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Appropriability, Technological Opportunity, Market Demand, and Technical Change - Empirical Evidence from Switzerland

Listed author(s):
  • Harabi, Najib

The purpose of this paper is to analyze both theoretically and empirically those factors which underlay the - empirically observable - inter-industry differences in technical progress. At the theoretical level economists agree more and more that technical progress can be explained at the industry level by the following three factors: (1) the technological opportunities, (2) the appropriability conditions, meaning the ability to capture and protect the results of technical innovations and (3) the market demand conditions. The basic theoretical model was tested with the help of two sets of Swiss data. One set was made available by Swiss Federal Office of Statistics and consists of quantitative information on R&D expenditures, R&D personnel, total employment and sales figures for 124 (4-digit SIC) industries for the year 1986. The second set was derived from a survey I carried out in the summer of 1988. 940 industry experts were approached; 358 of them, or 38%, covering 127 industries, completed the questionnaire. The items on the questionnaire were related to the two supply-side determinants of technical progress - items (1) and (2) above. For the empirical specification of the theoretical model, technical progress (as the dependent variable) was measured by three indicators: an output indicator, representing the introduction rate of innovations since 1970; two input indicators, "share of R&D expenditures in sales" and "share of R&D personnel in total employment". All data were aggregated at the industry-level (4-digit SIC). Three equations were estimated individually, using the OLS, GLS and Tobit methods. The most important results of the empirical analysis can be summarized as follows: - The ability to appropriate the results of innovations exerts a positive impact on technical progress in all three models. In this context, the non-patent related means of appropriability "secrecy", "lead time", "moving downward on the learning curve" and "superior sales and service efforts" prove to be more important for the innovation process than the means "patents to protect against imitation" and "patents to secure royalty income". - Of all external sources of technological opportunities, domestic and foreign university research makes the largest quantitative and statistically most significant contribution to technical progress. -Science (i.e. education in 14 science fields) is on the whole relevant for technical progress. But its contribution to technical progress would increase, if at the R&D level its application could be better targeted. - Of the six fields of basic science, only in mathematics and in theoretical computer science is education relevant for technical progress. - The relevance of education and training in the applied sciences for technical progress is high and significant in the fields of medical science and electronics. - The impact of sales as an indicator for market demand is negative. Industries with relatively low sales are relatively more innovative than those with a higher level of sales.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26221.

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Date of creation: Jul 1992
Handle: RePEc:pra:mprapa:26221
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  1. Dasgupta, Partha & Stiglitz, Joseph, 1980. "Industrial Structure and the Nature of Innovative Activity," Economic Journal, Royal Economic Society, vol. 90(358), pages 266-293, June.
  2. Tom Lee & Louis L. Wilde, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, Oxford University Press, vol. 94(2), pages 429-436.
  3. Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 395-410.
  4. Richard Levin & Peter C. Reiss, 1984. "Tests of a Schumpeterian Model of R&D and Market Structure," NBER Chapters,in: R&D, Patents, and Productivity, pages 175-208 National Bureau of Economic Research, Inc.
  5. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
  6. Levin, Richard C, 1978. "Technical Change, Barriers to Entry, and Market Structure," Economica, London School of Economics and Political Science, vol. 45(180), pages 347-361, November.
  7. Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908 Elsevier.
  8. Levin, Richard C, 1988. "Appropriability, R&D Spending, and Technological Performance," American Economic Review, American Economic Association, vol. 78(2), pages 424-428, May.
  9. Levin, Richard C, 1986. "A New Look at the Patent System," American Economic Review, American Economic Association, vol. 76(2), pages 199-202, May.
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