Working papers published by the United Nations University - Maastricht Economic and social Research and training centre on Innovation and Technology http://www.merit.unu.edu/publications/wp.php UNU-MERIT 2013 by R. Bauchmüller - Centre−based childcare is seen as a public investment to facilitate maternal employment. Recent theoretical research proposes that such investments potentially lead to substantial gains in child development and thus to high returns for society as a whole. However, the empirical evidence is still scarce and often contradictory. This study is based on rich survey data of a large−scale cohort study of children living in the Netherlands at the beginning of the new millennium. The Netherlands has made substantial investments in the last two decades to make the market of centre−based provisions more professional and far−reaching and to improve children's school readiness. I study the impact of experiencing centre− rather than home−based childcare on language, cognitive and non−cognitive development, assessed at the age of 6. To assess whether very long or intensive childcare spells can be harmful, I account for possible non−linearity in the correlation between the centre−based childcare experience and the child outcomes. As sensitivity analyses, I also apply instrumental variable and structural equation modelling approaches to try to correct for potential biases in my estimates that would result, for example, from unobserved heterogeneity of parents and children. For both ordinary least square estimates as well as the sensitivity analyses the results do not support the significant short−term effects of centre−based childcare stated in the literature. Keywords: centre−based childcare, non/cognitive and language development, school readiness, non−linear effects, parental choice JEL: Classification I21, J13, J24 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-026 by W. Raymond, J. Mairesse, P. Mohnen & F. Palm - This paper introduces dynamics in the R&D to innovation and innovation to productivity relationships, which have mostly been estimated on cross−sectional data. It considers four nonlinear dynamic simultaneous equations models that include individual effects and idiosyncratic errors correlated across equations and that differ in the way innovation enters the conditional mean of labour productivity: through an observed binary indicator, an observed intensity variable or through the continuous latent variables that correspond to the observed occurrence or intensity. It estimates these models by full information maximum likelihood using two unbalanced panels of Dutch and French manufacturing firms from three waves of the Community Innovation Survey. The results provide evidence of robust unidirectional causality from innovation to productivity and of stronger persistence in productivity than in innovation. Keywords: R&D, Innovation, Productivity, Panel data, Dynamics, Simultaneous equations JEL classification: C33, C34, C35, L60, O31, O32 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-025 by S. Akçomak, E. Akdeve & D. Fındık - This paper provides a novel taxonomy of firms based on specialization versus diversification in production and markets. Firms may choose to specialize on few production activities or alternatively may build expertise in many activities. There is an accompanying decision when firms sell their products: whether to serve few or many markets. We argue that the location on the specialization−diversification spectrum significantly affects how firms manage innovation. For a sample of 90 innovator ICT firms in Ankara we find that cooperation structure, sources of innovation and funding of R&D display statistically significant different patterns according to the specialization−diversification taxonomy. Key words: management of innovation, core competency, expertise building, R&D, ICT JEL: O32, L22, L86 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-024 by D. McKenzie & M. Siegel - Most migration surveys do not ask about the legal status of migrants due to concerns about the sensitivity of this question. List randomization is a technique that has been used in a number of other social science applications to elicit sensitive information. We trial this technique by adding it to surveys conducted in Ethiopia, Mexico, Morocco and the Philippines. We show how, in principle, this can be used to both give an estimate of the overall rate of illegal migration in the population being surveyed, as well as to determine illegal migration rates for subgroups such as more or less educated households. Our results suggest that there is some indication in this method: we find higher rates of illegal migration in countries where illegal migration is thought to be more prevalent and households who say they have a migrant are more likely to report having an illegal migrant. Nevertheless, some of our other findings also suggest some possible inconsistencies or noise in the conclusions obtained using this method, so we suggest directions for future attempts to implement this approach in migration surveys. Keywords: Illegal migration; List Randomization; Item Count Method; Survey Techniques JEL codes: F22, C83, J61, K42 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-023 by N. Zhelyazkova - This paper reviews the the literature on fathers' use of parental leave. Parental leave is a work−life reconciliation instrument with great potential to bring about a more equal distribution of paid and unpaid work between men and women. However, policy evaluation studies reveal that simply making parental leave available to men as an option does not lead to a marked increase in the number of male users. There is evidence that incentives in the policy design, such as earmarking part of the paid parental leave only for men on a use−it−or−lose−it basis, can raise the number of male users. Still, this evidence comes primarily from the Scandinavian context and the question whether such outcomes could be replicated in other countries remains open. Theoretical understanding of male use of parental leave is usually based on multidisciplinary frameworks. The economic theories typically focus on the relative resources in the family and there seems to be an absence of an integrated framework for analysis at the individual level. Several empirical studies provide support for the importance of the difference in a parenting couple's earnings for fathers' use of parental leave. Socio−economic characteristics, such as age, individual income, education, marital status, and number of other children, can also play a role in the decision of men to take leave. Situational factors, such as the sector of employment, or the size of the enterprize are similarly important. Keywords: work−family reconciliation, parental leave, fatherhood JEL classification: J130, J160 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-022 by P. Mohnen & B. Hall - This paper reviews the existing evidence regarding the effects of technological and non−technological innovations on the productivity of firms and the existence of possible complementarities between these different forms of innovation. JEL codes: O30 Keywords: innovation, productivity http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-021 by S. Cevikarslan - The aims of this paper are twofold. The first is to analyse the interaction between research and development (R&D) activities of firms and heterogeneous consumer preferences in structuring the evolution of an industry. The second is to explore the effects of patent life and patent breadth on market outcomes. To answer these research questions, an evolutionary, multi−agent based, sector−level cumulative innovation model is designed. The model addresses supply and demand sides of the market simultaneously with the co−evolution of heterogeneous consumer preferences, heterogeneous firm knowledge bases and technology levels at the micro level. In line with the evolutionary modelling tradition, we have a search algorithm−innovation and imitation of products by firms − a selection of algorithm−revealed preferences of the consumers − and a population of objects in which variation is expressed and on which selection operates: namely, firms (Windrum, 2004). Firms compete on quality and price of their products in an oligopolistic market whereas consumers, constrained by their computational limits, act to maximize their utility with their product choices in a boundedly rational way. There is continuous firm entry and exit depending on the competitive performance of the firms. Keywords: Patent; industrial dynamics; evolutionary economics; agent−based modelling JEL Classification: B52, L11, O34 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-020 by S. Cevikarslan - The aims of this paper are twofold. The first is to analyse the interaction between research and development (R&D) activities of firms and heterogeneous consumer preferences in structuring the evolution of an industry. The second is to explore the heterogeneity in firms' innovation strategies. Is heterogeneity sustainable in the long−term and what happens to the market shares of firms having different innovation strategies when a structural market characteristic (market size) or a behavioural rule (R&D intensity) is changed? To answer these research questions, an evolutionary, multi−agent based, sector−level innovation model is designed. The model addresses supply and demand sides of the market simultaneously with the co−evolution of heterogeneous consumer preferences, heterogeneous firm knowledge bases, and technology levels at the micro level. Keywords: Heterogeneity; innovation strategies; evolutionary economics; agent−based modelling JEL Classification: B52, L11, O33 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-019 by S. Ramani, A. Thutupalli, T. Medovarszki, S. Chattopadhyay & V. Ravichandran - The existing marketing, strategy and economics literature have little to offer by way of recommendations to promote entrepreneurship in the informal economy, except to advocate that multinationals, local firms, state and public agencies should work together to bring the informal economy into the fold of the formal economy. In contrast, this paper argues that the business sustainability of women entrepreneurs in the informal economy depends upon their engagements or business partnerships with other women (and men) and women−focussed intermediaries. More than formalization, women entrepreneurs need 'spaces' for dialogue with other women (and men) to learn and build business capabilities. Both the State and firms wanting to penetrate the informal economy can create such spaces through partnerships with NGOs and women−focussed organizations. While formalization of entrepreneurial activity is favourable under some circumstances, it can be detrimental under others − necessitating a case by case evaluation rather than a general rule. In order to ensure the business sustainability of women's ventures in the informal economy, any sort of formalization must occur through a gradual process accompanied by intermediaries. These results are formulated through the compilation and analysis of the existing literature and the study of six detailed case studies of women entrepreneurs from developing countries validated by extensive interviews. The results are then used to propose a closed model of linkages between formal and informal economies which has novel organizational implications for firms competing to establish consumer bases and business partnerships in the Base of Pyramid (BoP) markets of developing countries. Keywords: Informal economy, entrepreneurship, gender, business sustainability JEL classification: L26, B54, E26 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-018 by D. Escobar−García, F. García−Orozco & C. Cadena Gaitan - The construction of cable−propelled systems, fully integrated to urban public transport systems, has become an innovative trend in recent years for some Colombian cities. The most prominent examples include the cities of Medellín and Manizales, where these infrastructures have been built and running for several years. In fact, it should be highlighted that Manizales hosted, during the first half of the 20th century, the longest cable system in the world, which operated for nearly 40 years and was a cornerstone in the development of the region. This historic cable enabled the transportation of large shipments of coffee to the Magdalena River, to be exported across the world. In this paper we provide a thorough assessment of the current cable system in Manizales. We evaluate its costs in a comparative perspective against the impacts generated by the system, via time savings in daily travel. Due to its full integration with the public transport system, we also provide empirical evidence of the related passenger demand variability. Upon the implementation of the first cable system, additional similar projects have been initiated. We provide insights into a cable system designed and being built for recreation, and describe the planning process for the most recent public transport cable system being designed. All these systems are evaluated from the supply−side, measuring accessibility, from the demand−side, modelling the complete urban transport system for the city, and from the political side, describing the determinants of the decisions that ultimately stimulate the implementation of these projects in sustainable mobility. Based on the results obtained, we offer conclusions regarding the actual competitiveness of cable−propelled systems, arguing that they should be considered valid urban passenger transport solutions. Keywords: Accessibility, impact of transport modes, cable propelled system, transport innovation. JEL Classification: R41 and R42 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-017 by S. Nour - In this paper, we use the data from the firm survey (2002) at the micro level and some recent and update current secondary data at the macro level to examine the importance (impacts) of tacit and codified sources of knowledge at firm and aggregate levels respectively. Our results at the macro level are consistent with the notion that tacit knowledge is complementary with schooling, while tacit knowledge and codified knowledge are positively correlated with GDP. Moreover, at the macro/aggregate level, our results show a significant complementary relationship between codified knowledge and the number of Full Time Equivalent Researchers (FTER) and between them and publications, cooperation and technology (patents). Our findings at the micro level indicate positive correlations between tacit knowledge, ICT, training, profit, output and output diversification. In addition, our findings illustrate that tacit skill/knowledge inside the firm increases with market size: total investment, capital, firm size and age. Our results are consistent with the findings in the knowledge literature and are also useful to indicate the importance of good education at both the micro and macro levels. Keywords: Tacit knowledge, codified knowledge, economic growth, Arab Gulf countries. JEL classification: O10, O11, O30 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-016 by S. Nour - This paper employs both the descriptive and comparative approaches and uses the definition of knowledge and knowledge indicators used in the literature to examine the existence and development of the knowledge economy in the Arab region. We fill the gap in the Arab literature and present a more comprehensive analysis of the development of knowledge indicators in the Arab region. Our findings support the first hypothesis that the knowledge economy exists in the Arab region and coincides with a substantial knowledge gap compared to other world regions. Our results corroborate the second hypothesis concerning the variation in knowledge indicators, according to the structure of the economy in the Arab region, and support the third hypothesis concerning the poor and slow progress in the trend of knowledge − related indicators in the Arab region. Therefore, it is essential for the Arab region to enhance the knowledge economy and indicators to achieve economic development in the Arab region. Keywords: Knowledge economy, tacit knowledge, codified knowledge, knowledge index, Arab region JEL classification: O10, O11, O30 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-015 by S. Nour - This paper explains the importance of IPRs and examines the factors hindering and those contributing toward enhancing IPRs in Sudan. We find that the inadequacy of IPRs protection in Sudan is attributed to low integration in the international institutions, lack of legal issues, lack of government concern, lack of private sector concern, weak institutions setting, lack of public awareness, lack of resources, weak culture for IPRs, lack of cooperation between universities and industry and lack of coordination. The inadequate IPRs protection in Sudan leads to poor national system of innovation, hindering FDI and hindering transfer of technology. The factors contributing toward enhancing IPRs in Sudan include promotion of adequate IPRs legislations and enforcement; planning, commitment to international IPRs agreements; finance, investment and resources; social partnership to encourage IPRs protection, government concern, private sector concern, public awareness, cooperation between universities and industry, institutions setting, coordination and culture for IPRs protection. Keywords: IPRs, economic importance, economic impacts, Sudan, Africa. JEL classification: O3, O30, O34 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-014 by S. Nour - This paper discusses the importance of sound policies for achieving social development and social justice in provision of education, training and health services in Sudan. Different from Sudanese literature, we provide new contributions by explaining the low commitment to the standardized international equity criterion related to the supply−demand sides and provision of education, training and health services in Sudan. We fill an important gap in Sudanese literature by explaining that regional inequality in the demand for education (share in enrolment in education) is most probably due to economic reasons (per capita income and poverty rate), demographic reasons (share in total population) and other reasons (degree of urbanization) in Sudan. We find that the increase in the incidence of high poverty rates and low per capita incomes seem to be the most important factor limiting the demand for education, notably, demand for primary education, especially for females in Sudan. The major policy implication from our findings is that poverty eradication is key for the achievement of universal access to primary education, gender equality, equity, social justice and therefore, fulfillment of the second and third UN−MDGs in Sudan by 2015. We recommend further efforts to be made to improve equitable provision of education, training and health services to enhance social justice and social development in Sudan. Keywords: Education, training, health, supply, demand, equity, development, social justice, Sudan JEL classification: I14, I24, I28, I1, I2, I0, I00 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-013 by S. Nour - This paper employs both the descriptive and comparative approaches and uses the definition of systems of innovation used in the literature to examine the existence, characteristics and implications of the regional systems of innovation in the Arab region. We examine three hypotheses, that the regional systems of innovation exist but are characterized by serious weaknesses in the Arab region compared with other world regions, that the structure of the economy has a significant effect in the performance of innovation systems in the Arab region, and that the poor Arab systems of innovation have serious implications in the Arab region. We explain two common characteristics of Arab regional systems of innovation concerning poor subsystems of education, S&T, R&D and ICT institutions in the Arab region and concentration of R&D activities within public and universities sectors and small contribution of the private sector in R&D activities. We find that the major implications are the poor performance of the Arab region in terms of S&T indicators, competitiveness indicators, technology achievement index and poor integration in the knowledge economy index. Therefore, it is essential for the Arab region to enhance the institutions of higher education, S&T, R&D and ICT to build the Arab regional systems of innovation and to achieve economic development in the Arab region. Key words: Education, S&T, R&D, Systems of innovation, economic structure, Arab region. JEL classification: O10, O11, O30 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-012 by S. Bhupatiraju, B. Verspagen & T. Ziesemer - We propose a method for spatial principal components analysis that has two important advantages over the method that Wartenberg (1985) proposed. The first advantage is that, contrary to Wartenberg's method, our method has a clear and exact interpretation: it produces a summary measure (component) that itself has maximum spatial correlation. Second, an easy and intuitive link can be made to canonical correlation analysis. Our spatial canonical correlation analysis produces summary measures of two datasets (e.g., each measuring a different phenomenon), and these summary measures maximize the spatial correlation between themselves. This provides an alternative weighting scheme as compared to spatial principal components analysis. We provide example applications of the methods and show that our variant of spatial canonical correlation analysis may produce rather different results than spatial principal components analysis using Wartenberg's method. We also illustrate how spatial canonical correlation analysis may produce different results than spatial principal components analysis. Keywords: spatial principal components analysis; spatial canonical correlation analysis; spatial econometrics; Moran coefficients; spatial concentration JEL Classification: R10, R15, C10 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-011 by J. Hou & P. Mohnen - In developing countries, innovation is to a large extent a matter of adoption of advanced technologies but also of conducting internal R&D to be able to better assimilate existing technologies. This paper, based on firm level data from 24 developing countries, examines the roles of internal R&D efforts (MAKE) and external technology sourcing (BUY) in fostering productivity in manufacturing firms. Is MAKE a substitute for BUY or are the two strategies complementary as evidenced in some developed countries? Our empirical investigation highlights the critical role of external technology acquisition in manufacturing industries in low−income countries and exhibits signs of complementarity only in middle−income countries. Keywords: innovation, make and buy, complementarity, developing countries JEL classification: O13, O33, D22 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-010 by A. van Zon & P. David - The research reported here gives priority to understanding the inter−temporal resource allocation requirements of a program of technological changes that could halt global warming by completing the transition to a "green" (zero net CO2− emission) production regime within the possibly brief finite interval that remains before Earth's climate is driven beyond a catastrophic tipping point. This paper formulates a multi−phase, just−in−time transition model incorporating carbon−based and carbon−free technical options requiring physical embodiment in durable production facilities, and having performance attributes that are amenable to enhancement by directed R&D expenditures. Transition paths that indicate the best ordering and durations of the phases in which intangible and tangible capital formation is taking place, and capital stocks of different types are being utilized in production, or scrapped when replaced types embodying socially more efficient technologies, are obtained from optimizing solutions for each of a trio of related models that couple the global macro−economy's dynamics with the dynamics of the climate system. They describe the flows of consumption, CO2 emissions and the changing atmospheric concentration of green−house gas (which drives global warming), along with the investment dynamics required for the timely transformation of the production regime. These paths are found as the welfare−optimizing solutions of three different "stacked Hamiltonians", each corresponding to one of our trio of integrated endogenous growth models that have been calibrated comparably to emulate the basic global setting for the "transition planning" framework of dynamic integrated requirements analysis modelling (DIRAM). As the paper's introductory section explains, this framework is proposed in preference to the (IAM) approach that environmental and energy economists have made familiar in integrated assessment models of climate policies that would rely on fiscal and regulatory instruments −− but eschew any analysis of the essential technological transformations that would be required for those policies to have the intended effect. Simulation exercises with our models explore the optimized transition paths' sensitivity to parameter variations, including alternative exogenous specifications of the location of a pair of successive climate "tipping points": the first of these initiates higher expected rates of damage to productive capacity by extreme weather events driven by the rising temperature of the Earth's surface; whereas the second, far more serious "climate catastrophe" tipping point occurs at a still higher temperature (corresponding to a higher atmospheric concentration of CO2). In effect, that sets the point before which the transition to a carbon−free global production regime must have been completed in order to secure the possibility of future sustainable development and continued global economic growth. JEL codes: Q540, Q550, O310, O320, O330, O410, O440 Keywords: global warming, tipping point, catastrophic climate instability, extreme weather−related damages, R&D based technical change, embodied technical change, optimal sequencing, multi−phase optimal control, sustainable endogenous growth http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-009 by M. Müllers, J. Muysken & E. de Regt - In this paper we present data on flows in the labour market for the period 1980 − 2010, which have been constructed using various sources. The focus of our analysis is on four labour market states within the working age population of age 15 − 64: Employment, Unemployment, Not working and Disabled. A comparison is provided with the earlier studies of Broersma and den Butter (1994) and Kock (1998), and with the data published by the CBS from the labour force survey (EBB). The latter comparison is also used to indicate the presence of the time aggregation bias in the CBS data. Key words: labour market flows, time aggregation bias, the Netherlands JEL−code: J60, J63, J64, J82 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-008 by M. Cohen, P. Figueiredo & S. Gomes - Although much has been written about organizational−level learning, there is a dearth of empirical studies that explore the role of changes in the nature of firm−centred learning mechanisms in affecting inter−firm differences and similarities in the accumulation of innovation capabilities, especially among firms from emerging economies, known as latecomers. By examining the relationships between these issues based on fieldwork evidence from 13 natural resource−processing firms in Brazil (1950−2000s), this study found that: (1) firms that combined the use of external and internal learning mechanisms with increased intensity and quality achieved higher innovation capability levels than firms that used these learning mechanisms with limited frequency and unchanged quality over time; (2) the relative importance of both external and internal learning mechanisms changed as firms' capabilities approached world−leading levels; (3) some combinations of external and internal learning mechanisms were associated with the attainment of particular innovation capability levels. Therefore, if latecomer firms expend limited efforts in using and deliberately changing the intensity and, mainly, the quality of both external and internal learning mechanisms over time, they will deepen their innovation capabilities slowly and will remain innovation 'followers' rather than becoming world−leading innovators. Using a novel approach that explores the relationship between latecomer firms' innovation capability−building and the extent of changes in the underlying learning mechanisms, this paper furthers our understanding of the nature and dynamics of learning and its role as a primary source of firms' international innovation performance. It also challenges recent approaches that seem to over emphasize open learning processes and post−Chandlerian forms of learning as the leading sources of firms' innovation capabilities. Key words: Innovation capability building; learning mechanisms; latecomer firms; natural resources; multiple case−study; Brazil. JEL classification: O12, O32, O33, M10, Q2 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-007 by L. Borghans, H. Meijers & B. ter Weel - This research provides an economic model of the way people behave during an IQ test. We distinguish a technology that describes how time investment improves performance from preferences that determine how much time people invest in each question. We disentangle these two elements empirically using data from a laboratory experiment. The main findings are that both intrinsic (questions that people like to work on) and extrinsic motivation (incentive payments) increase time investments and as a result performance. The presence of incentive payments seems to be more important than the size of the reward. Intrinsic and extrinsic motivations turn out to be complements. Keywords: incentives; cognitive test scores JEL Codes: J20; J24 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-006 by M. Iizuka - The innovation systems approach has proven useful in explaining the reasons behind varying economic performance in developing countries. The systemic understanding of the innovation process, which pays attention to the knowledge flow among interactive actors, serves as a useful 'focusing device' for elaborating effective policy to accelerate the innovation process and to contribute to economic development. The existing use of the innovation system may need to change substantially to address present−day societal challenges. The emerging types of innovation−such as user innovation, public sector innovation, social innovation and innovation for inclusive development−have different features from those of existing types. This paper examines the features of emerging types of innovation to assess whether and how the current innovation system can be remodelled to explain emerging social agendas, with particular focus on developing countries. Keywords: innovation system, user innovation, public sector innovation, social innovation, innovation for inclusive development, developing countries JEL Classification: O20, O21 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-005 by R. Cowan & A. Kamath - This is a model of knowledge exchange by means of informal interaction among agents in low technology clusters. What this study seeks to do is to colour these exchanges by placing them in an environment of complex social relations, test whether the small−world network structure is the most favourable for knowledge exchanges in these environments, and explore the influence of social relations and network distance. These enquiries are the contribution of this model to the existing series of studies on efficient network structures for knowledge diffusion. We find that the small−world network structure may not be the best network structure for highest and most equitable knowledge distribution, when knowledge exchanges are undertaken in environments of complex social relations. Also, we confirm that the highest and most equitable knowledge distribution is achieved when there is perfect affinity among the agents. Keyword: Knowledge Exchanges, Small−Worlds, Social Networks, Complex Social Relations JEL Classification: O33, Z13 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-004 by S. Arvanitis, B. Lokshin, P. Mohnen & M. Wörter - There is growing evidence that firms increasingly adopt open innovation practices. In this paper we investigate the impact of two such external knowledge acquisition strategies, 'buy' and 'cooperate', on firm's product innovation performance. Taking a direct (productivity) approach, we test for complementarity effects in the simultaneous use of the two strategies, and in the intensity of their use. Our results based on large panels of Dutch and Swiss innovating firms, suggest that while both 'buy' and 'cooperate' have a positive effect on innovation, there is little statistical evidence that using them simultaneously leads to higher innovation performance. Results from the Dutch sample provide some indication, that there are positive economies of scope in doing external and cooperative R&D simultaneously conditional on doing internal R&D. JEL−codes: O31, O32 Keywords: Open innovation, R&D collaboration, make, buy strategies http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-003 by G. van Leeuwen & P. Mohnen - Almost all empirical research that has attempted to assess the validity of the Porter hypothesis has started from reduced−form models, e.g. by using single−equation models for estimating the contribution of environmental regulation (ER) to productivity. This paper addresses the Porter Hypothesis within a structural approach that allows us to test what is known in the literature as the "weak" and the "strong" version of the Porter hypothesis. Our "Green Innovation" model includes three types of eco investments and non−eco R&D to explain differences in the incidence of innovation. Besides product and process innovations we recognize eco−innovation as a separate type of innovation output. We explicitly model the potential synergies of introducing the three types of innovations simultaneously and their synergy in affecting total factor productivity (TFP) performance. Using a comprehensive panel of firm−level data built from four surveys we aim to estimate the relative importance of energy price incentives as a market based type of ER and the direct effect of environmental regulation on eco investment and firms' decisions regarding the introduction of several types of innovations. The results of our analysis show a strong corroboration of the weak version of the Porter hypothesis but not of the strong version of the PH, in this case on TFP performance. Keywords: Porter Hypothesis, green innovation, environmental regulation, innovation complementarities, productivity JEL codes: H23, L5, O32, O38, Q55 http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-002 by G. Crespi & E. Tacsir - This study examines the impact of process and product innovation on employment growth and composition in Argentina, Chile, Costa Rica, and Uruguay using micro data from innovation surveys. Based on the model put forward by Harrison et al. (1998), employment growth is related to process innovations and to the growth of sales separately due to innovative and unchanged products. Results show that compensation effects are pervasive and that the introduction of new products is associated with employment growth at the firm level. No evidence of displacement effects due to the introduction of product innovations was observed. With respect to the impact of innovation on employment composition, there is scant evidence of a skill bias, although product innovation is more complementary to skilled than to unskilled labour. JEL: O12, O14, O31, O33, O40, J21 Keywords: innovation, employment, developing countries, Latin America, innovation surveys http://www.merit.unu.edu/publications/wp.php?year_id=2013#wp2013-001