Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp06063.pdf Non-technical summarySchumpeter was the first to acknowledge the importance of continuous innovation in an economy. Especially against the background of the knowledge economy, innovation nowadays is deemed to be the main driving force of a country's competitive strength. Statistics show that there still is a big gap between the EU25 on the one hand and Japan and the US on the other hand when the R&D expenditure relative to the GDP is considered. As a result the European Commission very recently launched an integrated innovation/research action plan, which calls for a major upgrade of the research and innovation conditions in Europe. Mobilizing EU funds and instruments to support research and innovation is one of the objectives.Government intervention in the domain of private R&D activities is justified by the argument of market imperfection and has since long been common practice in most industrialized countries. R&D entails the non-excludability characteristic of a public good. Private investments in R&D can never be fully appropriated because other companies have the opportunity to free ride. This leads to underinvestment in R&D activities: the level of R&D expenditure will be below the socially desirable optimum. Public funding reduces the price of socially valuable R&D projects for private investors to a level at which it becomes profitable for companies to invest.The big challenge for governments obviously is to allocate public funding only to those projects that are socially beneficial and would not be carried out in the absence of a subsidy. This is however not straightforward as companies always have an incentive to apply for public funding. It might be the case that a subsidy merely replaces -or crowds out-private money and does not engender additional R&D investments.This paper provides empirical evidence on the relationship between public R&D funding and private R&D efforts in Flanders and Germany. Evaluation studies are inconclusive as some report crowding-out effects while others reject them. This is partly due to the fact that researchers use very different databases and econometric methods resulting from differences in information availability in different countries. Therefore it is useful to compare the impact of funding in different countries using similar methods and datasets.A comparison between Germany and Flanders seems to be a reasonable choic...

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This paper empirically analyzes the effect of R&D activities, human resource and knowledge management, and the organization of knowledge sharing within a firm on the absorptive capacity of innovative firms for three different types of knowledge, namely absorptive capacity to use knowledge from a firm's own industry, knowledge from other industries and knowledge from research institutions. Using data from the German innovation survey, we investigate how firms are able to exploit knowledge from external partners for successful innovation activities. The estimation results show that the determinants of absorptive capacity differ with respect to the type of knowledge absorbed for innovation activities. In particular, we find that the R&D intensity does not significantly influence absorptive capacity for intra-and inter-industry knowledge. Additionally, our results suggest that absorptive capacity is path dependent and firms can influence their ability to exploit external knowledge by encouraging individuals' involvement in a firm's innovation projects.

Applied Econometrics, Germany, Innovation success, R&D cooperation, L25, O31, C24,