Innovation and Spillovers: Evidence from European Regions

The importance of innovation for the economic performance of industrialized countries has been largely stressed recently by the theoretical and empirical literature. Moreover the intensity of knowledge externalities in generating innovation, is the key parameter in determining sustained growth in a model with endogenous technological change. This paper takles the extremely important task of identifying and estimating a "production function" of innovation for European regions using Patent and R&D data, 1977-1995. After correcting for the endogeneity bias we find that the elasticity of innovative output to R&D employment is around 1, while knowledge externalities exist, are geographically localized in an area of 200 kms and are significant. Nevertheless these externalities are not strong enough to generate sustained growth, and therefore European regions' innovative activity is better represented by a model as Jones (1995) than by one as Romer (1990). Knowledge spillovers could be due to the similar technological specialization of close regions, as we find significant spillovers also in technological space.Regions, R&D, spillovers, demand pull, endogenous innovation

The International Dynamics of R&D and Innovation in the Short and in the Long Run

In this paper we estimate the dynamic relationship between employment in R&D and generation of knowledge as measured by patent applications across OECD countries. In several recently developed models, known as `idea-based' models of growth, the afore mentioned "idea-generating" process is the engine of productivity growth. Moreover, in real business cycle models technological shocks are an important source of fluctuations. Our empirical strategy is able to test whether knowledge spillovers are strong enough to generate sustained endogenous growth and to estimate the quantitative impact of international knowledge on technological innovation of a country in the short and in the long run. We find that a country's stock of knowledge, its R&D resources and the stock of international knowledge move together in the long run. International knowledge has a very significant impact on innovation. As a consequence, a positive shock to R&D in the US (the largest world innovator) has a significant positive effect on the innovation of all other countries. Such a shock produces its largest effect on domestic and international innovation after five to ten years from its occurrence.

Financing Entrepreneurial Firms in Europe: Facts, Issues, and Research Agenda

During the latter part of the 1990s the introduction of the euro, the dramatic increase in the supply of venture capital in most EU countries, and the creation of several ‘new’ equity markets targeted at innovative firms have dramatically transformed the financing prospects of European entrepreneurial firms. In this study we contribute to a deeper understanding of their actual relevance by (i) gathering new evidence on European venture capital and on Europe’s ‘new’ stock markets, (ii) providing a rigorous econometric analysis of their impact on corporate growth, and (iii) elaborating on our findings to devise a research agenda.venture capital, initial public offerings (IPOs), entrepreneurship, going public, accounting standards

The role of venture capital in alleviating financial constraints of innovative firms

Venture capital is considered to be the most appropriate form of financing for innovative firms in high-tech sectors. We provide an assessment of venture capital with some of Europe’s most innovative and successful companies: those listed on Europe’s “new” stock markets. Venture capital is effective in helping these firms overcome credit constraints but has a limited effect on their ability to grow and create jobs. This result clashed with the evidence on the role of VC for US companies. Yet, VC is not only about money but also about steering and supporting portfolio companies, activities which depend on venture capitalists’ educational and organizational background as well as on the legal and cultural environment in which they operate.Venture capital; innovative firm; financing constraint; start-up; IPO; investor activism; legal system

Innovation and Spillovers: Evidence from European Regions

The importance of innovation for the economic performance of industrialized countries has been largely stressed recently by the theoretical and empirical literature. Moreover the intensity of knowledge externalities in generating innovation, is the key parameter in determining sustained growth in a model with endogenous technological change. This paper takles the extremely important task of identifying and estimating a production function of innovation for European regions using Patent and R&D data, 1977-1995. After correcting for the endogeneity bias we find that the elasticity of innovative output to R&D employment is around 1, while knowledge externalities exist, are geographically localized in an area of 200 kms and are significant. Nevertheless these externalities are not strong enough to generate sustained growth, and therefore European regions' innovative activity is better represented by a model as Jones (1995) than by one as Romer (1990). Knowledge spillovers could be due to the similar technological specialization of close regions, as we find significant spillovers also in technological space

Asymmetric Information and Monetary Policy in Common Currency Areas

In a Common Currency Area (CCA) the Common Central Bank sets a uniform rate of inflation across countries, taking into account the area’s economic conditions. Suppose that countries in recession favor a more expansionary policy than countries in expansion, a conflict of interest between members arises when national business cycles are not fully syncronized. If governments of member countries have an informational advantage over the state of their domestic economy, such conflict may create an adverse selection problem: national authorities overemphasize their shocks, in order to shape the common policy towards their needs. This creates an inefficiency over and above the one-policy-fits-all cost discussed in the optimal currency area literature. In order to minimize this extra-burden of asymmetric information, monetary policy must over-react to large symmetric shocks and under-react to small asymmetric ones. The result is sub-optimal volatility of inflation

Financial Literacy and Financial Resilience: Evidence from Italy

In this paper, we examine financial literacy and financial resilience in Italy. We show that financial literacy is particularly low among the young, women, and the less educated. We also highlight regional differences in financial knowledge, with individuals in Southern Italy performing worse. We find that the lack of financial literacy increases the probability of being unable to face financial shocks and leads to an overaccumulation of debt. Hence, our results support the hypothesis that financial literacy can be considered an enabling factor for financial resilience

The Dynamics of R&D and Innovation in the Short Run and in the Long Run

In this paper we estimate the dynamic relationship between resources used in R&D by some OECD countries and their innovation output as measured by patent applications. We first estimate a long-run cointegration relation using recently developed tests and panel estimation techniques. We find that the stock of knowledge of a country, its R&D resources and the stock of international knowledge move together in the long run. Then, imposing this long-run relation across variables we analyze the impulse response of new ideas to a shock to R&D or to a shock to innovation by estimating an error correction mechanism. We find that internationally generated ideas have a very significant impact in helping innovation in a country. As a consequence, a positive shock to innovation in a large country as the US has, both in the short and in the long run, a significant positive effect on the innovation of all other countries

Financing Entrepreneurial Firms in Europe: Facts, Issues, and Research Agenda

During the latter part of the 1990s the introduction of the euro, the dramatic increase in the supply of venture capital in most EU countries, and the creation of several new' equity markets targeted at innovative firms have dramatically transformed the financing prospects of European entrepreneurial firms. In this study we contribute to a deeper understanding of their actual relevance by (i) gathering new evidence on European venture capital and on Europe's new' stock markets, (ii) providing a rigorous econometric analysis of their impact on corporate growth, and (iii) elaborating on our findings to devise a research agenda

Underpricing and voluntary disclosure: The case of mining IPOs in Australia

We study the extent to which voluntary disclosure of information in IPO prospectuses of mining companies is associated with lower IPO underpricing. We study the disclosure of information at IPO, looking at the IPO prospectus which is the fundamental document providing investors with information about the company. While its format and main contents are largely fixed by law, there is considerable scope for voluntary disclosure. Mining is a highly capital intensive endeavor and access to equity capital is a key requirement for the development of a mine. We find that the quality of information disclosure, as well as the characteristics of the mining companies, indeed affects underpricing