week 7

Question 1

goods with peculiar characteristics

Answer 1

Knowledge, ideas, basic research, and development

Question 2

supply-side

Answer 2

measures provide incentives by reducing the cost of inputs

Question 3

demand-side

Answer 3

measures provide incentives by increasing the final demand for innovated products and services

Question 4

decentralized system for IP

Answer 4

provide incentive for the inventor’s initiative

Question 5

supply-side tools

Answer 5

aim at increasing firms’ incentive to invest in R&D by reducing investment costs

Question 6

public funding

Answer 6

should reduce the cost to invest in R&D projects

Question 7

crowding out effect

Answer 7

an economic theory arguing that rising public sector spending drives down or even eliminates private sector spending

Question 8

marginal rate of return curve (MRR)

Answer 8

The firm evaluates R&D projects according to the costs and benefits to calculate their expected rate of return
- The R&D projects can be ranked in descending order of expected return

Question 9

marginal cost of capital (MCC)

Answer 9

depicts the opportunity costs of investment into additional R&D projects
- Interpretation: marginal cost of R&D

Question 10

optimal level of R&D investment

Answer 10

MCC = MRR

Question 11

competitive basis

Answer 11

Permanent call for proposals or periodic calls with fixed deadlines and fixed budget

Question 12

selection process

Answer 12

review panel ranking proposal that should ensure a transparent, fair and merit-based competition for resources

Question 13

advantage of subsidies

Answer 13

can be targeted to specific activities and actors that are of greatest interest in meeting public policy goals

Question 14

disadvantage of subsidies

Answer 14

require high bureaucracy and administration costs

Question 15

evaluation problems

Answer 15

selectivity, crowding-out and additionality

Question 16

selection bias

Answer 16

occurs when the selection of subjects into a study leads to a result that is systematically different to the target population

Question 17

picking winner strategies

Answer 17

→ Focus on projects with a higher success probability
→ Select more established companies

Question 18

level scheme

Answer 18

tax relief on the total amount of R&D

Question 19

incremental scheme

Answer 19

tax relief on increases of R&D expenditures

Question 20

advantages of tax credits

Answer 20

• R&D tax credit are neutral and market based
• They are less costly to administer and involve less red tape, especially for small firms
• They are more easily acceptable for passing the general block exemption regulation for State aid in the European Union

Question 21

disadvantages of tax credits

Answer 21

• R&D tax credit may fail to focus on projects with a high social rate of return, precisely the market failure that the policy tries to correct
• Tax incentives favour large R&D spenders
  → Business R&D is heavily concentrated in large multinational enterprises
• It is not always straightforward for tax authorities to identify expenditures that qualify for the tax credit

Question 22

patent box

Answer 22

a policy tool that reduces the rate of corporation tax levied on the income from patents

Question 23

theory of patent boxes

Answer 23

boxes are justified as an incentive or a reward for innovative activity

Question 24

spurring innovation

Answer 24

encourage or motivate something to become more innovative

Question 25

fiscal optimisation for MNEs (multinational enterprises)

Answer 25

A straightforward ranking of risks in descending order from most impactful to least

Question 26

sequential process

Answer 26

the execution of tasks or instructions in a specific order, where each task is completed before moving on to the next one

Question 27

scientist maximize a utility function that includes

Answer 27

financial rewards and priority & recognition

Question 28

research universities

Answer 28

• Self-regulating scientists undertaking the research, who in turn are subsidized for their effort by the public purse
• Decentralized system

Question 29

government research laboratories

Answer 29

• The government engaging itself directly in the production of knowledge
• Command mode of planning: what to produce and how much to produce is decided by the government

Question 30

economic incentive

Answer 30

motivate people to behave in a certain manner

Question 31

resources allocation

Answer 31

the process of assigning and managing assets in a manner that supports an organization’s strategic planning goals

Question 32

bock grants

Answer 32

ransfer of resources from the government to the University

Question 33

competitive grants

Answer 33

scientists are responsible for raising their own funds through the submission of proposals to governmental funding agencies

Question 34

demand-pull hypothesis

Answer 34

the theory that inflation occurs when demand for goods and services exceeds existing supplies.

Question 35

linear model

Answer 35

basic science ⇒ development ⇒ innovation

Question 36

demand-pull

Answer 36

market need ⇒ development ⇒ innovation

Question 37

public procurement

Answer 37

he purchase of goods and services by a public agency

Question 38

regular procurement

Answer 38

Public agencies buy ready-made products ‘off the shelf’. No additional R&D or innovations results from public intervention

Question 39

public procurement for innovation

Answer 39

occurs when a public agency places an order for a product or a service which does not exist at the time, but which could be developed within a reasonable period

Question 40

pre-commercial procurement

Answer 40

occurs when an expected R&D result is procured by a public agency

Question 41

public procurement of innovation (PPI)

Answer 41

a peculiar innoation policy. It could be considered a mulit-objective policy, but the main objective is not fostering innovation per se. The ultimate goal is the satisfaction of the need of the public buyer.

Question 42

justification of PPI as innovation policy

Answer 42

1 Market creation and market enlargement
2 Government acting a as lead user
3 Technology adoption and standard setting

Question 43

technologies developed with public demand

Answer 43

internet, GPS, radar technologies, aerospace, semiconductors