military institutions for R&D? Third, do we find evidence of a change in the direction of R&D activities within large firms? 

Contact person: Michael Rose

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We return to the theoretical foundations of absorptive capacity and test the idea that personal experience in a field makes it easier for firms’ inventors to recognize and build upon local knowledge spillovers from other firms in that field. We propose a new empirical model of localized knowledge diffusion, which 1) measures a firm’s absorptive capacity by its inventors’ prior experience in a field, 2) uses a death instrument to exogenously vary the availability of knowledge of the same collaborative patent in different regions, and 3)estimates the difference in citation likelihood from all subsequent inventors across both regions, as a function of a potentially citing inventor’s prior experience in the field. Consistent with the original theory, firms whose inventors have prior experience in a field are more likely to use locally available spillovers from other firms. No such localization occurs for within firm knowledge diffusion. The effects are stronger for collaborative inventors and more recent knowledge.  (with Benjamin Balsmeier and Sonja Lück)

Contact person: Marina Chugunova

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Medical devices are critical to the delivery of health care, but malfunctioning products can pose a threat to patients, necessitating product recalls. In addition to the direct effects of medical device recalls, such as public health protection and negative reputational and financial consequences for the recalling firm, there may be spillover effects on product development. In particular, the vacuum left by the recalled product and its reputational damage may incentivize competing firms to introduce new medical devices to the market. This study examines the impact of serious medical device recalls on subsequent new product development by competitors, as measured by new medical device submissions to the FDA. We compile data from three regulatory databases representing 11,724 new product submissions and 2,647 recalls for 7,208 unique medical device firms over a 17-year period. Using a fixed effect model and institutional features of the FDA’s clearance process, we find that serious recalls increase other firms’ new product submissions in the affected product market. We estimate that a single recall in a product market increases subsequent submissions by approximately eight percent. Moreover, we find that this relationship is attenuated in markets with more competitors. Our results indicate that firms may currently undervalue actions to avoid product recalls, and that the medical device market may be improved by regulatory efforts to enhance transparency in the recall process.

Contact person: Elisabeth Hofmeister

Subscription to the invitation mailing list and more information on the seminar page.