Innovation under taxes versus permits : how a commonly made assumption leads to misleading recommendations

The literature on the impact of economic instruments (typically taxes and tradable permits) on the level of innovation is usually based on the assumption that innovation reduces the slope of the marginal abatement cost curve. This assumption, which usually leads to the conclusion that taxes induce higher levels of innovation than tradable permits, is however never motivated. In this short article, we analyse the assumption by introducing innovation in the production function as a polluting firm and by showing how it affects the corresponding marginal abatement cost curve. We show that the slope of the marginal abatement cost curvedoes not necessarily decrease with the level of innovation. As a consequence, previous analyses lead to misleading policy recommendations

Technology Transfer Versus Transformation

Research defines technology transfer from the viewpoint of business processes and personnel skills (Rogers, Takegami & Yin, 2001). The focus is on action to adapt and embrace an existing technology to gain efficiency (Gilsing et al., 2011). We examine this phenomenon as innovation based on the ability to transfer existing needs, desires, behaviors, and expectations to new technology. We find technology is adopted when transfer opportunities become manifest and each transfer builds upon its predecessor to create transformation in the long term. This relationship between transfer and transformation gradually builds technology adoption across chasms of the S-curve technology innovation curve

Competition, R&D and the cost of innovation

This paper proposes a model in the spirit of Aghion and al. (2005) that relates the magnitude of the impact of competition on R&D to the cost of innovation. The effect of competition on R&D is an inverted U-shape. However, the shape is flatter and competition policy is therefore less relevant for innovation when innovations are relatively costly. Intuitively, if innovations are costly for a firm, competitive shocks have to be significant to alter its innovation decisions. Empirical investigations using a unique panel dataset from the Banque de France show that an inverted U-shaped relationship can be clearly evidenced for the largest firms, but the curve becomes flatter when the relative cost of R&D increases. For large costs, the relationship even vanishes.competition ; R&D ; innovation

The Dynamics of Contract Evolution

Contract scholarship has given little attention to the production process for contracts. The usual assumption is that the parties will construct the contract ex nihilo, choosing all the terms so that they will maximize the surplus from the contract. In fact, parties draft most contracts by slightly modifying the terms of contracts that they have used in the past, or that other parties have used in related transactions. A small literature on boilerplate recognizes this phenomenon, but little empirical work examines the process. This Article provides an empirical analysis by drawing on a data set of sovereign bonds. The authors show that exogenous factors are key determinants in the evolution of these contracts. We find an evolutionary pattern that roughly separates into three stages. Stage one where a particular standard form dominates; stage two where there are external shocks and marginal players experiment with deviations from the standard form; and stage three where a new standard emerges. The pattern confirms roughly to the S curve commonly described in the product innovation literature. The authors also find that more marginal law firms are likely to be leaders in innovation at early stages of the innovation cycle but that dominant law firms are the leaders at later stages