A Dynamical Model of Optimal Allocation of Resources to R&D

We provide steps towards a welfare analysis of a two-country endogenous growth model where a relatively small follower absorbs part of the knowledge generated in the leading country. To solve a suitably defined dynamic optimization problem an appropriate version of the Pontryagin maximum principle is developed. The properties of optimal controls and the corresponding optimal trajectories are characterized by the qualitative analysis of the solutions of the Hamiltonian system arising through the implementation of the Pontryagin maximum principle. We find that for a quite small follower, optimization produces the same asymptotic rate of innovation as the market. However, relative knowledge stocks and levels of productivity differ, in general. Thus, policy intervention has no effect on growth rates but may also affect these relative levels. The results are different for not so small follower economies. The present paper provides the rigorous justification for the results presented in Aseev, Hutschenreiter and Kryazhimskii, 2002

Optimal Investment in R&D with International Knowledge Spillovers

We provide steps towards a welfare analysis of a two-country endogenous growth model where a relatively small follower absorbs part of the knowledge generated in the leading country. To solve a suitably defined infinite-horizon dynamic optimization problem a specialized version of the Pontryagin maximum principle had to be applied. For a quite small follower, optimization produces the same asymptotic rate of innovation as the market. However, relative knowledge stocks and levels of productivity differ in the two solutions. Thus, optimal policy intervention has no effect on long-run growth rates but affects these relative levels

Endogenous Growth, Absorptive Capacities and International R & D Spillovers

Interaction between own research and externally produced knowledge has been observed both at the firm and the macro level. This paper intends to fill a gap between endogenous growth models which treat knowledge capital as either a purely national or global public good. As a generalization, we introduce "absorptive capacities" of a smaller country "tapping" the knowledge stock of a larger autarkic country (the technological leader, evolving along its steady state) by means of own investment in R&D into an endogenous growth model with brand proliferation due to Grossman and Helpman. The asymptotic behavior of the ensuing non-linear dynamic model is analyzed in detail. Long-run solutions for the variables representing the evolution of the follower country are compared with the perfect-autarky steady states for both countries. Along a trajectory consistent with perfect foresight in the valuation of the firm, the follower's long-run rate of innovation approaches that of the leader which implies an improvement in the long-run innovative and growth performance of the follower as measured against the perfect autarky benchmark. The limit ratio of the knowledge stocks originating in the two countries is calculated explicitly. The present model is richer in its dynamic behavior than the basic model of brand proliferation. Unlike the basic model, an originally stagnant, non-innovating follower economy might still be able to embark on an equilibrium trajectory with ongoing innovation, in particular when it is linked informationally to a rapidly innovating leader. The model accounts for a number of observed facts about international economic growth. Perfect-foresight trajectories resulting in catching up and secular changes in leadership by taking over in terms of knowledge stocks and total factor productivity are generated by the present model under well-defined conditions. At the same time, the opportunities of catching up and taking over are shown to be limited in the sense that the backward and forward time-lags vis-a-vis the leader tend to finite values. While long-run rates of innovation and growth are equalized, implicit transitional growth differentials give rise to statements about convergence (or divergence) across countries depending on the set of conditions prevailing in the two countries initially

OECD Reviews of Innovation Policy: Austria 2018

Austria’s innovation system has developed rapidly over the past two decades. From 1998 to 2016, Austria showed the second highest increase in R&D intensity of all OECD countries, exceeded only by Korea. The rapid growth of R&D inputs was matched by a similar increase in human resources for STI. Increased resources have helped to expand STI activities and opportunities for learning, but outputs and outcomes have not always met expectations. To become a leader in innovation, Austria faces the challenge of transforming its sizeable investment in STI into more decisive economic and social impacts

Coping with Societal Challenges: Lessons for Innovation Policy Governance

Grand societal challenges, such as global warming, can only be adequately dealt with through wide-ranging changes in technology, production and consumption, and ways of life, that is, through innovation. Furthermore, change will involve a variety of sectors or parts of the economy and society, and these change processes must be sufficiently consistent in order to achieve the desired results. This poses huge challenges for policy-making. In this paper, we focus on implications for the governance of innovation policy, i.e., policies influencing a country's innovation performance. Based on a systemic understanding of innovation and the factors shaping it, the paper highlights the need for effective coordination of policies influencing innovation and what changes in innovation policy governance this may require. To throw further light on how this may be realized, the paper discusses evidence on national innovation policy practice, from Finland, the Netherlands and Sweden, respectively, drawing on the country reviews of innovation policy conducted by the OECD as well as other sources. It is concluded that, for innovation policy to tackle societal challenges effectively, clearer goals and stronger and better coordination among the various actors-both public and private-whose actions matter for innovation performance will be required. Based on the experiences of the three countries, the paper particularly considers the role that comprehensive and inclusive innovation policy councils, with the prime minister in a central role, may play in such a process

Coping with Societal Challenges: Lessons for Innovation Policy Governance

Grand societal challenges, such as global warming, can only be adequately dealt with through wide-ranging changes in technology, production and consumption, and ways of life, that is, through innovation. Furthermore, change will involve a variety of sectors or parts of the economy and society, and these change processes must be sufficiently consistent in order to achieve the desired results. This poses huge challenges for policy-making. In this paper, we focus on implications for the governance of innovation policy, i.e., policies influencing a country’s innovation performance. Based on a systemic understanding of innovation and the factors shaping it, the paper highlights the need for effective coordination of policies influencing innovation and what changes in innovation policy governance this may require. To throw further light on how this may be realized, the paper discusses evidence on national innovation policy practice, from Finland, the Netherlands and Sweden, respectively, drawing on the country reviews of innovation policy conducted by the OECD as well as other sources. It is concluded that, for innovation policy to tackle societal challenges effectively, clearer goals and stronger and better coordination among the various actors—both public and private—whose actions matter for innovation performance will be required. Based on the experiences of the three countries, the paper particularly considers the role that comprehensive and inclusive innovation policy councils, with the prime minister in a central role, may play in such a process