The impact of technological variety in co-patenting networks

A relevant issue in the knowledge externalities literature is whether firms located in agglomerations mainly learn from other local firms in the same industry or from other local firms in a range of other industries (Glaeser et al, 1992). A second form of externalities relates to Jane Jacobs’ contributions on cities, externalities and innovation (Jacobs 1969). From her work we learn that a diversified economy would bring benefits to local firms because it would generate new ideas steaming from the cross-fertilization of ideas across different industries. In a regional context, this would be in line with the idea that regions with a more diverse stock of knowledge would have a greater potential for innovation and growth. However, since the paper by Frenken et al (2007), several authors have argued that the concept of diversification claimed by Jacobs need to be more deeply specified, by separating between diversification of related industries and diversification of unrelated industries – or, using the correct jargon, related versus unrelated variety. Regions hosting related industries, with different but connected knowledge bases, can more easily engage in recombinant innovation. On the contrary, the combination of previously unrelated industries or technologies is more difficult to succeed.

We study in depth the relationships between the local knowledge economy and the knowledge that flows from other regions in generating new knowledge. In particular, we assess whether the more similar the internal and external knowledge sectors, the larger the innovation outputs, or else, different but related internal and external sectors are more prone to innovation creation. We use a sample of 274 NUTS2 European regions of 27 countries from 1999 to 2007.

We obtain that similarity between the technological composition of the knowledge of the within-the-region patents and that of the cross-regional co-patents has a highly significant impact on the regions’ innovative output. In other words, if the knowledge that enters a region thanks to collaboration agreements with inventors in other regions is from sectors in which it already patents, there is plenty of room for absorbing new knowledge, with the subsequent significant impact on innovation output.

On the contrary, if only a certain degree of relatedness between the technological sectors of the patents in the region and the technological sectors of the knowledge flows that come from co-patenting with inventors in other regions exists, the interconnection does not seem to produce any significant innovation outcome but a higher similarity is needed. However, when the patents are weighted by their quality, the positive and significant parameter of the relatedness index suggests that the connections made with inventors outside the region have a relevant impact on its innovation output as far as the co-patenting profile (the knowledge that enters the region from the external world) and the knowledge stock of the region are related to a certain extent, but are not very similar. This is probably the case because the possibilities to learn different competences are wider in such a case and seem to be needed to generate more radical innovations. We can conclude, therefore, that in order to develop the exchange between inventors belonging to different technological sectors, it is necessary to have a certain level of similarity so as to have the opportunity to learn from each other, but this is not so much the case for breakthrough innovations, where just some relatedness between the knowledge inside and outside is necessary.

Glaeser, E.L., Kallal, H.D., Scheinkman, J.A. and Shleifer, A. (1992) Growth in Cities, Journal of Political Economy 100(6): 1126-1152.

Frenken, K., F. van Oort and T. Verburg (2007) Related Variety, Unrelated Variety and Regional Economic Growth, Regional Studies, 41(5), 685–697.

Jacobs J (1969) The economy of cities. Random House, NewYork.


Determinants of R&D cooperation. Differences across partners and sectors

Which type of partners do Spanish firms cooperate with?

Using information from the Technological Innovation Panel (PITEC) for Spanish firms we observe that Spanish firms tended to choose simultaneously several types of partners to carry out their innovation activities: customers and suppliers (vertical cooperation), competitors (horizontal competition) and institutions and research centres. Around 48% of the enterprises that decided to cooperate did so with at least two types of partners, and almost 14% cooperated with the three types of partners at a time.

R&D cooperation strategies among Spanish innovative firms
I V H Strategies Firms %
0 0 0 Non-cooperation 4842 65.8
1 Only Horizontal 80 3.2
1 0 Only Vertical 436 17.3
1 Vertical + Horizontal 50 2.0
1 0 0 Only Institutional 788 31.3
1 Institutional + Horizontal 132 5.2
1 0 Institutional + Vertical 683 27.1
1 All strategies 351 13.9
Total innovative firms with at least a cooperative agreement 2520 34.2
Horizontal R&D cooperation (H)* 613 24.3
Vertical R&D cooperation (V)* 1520 60.3
Institutional R&D cooperation (I)* 1954 77.5
* H: Competitors; V: Suppliers and/or Customers; I: Consultants, commercial labs or private R&D institutes; universities; government or public research institutes; technological centres. 0 indicates NO and 1 indicates YES.

Note: Except for the 2 values in bold, the rest of % are computed over the total number of firms cooperating.

Which are the main determinants of cooperation?

Related to the drives of R&D cooperation we confirmed that, in the case of Spanish firms, incoming spillovers were an important determinant of the choice of cooperating with any type of partner, regardless of the sector, but this impact was significantly higher in the case of partnerships with research institutions and universities. This result is consistent with the notion that firms which are able to get more benefits from external knowledge might be more likely to engage in cooperation agreements with the research base or, at least, with firms outside their own industry. Similarly, public funding also played a key role in the firms’ decisions to cooperate, especially when the partners are research institutions. This may be related to the fact that much of the public funding for innovation aims to encourage and promote knowledge transfer from research institutions to companies. Results also show that large firms are more likely to cooperate with all types of partner than small firms, highlighting the fact that large firms are more likely to face the commitment required in partnerships and better reap the returns of cooperation agreements.

Are there relevant differences in the patterns of cooperation in manufactures and services?

The differences found among the main determinants of R&D cooperation across sectors are also of great interest. In the case of Spanish firms, there was a greater propensity to cooperate in the service sector (40%) than in manufactures (31%). Additionally, this lower probability of R&D cooperation for manufactures was more pronounced in the case of horizontal cooperation (with competitors). This can be related with previous findings suggesting that in the manufacturing sector, for which legal protection methods are in general more important than for the service sector, cooperation may act as a substitute to legal protection through patenting. Also, the results point to the fact that firms in the service sector see cooperation agreements as an effective way to enhance and complement their human resources for carrying out R&D activities. These differences are presumably due to sectoral differences in the orientation of innovations in industrial and services firms, since, for instance, innovation is more closely involved with worker skills in the services sector than in manufactures, where machine and equipment play a more important role in the innovation process.

Comparing Spanish innovative and cooperative firms to other European countries: Evidence from the Community Innovation Survey in 2004-2012

The Community Innovation Survey allows to compare innovation and competiveness of firms, industries, and countries across Europe. It includes EU member states and Iceland, Norway, Croatia, Serbia and Turkey (with some exceptions across the seven waves). In here, we consider the last five waves (i.e. 2004-2012) for a most comprehensive picture, since in 2004 new member states were included in the survey.[1]

In the period considered, more than 700,000 companies participated in the survey each year; of these, about one-third declared to have undertook innovation activities[2]. Countries differ significantly in terms of the innovation behaviour of their firms. Fig. 1 shows the share of innovative enterprises on total enterprises by country and wave, ordered by the average shares over the four waves. The average share of innovative firms ranges from the highest one of Germany (64%) to the lowest one of Romania (16%). Spain occupies the second half of the ranking, with an average share of innovative firms of 30%. Such variety is pervasive also in terms of the trend across the years. In particular, Spain shows a decreasing pattern; in 2004, the share of innovative firms is 35%, while in the last wave drops to 23%. Similar declining trends are shown by Poland and Estonia, while Malta is the only country with increasing shares; the remaining countries exhibit more fluctuating trends over the years.

Fig. 1 – Share of innovative firms on total firms

Fig. 1

Source: EUROSTAT, Community Innovation Survey

R&D cooperation among EU countries concerns about one-quarter of innovative firms (average on the four waves). Fig. 2 shows the shares of cooperative innovative firms by country and wave. The country ranking lowest is Italy (13%), while Cyprus is the country with the highest share (54%). In the last two waves, the percentage of cooperative innovative firms of EU members increase from 25% in 2010 to 31% in 2012. Spain collocates among the bottom rows with an average share of 21%. Spain is among the countries which significantly increase the share of cooperative innovative firms in the latest years, from 22% in 2010 to 29% in 2012; similarly, Belgium increases its share from 42% in 2010 to 52% in 2012, while other countries experience a decline instead, such as for example Luxembourg (from 32% in 2010 to 20% in 2012). However, likewise the statistics on the share of innovative firms discussed above, the shares of cooperative innovative firms for each country tend to fluctuate over time. In the case of Spain, the combination of a decrease in the share of innovative firms as discussed above and an increase of the share of cooperative innovative firms signal a possible reinforcement of the links between technological cooperation and innovativeness, meaning that the firms which manage to be innovative are also cooperating to a significant extent.

Fig. 2 – Share of innovative firms with any type of cooperation

Fig. 2

Source: EUROSTAT, Community Innovation Survey

Firms rely on both internal and external sources of knowledge to sustain their competitive advantage. With respect to R&D expenditures, the Community Innovation Survey provides data for in-house R&D and external R&D (i.e. R&D contracted out to other enterprises or research organisations). Fig. 3 shows the shares of innovative firms with internal and external R&D by country, averaged on the period 2004-2012. Firms from EU-28 countries which are engaged in internal R&D constitute 39% of innovative firms, while only 18% of innovative firms carry out external R&D. For internal R&D, Bulgaria has the lowest share (11%), while Finland ranks at the top (77%). In terms of external R&D, the lowest share belongs to Malta (6%), while Finland has the highest one (32%). Spain stays in the bottom-half of the ranking, both in terms of internal R&D (35%) and external R&D (19%), although the latter is slightly higher than EU-28 average.

Fig. 3 – Average shares of innovative firms with internal and external R&D, 2004-2012

Fig. 3

 Source: EUROSTAT, Community Innovation Survey

By looking at the trends over the period 2004-2012, the shares of innovative firms with internal R&D in Spain vary across time as shown in Fig. 4, with the highest figure registered in 2012 (41%), about two percentage-points above EU-28 countries in the same year. About the trends of external R&D showed in Fig. 5, Spain experiences a lower point in 2004, and then a steady increase until 2012, where the percentage of innovative firms with external R&D reaches the same level as in 2004. The increase of both internal and external R&D in the latest years suggests an intensification of the linkage between R&D expenditures and innovation for Spanish firms; if we consider the decreasing trend of the share of innovative firms in the period considered, this suggests that for the firms which manage to stay (or start to be) innovative, R&D remains an important source of knowledge.

Fig. 4 – Share of innovative firms with internal R&D, 2004-2012

  Fig. 4

Source: EUROSTAT, Community Innovation Survey

Fig. 5 – Share of innovative firms with external R&D, 2004-2012

 Fig. 5

Source: EUROSTAT, Community Innovation Survey 

[1] We consider the following core innovative sectors for 2004-2006: Mining and Quarrying; Manufacturing; Electricity, gas, water supply; Transport, storage and communication; Financial Intermediation; Wholesale trade and commission trade, except of motor vehicles and motorcycles; Computer and related activities; Architectural and engineering activities and related technical consultancy; Technical testing and analysis. For 2008-2012: Mining and Quarrying; Manufacturing; Electricity, gas, steam and air conditioning supply; Water supply, sewerage, waste management and remediation activities; Wholesale trade, except of motor vehicles and motorcycles; Transportation and storage; Publishing activities, Telecommunications, Computer programming, consultancy and related activities, Information service activities; Financial and insurance activities;  Architectural and engineering activities; technical testing and analysis.

[2] Innovative firms are those which have product or/and process innovation, regardless of organisational or marketing innovation, including enterprises with abandoned/suspended or on-going innovation activities.

Does technological cooperation impact innovative performance in Spanish firms?

Recent studies have emphasized that the development of new products in firms largely depends on the firm’s ability to build networks and partnerships as a way to incorporate external knowledge for innovation. Is this true in the Spanish case?

Using the Spanish Technological Innovation Panel from 2004 to 2012 and following a two-stage approach to address the selection bias on the estimation of the innovation performance model, we provide evidence on the issue. As shown in the results provided in the first paper of Task 1 in this project (INNOREDES 1.1), technological collaborations are found to be positive and statistically significant, pointing to a positive benefit from cooperation with firms or institutions. Our results conclude that firms maintaining research collaborations with partners are able to get a higher share of innovative sales if compared with those not carrying out cooperation agreements.

The impact of cooperation is much clearer in the case of large firms, where technological alliances have a significant effect on the generation of both incremental and radical innovations (incremental implies a product which is new only for the firm, whereas the radical one is new also for the market), although the latter is higher. For small firms, cooperation in innovative activities only presents a significant impact on radical innovations.

The impact of cooperation does not seem to differ before and during the crisis, being significantly positive in both cases, although of a slightly higher value in the crisis period. This higher impact in the crisis could be related to the fact that in a crisis period, with lower funding levels, firms would be more cautious with the resources they spend in new innovation projects and try to choose those with higher chances of success. In such a case, the return obtained from cooperation strategies would be higher.

Finally, collaborations exclusively with national partners and those exclusively with international partners are found to be positive and statistically significant, pointing to a positive benefit from cooperation with external firms or institutions no matter the geographical scope of the alliances. Moreover, our results conclude that firms maintaining research collaborations with partners abroad increase the share of innovative sales more than those that collaborate only with partners located in the same geographical area. This can be explained by the fact that collaboration with partners abroad can improve access to new or complementary technologies and resources that provide less redundant pieces of knowledge, which would allow enhancing innovation.

Box 3

How importantly is technological cooperation used by Spanish firms?

Collaborative agreements have become a strategy of knowledge sharing and transfer across firms which are largely recognised as an important (quasi-market) mechanism to access such external knowledge. Accordingly, for many firms it is becoming increasingly important to cooperate with other organizations to carry out their R&D activities. How importantly is this technological cooperation used by Spanish firms?

As shown in the first paper related to Task 1 in the project (INNOREDES 1.1), an average of 74% of Spanish firms in the period under consideration (2004-2012) declares to make some innovation although with a decreasing trend, more accentuated in the crisis period. This share is higher in the case of firms with less than 200 employees, for which the average amounts to 78%, and 64% of large firms innovating. However, the crisis from 2009 seems to affect small firms more importantly, with the share of small firms that innovate decreasing considerable from 2010.

Image 1

Also, around 36% of innovative firms in Spain cooperate in innovation activities. However, this share is higher in the case of firms with more than 200 employees than in the case of SMES (less than 200 employees): 34% versus 44%, respectively. This share is maintained quite stable along the expansion period (2004-2008), whereas is seems to increase in the crisis (2009-2012). This time profile in the proportion of cooperative firms is reproduced both for small and large firms.

Image 2

Figure 3 displays the distribution of the types of alliance by geographical areas and their temporal pattern, revealing interesting results. Research alliances with national partners are much higher than with foreign partners. On average, more than 60% of collaborative firms maintain research alliances exclusively with national partners with a decreasing pattern from 2005. The national nature of the majority of technological partnerships is not exclusive to the Spanish case, since previous studies for French and Dutch firms have also shown such pattern. The second most common type of alliance is that including both national and international partners (around 35%), a share increasing over time.

Image 3

Box 1

Is technological cooperation related to innovation performance?

Going into the detail of the innovative results obtained by Spanish firms, in Figure 4 we observe the share of sales due to innovative products, and the average share in the period under consideration (2004-2012) is much higher in the case of cooperative firms (31%) than in the case of non-cooperative firms (25%), a profile which is maintained along time. A test of differences in the mean between cooperative and non-cooperative firms is rejected in all years.

Image 4

When disaggregating by firm’s size, Figures 5 and 6 display that in general, small firms present higher innovative results than large firms, this being the case no matter if the firm cooperates or not.

Image 5

Image 6

Box 2

La Fundación BBVA otorga una ayuda al proyecto INNOREDES

logofbbvadoscoloresrepasadoLa Fundación BBVA otorga una de sus cinco ayudas a proyectos de investigación en el área de socioeconomía a un equipo integrado y liderado por investigadores del grupo AQR. El proyecto “Redes de colaboración tecnológica e innovación. Determinantes y efectos sobre la competitividad de las empresas españolas” ha sido uno de los 5 seleccionados por ser financiado dentro de la convocatoria de las Ayudas Fundación BBVA a Proyectos de Investigación en Socioeconomía. El número de solicitudes presentadas en esta área superó el centenar. El equipo del proyecto está compuesto por los miembros de AQR R. Moreno, como IP, J.Ll. Carrión, E. López-Bazo, R. Ramos, V. Royuela, J. Suriñach y E. Vayá. Asimismo cuenta con la participación de R. Crescenzi (LSE), E. Miguelez (Univ. Bordeaux) y S. Usai (CRENoS-Univ. of Cagliari).

El objetivo general del proyecto, a ejecutar a lo largo de los dos próximos años, es el de proporcionar evidencia robusta sobre el papel que juega la colaboración tecnológica y la participación en redes globales de innovación en el éxito de la actividad innovadora de la empresa española y del efecto que la misma tiene tanto sobre los resultados empresariales, especialmente en cuanto a su competitividad internacional, como en la generación de ocupación y la desigualdad de ingresos.

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