Essays on the Economics of Innovation

The thesis brings together three independent essays on the economics of innovation. I analyse the impact of competition on firm-level innovation (chapter 1) and the impact of different types of innovation on firm performance (chapter 2) looking at the top business R&D spenders of the world. I, then, switch my focus on researchers and analyse the determinants of brain drain in Europe (chapter 3).The first chapter is co-authored by Anabela Santos (European Commission) and Michele Cincera (ULB) and aims at assessing the impact of competition on firm-level innovation. The sample is composed of the world top corporate R&D spenders listed in the EU 2017 industrial R&D Scoreboard, and the analysis covers the years spanning from 2007 to 2016. We use an industry-year indicator, the inverse of the Lerner Index, as the indicator of competition for these firms that are leading in innovation efforts in the industries they are operating at the worldwide. R&D expenditures are used as the proxy for innovation. Model is estimated using two-stage least squares, to control for potential endogeneity of the competition indicator. Results confirm the existence of an inverted-U shaped relationship between competition and innovation. Further analysis is undertaken splitting the overall firm sample into services and manufacturing sectors according to technology and knowledge intensities and into the country of headquarters. We validate the inverted-U shaped relationship between competition and innovation for the firms in medium-high- and high-tech manufacturing sectors whereas we do not observe this impact for the firms operating in medium-low- and low-tech manufacturing sectors nor in services sectors. We also find differences in innovation behaviour of firms headquartered in the EU, US, Japan and China. While the inverted-U shaped relationship is highly pronounced for the Chinese firms, we find the U shaped impact of competition on the innovation of the EU and Japanese firms.The second chapter brings together firm-level R&D spending information with patent information, and aims at investigating the impact of different types of patented inventions on firm output growth performance controlling for R&D spending and other firm financials. The firm sample is sourced from the EU 2014 Industrial R&D Scoreboard that brings together the leading private sector R&D investors of the world. The analysis covers the years from 2005 to 2010. I consider forward-looking patent value indicators of breakthrough and general innovation using 7-year citation window, and backward-looking patent value indicators of originality and radicalness in innovation activities. Firm performance is estimated through a Cobb-Douglas production function. I allow for non-linearity in the relationship between innovation strategy and firm performance, and investigate sectoral heterogeneity looking at the impact in health industries and ICT producers. Models are estimated using two-stage least squares and generalised method of moments to control for potential endogeneity of innovation indicators. The findings confirm certain non-linearities and sectoral heterogeneities in the relationships between the different types of innovation and firm performance. ICT producers are growing with breakthrough innovations, generality and novelty in innovation process supporting the general-purpose technology feature of ICT. I, however, do not find a positive impact of technological breakthroughs nor a specific trend of generality and novelty in innovation process on productivity of pharmaceutical and biotechnology firms in the sample.The third chapter is co-authored by Christophe Colassin (ULB) and Michele Cincera (ULB) and aims at analysing the determinants of brain drain in Europe where there exists unbalances and polarisation between the States in terms of attractiveness for researchers despite the common policies and practices put in place by the European Union. The information about the mobility outflows are sourced from Centre for Science and Technology Studies and concern the year 2019. In order to analyse the macroeconomic determinants of mobility of researchers, the chapter brings together information from various data sources that attribute country-level values to the potential determinants of mobility outflows. We use a gravity model framework to detect quantitatively the pull and push factors of researchers' mobility including the 28 EU Member states in the time of analysis, and 3 additional Schengen countries, Norway, Iceland and Switzerland. In addition to the cultural and geographic proximity, we find that a country’s researcher base, entrepreneurial opportunities, knowledge intensity, public R&D spending and international collaborations increase the mobility of researchers within Europe whereas non-academic placements of researchers and the perception of virtual mobility as an alternative decrease the mobility. Researchers from countries with attractive research systems, more innovative private sector and more female researchers are found to be more mobile, whereas, the ones with higher GDP growth rates are less. We find that satisfaction with the recruitment process and the salary levels are decreasing factors for the mobility outflows. Finally, while fixed-term contracts in academia are found to be a factor that decreases the attractiveness; satisfaction with recruitment process, existence of the top R&D spending enterprises in the economy, and the freedom of academic exchange and dissemination are the factors that increases the attractiveness of a country for mobility inflows.