Essays on Innovation

One of the top priorities of any policymaker is to ensure long-term economic growth, where one of the main components is technology. A major driver for technology advancements is innovation that increases productivity and promotes economic growth. This dissertation serves as further understanding of the innovation process. Specifically, this thesis focuses on three different aspects: i) how to incentive re- search (Chapter 1 and 2), how to organise it (Chapter 3 and 4), and how decision making occurs (Chapter 5). In Chapters 1 and 2, I examine how research responds to different incentives. I analyse whether university research is more basic than the one of the private firms. Using a unique patent database using GM crops technology, where I can track the development of the technology since I identify the first patent issued in this field. One significant finding is that university patents generate broader use at the beginning of the technology cycle, while private firms research is as complement later. In Chapter 3 and 4, I study how research is organised within a firm, focusing on the degree of third-party involvement in new product development. I use the aircraft industry where each firm has a different innovation path due to the inherent structure of each one. One main result is that major involvement of third agents in the R&D process can save time and money, but requires effective monitoring and coordination to avoid delays and unexpected costs. In Chapter 4, I provide a unique case study using empirical evidence of the different innovation attitudes of Boeing and Airbus by tracking the careers of the inventors that have been present in at least one patent owned by any of these firms. I use a unique database where I can track the patent profile of the inventors and make inferences of each company’s innovation attitude. In Chapter 5, I use real options analysis to provide a tool to decision-makers where businesses in a duopoly face uncertainty in the outcome of the R&D phase. This chapter provides a broader approach to the real options analysis under strategic competition, and I find that a higher probability of success does not mean higher value for the firm since the preemption behaviour lowers the value of the investment opportunity.