I. The inducement of innovations, 412. — II. Decision processes in the inducement of innovations, 415. — III. The adoption of new technologies, 422. — IV. The adjustment path of actual to latent demand, 424. — V. Induced innovations and Argentine agricultural development, 428

This paper examines the impact of changes in job security on corporate innovation in 20 non-U.S. OECD countries. Using a difference-in-differences approach, we provide firm-level evidence that the enhancement of labor protection has a negative impact on innovation. We then discuss possible channels and find that employee-friendly labor reforms induce inventor shirking and a distortion in labor flow. Further investigation reveals that the negative relation is more pronounced in (1) firms that heavily rely on external financing, (2) firms that have high R&D intensity, (3) manufacturing industries, and (4) civil-law countries. Our micro-level evidence indicates that enhanced employment protection impedes corporate innovation

The present paper is a time series analysis of the relationship between consumption and income innovations. The empirical findings based on aggregate, seasonally unadjusted quarterly UK and German data suggest that the adjustment of consumption to income innovations is not instantaneous (within a quarter), and that the estimated marginal propensities to consume out of income innovations are too large to be compatible with the predictions of the rational expectations-life cycle model. It is found that the same qualitative results are obtained when the disposable income data for West Germany is disaggregated into labour income, transfer payments and profits (transferred from the business sector to households

When companies select and use compensation peers to determine chief executive officer (CEO) compensation, they create unintended peer effects on corporate innovation due to the similarities between these companies and their compensation peers in terms of product markets, CEO characteristics, and compensation schemes. After controlling for industry and geography peer groups, the findings confirm that the average innovation activity of compensation peers is a significant and distinct predictor of corporate innovation. Further analysis showed that (1) the peer effect is stronger in firms and compensation peers that pay their CEOs using long-term compensation, in firms with stronger labor market competition and board monitoring, and in peer companies that experience higher innovation competition and are closer to the median peer company in the peer group; (2) the obtained results are likely not attributable to the knowledge spillover mechanism and are more consistent with the peer pressure mechanism; and (3) the Securities and Exchange Commission's 2006 executive compensation disclosure rules may have generated peer effects

We demonstrate theoretically and empirically that strategic considerations are important in shaping the cash policies of innovative firms. In our model, firms compete in product markets with uncertain structure using cash as a commitment device to invest in innovation. We show that firms’ equilibrium cash holdings are related to the expected intensity of competition. The sign and magnitude of this relation depends on firms’ financial constraints. Consistent with the strategic motive for hoarding cash, we show that firms’ cash holdings are negatively affected by their rivals’ cash-holding choices, even more so when competition is expected to be intense

Does a financial system architecture anchored on banks perform better than one centered on markets in fostering technological innovations as engines of growth? In a panel of industrial sectors across a large cross section of countries, I find that while market-based systems have a general positive effect on innovations in all economic sectors, bank-based systems foster more rapid technological progress in more information-intensive industrial sectors, suggesting a heterogeneous impact of financial architecture. Thus, the relative performance of bank-based systems vis-à-vis market-based systems depends on the industrial structure of the economy

We provide empirical evidence on the positive effect of non-executive employee stock options on corporate innovation. The positive effect is more pronounced when employees are more important for innovation, when free-riding among employees is weaker, when options are granted broadly to most employees, when the average expiration period of options is longer, and when employee stock ownership is lower. Further analysis reveals that employee stock options foster innovation mainly through the risk-taking incentive, rather than the performance-based incentive created by stock options

I examine the role of banking competition for transmission of incentives to the creation of innovative firms. Exploiting the 2012 Start-Up Italy Act, designed to foster firm creation through public bank guarantees, I document that the policy increased the creation of innovative firms by 24 percent between 2012 and 2015, but only in provinces where banking competition is stronger. Weaker banking competition leads to less guaranteed lending, fewer venture capital deals and lower leverage for these firms, resulting in higher entrepreneurial migration. The findings suggest that bank market power plays a crucial role in shaping the market for entrepreneurial finance

The paper analyzes the organization of the R&D activity in an incomplete contract framework. It provides theoretical foundations: (a) to understand how the allocation of property rights on innovations may affect both the frequency and the magnitude of these innovations; (b) to rationalize commonly observed features in research employment contracts, such as shop rights, trailer clauses, and the "hired for" doctrine; (c) to discuss the robustness of the so-called Schumpeterian hypotheses to endogenizing the organization of R&D; and (d) to provide a rationale for cofinancing arrangements in research activities

We examine the quantitative impact of policy-induced changes in firms’ innovative investment on growth in aggregate productivity and output in a model that nests several of the canonical models. We isolate two statistics, the impact elasticity of aggregate productivity growth with respect to aggregate innovative investment and the degree of intertemporal knowledge spillovers in research, that shape the model’s predicted dynamic response to a change in the innovation intensity of the economy. Given measures of these statistics, there is only modest scope for increasing aggregate productivity and output over a 20-year horizon with uniform innovation subsidies to firms’ investments in innovation of a reasonable magnitude, but the welfare gains may be substantial