Open Workshop by Prof. Priit Vahter: Complementarities and Learning Effects in the Innovation Value Chain

Speaker: Dr Priit Vahter, Tartu University, Estonia

We explore in this seminar the empirical evidence about the learning effects and complementarities in the innovation process of firms. We focus especially on the classical research question whether openness of firms in terms of external innovation linkages generates complementarities with firm’s own R&D, and the related spillovers and learning effects.  

Using a panel dataset of Irish manufacturing plants covering data from two decades, we, firstly, test for ‘dynamic complementarities’ in the joint use of internal R&D and external knowledge sources. We find little evidence, either from considering successive cross-sectional waves of comparable surveys, or in terms of the strategy switch choices of specific plants, that there has been a systematic move towards the joint use of internal and external knowledge in innovation. We then test formally for the presence of complementarities in the joint use of internal R&D and external innovation linkages. In static terms we find no evidence of complementarity, but in dynamic terms find evidence that strategy switches by individual plants towards a more ‘open’ strategy are accompanied by increased innovation outputs.

Secondly, we show that there is empirical evidence suggesting externalities of firms’ openness in innovation. Openness in innovation may itself generate positive externalities by enabling improved knowledge diffusion. Without public intervention firms’ innovation strategies may be more ‘closed’ than the socially optimal level. Our results suggest that externalities of openness in innovation are significant and that they are positively associated with firms’ innovation performance. We find that these ‘spillover’ effects are unlikely to work through their effect on the spread of open innovation practices. Instead, they appear to positively influence innovation outputs by either increasing knowledge diffusion or strengthening competition.

Some relevant papers:

Love, J. H.; Roper, S.; Vahter, P. (2014). Dynamic Complementarities in Innovation Strategies. Research Policy, 43 (10),  1774−1784. 10.1016/j.respol.2014.05.005.

Roper, S.; Vahter, P.;  Love, J. H. (2013). Externalities of openness in innovation. Research Policy, 42 (9),  1544−1554. 10.1016/j.respol.2013.05.006.

Dr Priit Vahter is a Senior Research Fellow at the School of Economics and Business Administration of the University of Tartu. He received his PhD in Economics from the University of Nottingham in 2010. His research covers various determinants of innovation and firm performance and effects of international trade and FDI. In particular, his focus has been on micro-econometric research on open innovation, FDI spillovers, and the various effects of internationalization on firms. He has published papers at Research Policy, Strategic Management Journal, Review of World Economics, World Economy, Manchester School, Industry and Innovation, Journal of Comparative Economics, among others. Currently he is conducting research on complementarities and learning effects in innovation process, knowledge transfer through labour mobility and its effects on firm performance, learning effects from failure at firms. He has teaching experience in international economics, international business and innovation studies and supervises PhD students. He has in past worked as an Associate Professor at the University of Warwick (Warwick Business School) and as a Research Fellow at the University of Birmingham. He is also an External Research Associate at the UK Enterprise Research Centre.

Discussion moderated by Dr. Arnis Sauka.
Attendance is free of charge.