week 7 Flashcards
goods with peculiar characteristics
Knowledge, ideas, basic research, and development
supply-side
measures provide incentives by reducing the cost of inputs
demand-side
measures provide incentives by increasing the final demand for innovated products and services
decentralized system for IP
provide incentive for the inventor’s initiative
supply-side tools
aim at increasing firms’ incentive to invest in R&D by reducing investment costs
public funding
should reduce the cost to invest in R&D projects
crowding out effect
an economic theory arguing that rising public sector spending drives down or even eliminates private sector spending
marginal rate of return curve (MRR)
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
marginal cost of capital (MCC)
depicts the opportunity costs of investment into additional R&D projects
- Interpretation: marginal cost of R&D
optimal level of R&D investment
MCC = MRR
competitive basis
Permanent call for proposals or periodic calls with fixed deadlines and fixed budget
selection process
review panel ranking proposal that should ensure a transparent, fair and merit-based competition for resources
advantage of subsidies
can be targeted to specific activities and actors that are of greatest interest in meeting public policy goals
disadvantage of subsidies
require high bureaucracy and administration costs
evaluation problems
selectivity, crowding-out and additionality
selection bias
occurs when the selection of subjects into a study leads to a result that is systematically different to the target population
picking winner strategies
→ Focus on projects with a higher success probability
→ Select more established companies
level scheme
tax relief on the total amount of R&D
incremental scheme
tax relief on increases of R&D expenditures
advantages of tax credits
- 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
disadvantages of tax credits
- 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
patent box
a policy tool that reduces the rate of corporation tax levied on the income from patents
theory of patent boxes
boxes are justified as an incentive or a reward for innovative activity
spurring innovation
encourage or motivate something to become more innovative
fiscal optimisation for MNEs (multinational enterprises)
A straightforward ranking of risks in descending order from most impactful to least
sequential process
the execution of tasks or instructions in a specific order, where each task is completed before moving on to the next one
scientist maximize a utility function that includes
financial rewards and priority & recognition
research universities
- Self-regulating scientists undertaking the research, who in turn are subsidized for their effort by the public purse
- Decentralized system
government research laboratories
- 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
economic incentive
motivate people to behave in a certain manner
resources allocation
the process of assigning and managing assets in a manner that supports an organization’s strategic planning goals
bock grants
ransfer of resources from the government to the University
competitive grants
scientists are responsible for raising their own funds through the submission of proposals to governmental funding agencies
demand-pull hypothesis
the theory that inflation occurs when demand for goods and services exceeds existing supplies.
linear model
basic science ⇒ development ⇒ innovation
demand-pull
market need ⇒ development ⇒ innovation
public procurement
he purchase of goods and services by a public agency
regular procurement
Public agencies buy ready-made products ‘off the shelf’. No additional R&D or innovations results from public intervention
public procurement for innovation
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
pre-commercial procurement
occurs when an expected R&D result is procured by a public agency
public procurement of innovation (PPI)
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.
justification of PPI as innovation policy
1 Market creation and market enlargement
2 Government acting a as lead user
3 Technology adoption and standard setting
technologies developed with public demand
internet, GPS, radar technologies, aerospace, semiconductors
