Lecturer: Margherita Balconi  

Course name: Economics of innovation
Course code: 064125
Degree course: Ingegneria Elettrica, Ingegneria Elettronica, Ingegneria Informatica, Ingegneria dei Servizi
Disciplinary field of science: SECS-P/06
The course relates to:
University credits: CFU 5
Course website: http://www-3.unipv.it/webbalco/

Specific course objectives

The course aims at making students acquire the main conceptual frameworks developed by the economic literature to understand firms' innovative strategies, the typical issues concerning high-tech entrepreneurship, the dynamics of competition and the rational for public policies regarding technology transfer, intellectual property rights and research funding. Particular attention is devoted to communication and information technologies (ICTs) and to the patent system. The knowledge acquired by attending the course is fundamental for managers and entrepreneurs operating in the science and technology system of the knowledge based economy.

Course programme

The course faces the most important aspects of the economics of innovation, starting from the sources of innovation up to the mechanisms of diffusion. Particular attention is devoted to the issue of appropriation by firms of the profits engendered by innovation and especially to the economics of the patent system.

1) Introduction: competition in a dynamic setting

2) Research and innovation
Basic research, applied research and development: a discussion over the main statistical categories. The main models of the innovation process: the linear model, Pasteur's quadrant and the chain linked model. The relationships between universities and industry. The rationale for public funding of basic research. The incentive systems in the Republic of Science and in the Realm of Technology. The economics of knowledge: the distinction between tacit and codified knowledge.

3) Invention and technological innovation
Technological paradigms and trajectories. The different phases of the innovation process. The various forms of learning underpinning innovation. The learning curve. National and sectoral systems of innovation. The main statistical indicators of innovation.The technological balance of payments.

4) Incentives to innovation and the issue of appropriability
The modes of appropriation. The economics of the patent system. The Italian and the European patent. The main trade-offs of the system. Patent races. Process innovation, patent system and market structure. Monopoly power and sleeping patents. Theories on the benefits and costs of patents. Patent statistics. Measuring patent quality.

5) Limited rationality, competences and inertial behaviours
The limits of rationality. Resources, competences, competitive advantages and rents. Inertial behavior of big companies. The attackers' advantange in emerging markets. Case study: the disk drives industry. The relationship between market structure and product variety.

6) High-tech entrepreneurship
The main characteristics of high tech entrepreneurs. The acquisition of funds by start-ups in a world ridden with uncertainty and asymmetric information. Newly born companies' performance indicators. The opportunity cost of the entrepreneurial activiy. Industry characteristics and entrepreneurship. The means for mitigating risk. The importance and limits of business-plans.

7) The economics of information
Production and exchange of information goods. Network externalities and other forms of increasing returns. Switching costs, path dependency and lock-in: their effect on technological competition. Case study: the industry of video games.

8) The diffusion of innovations
Threshold adoption models and critical mass diffusion models

Course entry requirements

Basic principles of microeconomics (in particular with regard to the costs of production, profit maximisation and the models of perfect competition, monopoly and oligopoly)

Course structure and teaching

Lectures (hours/year in lecture theatre): 38
Practical class (hours/year in lecture theatre): 0
Practicals / Workshops (hours/year in lecture theatre): 0

Suggested reading materials

The complete program of the course is presented in the notes available on line

Testing and exams

The content of the course is available in the notes downloadable from the course website. No other text is required. At the end of the course the student must pass a written examination consisting of open questions. An integrative verbal examination may be added on student's request.