week 6

Question 1

innovation

Answer 1

must be introduced into the market so that consumers or other firms can benefit

Question 2

innovation-led growth

Answer 2

lead economists and policy makers to focus on the importance of investments in technology and knowledge production

Question 3

invention

Answer 3

enhances the stock of knowledge, but it does not instantaneously arrive in the market

Question 4

product innovation

Answer 4

the introduction of a new product, or a significant qualitative change in an existing product
- New market

Question 5

process innovation

Answer 5

the introduction of a new process for delivering existing goods and services
- Delivering more output using the same amount of input

Question 6

problem of matching incentives to the value of the activity

Answer 6

If the innovator cannot charge all the beneficiaries of its innovation

Question 7

possible market failure

Answer 7

the market system, guided by the independent actions of private firms, will not lead to the optimal amount of innovations

Question 8

three main reasons for market failure

Answer 8

knowledge, innovation, cost

Question 9

knowledge

Answer 9

ideas are goods with peculiar characteristics that make them very similar to public goods

Question 10

non-rival knowledge

Answer 10

the use of existing knowledge by one person does not preclude use by any other and does not cost additional resources

Question 11

non-excludable knowledge

Answer 11

the key issue is how easily knowledge can be accessed

Question 12

free good

Answer 12

Since the marginal cost of using knowledge is zero, maximum efficiency in its use implies no restriction to access

Question 13

non-rival good dilemma

Answer 13

only the anticipation of a positive price will guarantee the resources for creation of knowledge, but a positive price lead to under-consumption

Question 14

free-riding

Answer 14

those who benefit from the goods have an incentive to avoid paying

Question 15

market failure in knowledge

Answer 15

less resources in the production of new knowledge, less knowledge than what would be optimal from the social point of view

Question 16

positive externalities

Answer 16

• if the production possibilities of one firm are positively influenced by the choices of another firm
• The innovation first introduced in the market by the innovator, benefits other firms without any monetary reward for the innovator

Question 17

leaking out applied knowledge embedded in innovation

Answer 17

• Movement of personnel from one firm to another (learning by hiring)
• Informal communications networks among engineers and scientists
• Professional meetings at which information is exchanged
• Inputs from suppliers and customers
• Reverse engineering

Question 18

social benefits of an innovation

Answer 18

take into account the value of all the positive externalities

Question 19

indivisibility

Answer 19

R&D projects cannot be broken down into smaller, more manageable units

Question 20

uncertainty

Answer 20

R&D projects have a very low success probability

Question 21

intrinsic

Answer 21

belonging to the essential nature or constitution of a thing

Question 22

three different types of innovation or technology policy

Answer 22

institution & regulation, support, direct involvement

Question 23

increasing expenditures in formal R&D

Answer 23

the private sector, higher education government

Question 24

R&D target UN SDG (sustainable development goals, 2015)

Answer 24

rise R&D expenditure as a proportion of GDP and researchers (in full-time equivalent) per million inhabitants

Question 25

R&D target EU’s Lisbon Agenda (2000) and Europe 2020 strategy (2010)

Answer 25

3% of Gross Domestic Product (public and private
combined)

Question 26

R&D target Netherlands

Answer 26

2.5% of GDP

Question 27

intellectual property rights, R&D subsidies and tax credits

Answer 27

indirect, stimulate private investment in R&D

Question 28

research grants

Answer 28

indirect, support basic research and knowledge production

Question 29

government R&D

Answer 29

direct, basic research and knowledge production

Question 30

pre-commercial procurement

Answer 30

direct, stimulate private investment in R&D

Question 31

standards and regulation

Answer 31

indirect, improve framework, enhance demand

Question 32

under-provision of innovation

Answer 32

re-assignement of property rights

Question 33

patent

Answer 33

a document, issued upon application by a government office, which describes an invention and creates a legal situation in which the invention can only be exploited with the authorization of the
owner

Question 34

term of patent

Answer 34

generally 20 years

Question 35

markup over marginal cost

Answer 35

depends on price elasticity of demand and strength of the patent

Question 36

monopoly pricing

Answer 36

patent provided very stron protection

Question 37

incentive to innovate

Answer 37

Allocating strong property rights on knowledge and innovation

Question 38

life of the patent

Answer 38

for how many years should the monopoly last?
- Stipulated by law

Question 39

breadth of the patent

Answer 39

how different another product must be in order not to infringe?
- Under the control of the patent offices and courts

Question 40

short and narrow patent

Answer 40

not provided enough incentive to invent

Question 41

long and costly patent

Answer 41

too costly for the society

Question 42

optimal solution for patent design

Answer 42

a longer protection that allows for limited competition, or a hard monopoly (broad patent) for a shorter time

Question 43

nordhaus model

Answer 43

showed that an optimal patent must be of finite duration but strictly positive

Question 44

gallini model

Answer 44

showed that broad and short patent are optima

Question 45

maurer and scotchmer model

Answer 45

showed that a narrow but long patent is preferable

Question 46

strategic patenting

Answer 46

a practice when patent applications are prosecuted with the goal of improving a portfolio’s patent position in a defined technological area

Question 47

the optimal solution of patent protection depends on

Answer 47

the characteristics of the industry, demand conditions in a given market