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Complementarities in Innovation Policy

  • Pierre Mohnen
  • Lars-Hendrick Röller

This paper develops a framework for testing discrete complementarities in innovation policy using European data on obstacles to innovation. We propose a discrete test of supermodularity in innovation policy leading to a number of inequality constraints. We apply our test to two types of innovation decisions: to innovate or not, and if so, by how much. We find that the evidence regarding the existence of complementarity in innovation policies depends on the phase of innovation that is targeted (getting firms innovative or increasing their innovation intensity) as well as on the particular pair of policies that is being considered. The two phases of the innovation process, i.e. the probability of becoming an innovator and the intensity of innovation, are subject to different constraints. Interestingly, there seems to be a need to adopt a package of policies to make firms innovate, while a more targeted choice among policies is necessary to make them more innovative. Nous développons dans cet article un cadre qui permette de tester des complémentarités dans les politiques d'innovation à partir de données européennes sur les obstacles à l'innovation. Nous proposons un test discret de supermodularité en matière de politique à l'innovation qui repose sur un certain nombre de contraintes d'inégalité. Nous appliquons ce test à deux types de décision d'innovation: innover ou non, et si oui de combien. Nous trouvons que l'existence de complémentarité en politique à l'innovation dépend de la phase d'innovation qu'on veut promouvoir (pousser les firmes à devenir innovantes ou à innover davantage) et de la paire de politiques qu'on considère. Les deux phases de l'innovation, la probabilité d'innover et l'intensité d'innovation, sont soumises à des contraintes différentes. Il est intéressant de constater qu'il semble y avoir un besoin d'adopter tout un ensemble de mesures pour rendre les firmes innovantes, alors qu'une politique plus ciblée sur l'une ou l'autre mesure est nécessaire pour les rendre plus innovantes.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2003s-60.

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Length: 31 pages
Date of creation: 01 Sep 2003
Date of revision:
Handle: RePEc:cir:cirwor:2003s-60
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  1. Cassiman, Bruno & Veugelers, Reinhilde, 2002. "Complementarity in the Innovation Strategy: Internal R&D, External Technology Acquisition and Cooperation," CEPR Discussion Papers 3284, C.E.P.R. Discussion Papers.
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  7. Cassiman, Bruno & Veugelers, Reinhilde, 2002. "Complementarity in the innovation strategy: Internal R&D, external technology acquisition, and cooperation in R&D," IESE Research Papers D/457, IESE Business School.
  8. Milgrom, Paul & Roberts, John, 1994. "Complementarities and systems: Understanding japanese economic organization," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 9(1), pages 3-42.
  9. Miravete, Eugenio J & Pernías, Jose C, 2004. "Innovation Complimentarity and Scale of Production," CEPR Discussion Papers 4483, C.E.P.R. Discussion Papers.
  10. Jacques Mairesse & Pierre Mohnen, 2001. "To Be or Not To Be Innovative: An Exercise in Measurement," NBER Working Papers 8644, National Bureau of Economic Research, Inc.
  11. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
  12. Kodde, David A & Palm, Franz C, 1986. "Wald Criteria for Jointly Testing Equality and Inequality Restriction s," Econometrica, Econometric Society, vol. 54(5), pages 1243-48, September.
  13. North, Douglass C., 1993. "Economic Performance through Time," Nobel Prize in Economics documents 1993-2, Nobel Prize Committee.
  14. Arora, Ashish & Gambardella, Alfonso, 1990. "Complementarity and External Linkages: The Strategies of the Large Firms in Biotechnology," Journal of Industrial Economics, Wiley Blackwell, vol. 38(4), pages 361-79, June.
  15. Arora, Ashish, 1996. "Testing for complementarities in reduced-form regressions: A note," Economics Letters, Elsevier, vol. 50(1), pages 51-55, January.
  16. Susan Athey & Scott Stern, 1998. "An Empirical Framework for Testing Theories About Complimentarity in Organizational Design," NBER Working Papers 6600, National Bureau of Economic Research, Inc.
  17. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-91, September.
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