Working Paper: CEPR ID: DP2712
Authors: Pierre Mohnen; Larshendrik Röller
Abstract: This Paper develops a framework for testing discrete complementarities in innovation policy using European data on obstacles to innovation. We propose a discrete test of supermodularity in innovation policy leading to a number of inequality constraints. We apply our test to two types of innovation decisions: to innovate or not, and if so, by how much. We find that industries display a considerable amount of complementarity, with some industries being complementary across all obstacles. We also find that the lack of internal human capital (skilled personnel) is complementary to all the other obstacles in almost all industries. In this sense, our results suggest that internal human capital is key to any innovation policy, insofar that it is complementary to all the other factors that might hamper innovation activities.
Keywords: complementarity; supermodularity; innovation
JEL Codes: L5; O31; O38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lack of internal human capital (J24) | effectiveness of other innovation policies (O38) |
| internal human capital (J24) | intensity of innovation activities (O31) |
| complementarities (D10) | intensity of innovation (O31) |
| complementarities (D10) | probability of becoming an innovator (O35) |