The Determinants of National Innovation Capability - A Cross-Country Innovation Efficiency Analysis
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Since innovation is playing an important role in the age of knowledge, using innovative resources more efficiently gradually becomes a hot issue at national level. National innovative capacity is the ability of a country to produce and commercialize a flow of innovative technology over the long term (Furman, Porter, Stern, 2002). However, most previous studies equate number of patent or paper published with the level of innovative output instead of reflecting the real market value of innovation. This research applies Data Envelopment Analysis (DEA) to evaluate the efficiency among countries in the production and commercialization of new-to-the-world technologies. To do so, a framework based on the concept of national innovative capacity would be introduced and innovation process is divided into two periods: innovation production and innovation commercialization. The purpose of this study was to know the distributions of efficiencies in national innovation activities and the influences of environmental factors on innovation efficiency. Therefore, a framework based on the concept of national innovative capacity would be introduced and innovation process was divided into two periods: innovation production and innovation commercialization. That is, two-stage production process would be used to provide new insight regarding the location of inefficiency in national innovation production process. This topic could be identified as being of important to policy makers in providing them with necessary background to design proper promotion mechanism on innovation activity. Methodology This paper sets up an inter-country innovation production framework. Each country is regarded as a DMU (Decision making unit) and innovation production process is modeled as two stages in series. In the stage 1, DMU consumes inputs to produce intermediate products. The intermediate products are the inputs in stage 2 and used to produce outputs. The first stage, which is called "innovation production" stage, employs R&D personnel and R&D expenditure as input and produces patents and academic papers as outputs. The second stage is defined as innovation commercialization stage with patents and papers as inputs, and technology balance of payments: receipts and high technology export as outputs. Tobit estimation is applied to identify the external environmental factors that influence the production and commercialization efficiency. These environmental factors that determine the national innovative capability could divide into three categories: the common innovation infrastructure, the particular innovation environment in the nation's industrial clusters, and the linkages between them. The results show that less than one-half of the countries are fully efficient in innovation activities. Efficiencies of selected countries in innovation commercialization are more diverse than those in innovation production. 16 of the countries are at the stage of decreasing returns of scale in innovation production, while the number of countries in innovation commercialization is 14. It implies that in these countries the percentage for increment in outputs is less than that in inputs. The Tobit regressions reveal that environmental factors which belong to infrastructure such as GDP, public expense on education, tertiary school enrollment ratio, are significant in explaining innovation production efficiency. In innovation commercialization, in addition to mentioned factors, trade ratio, which is one of the cluster specific factors, is also positive coefficient with innovation commercialization. This research decomposes the process of innovation activity and provides insight regarding the locations of inefficiency in the innovation process at national level. This topic would be identified as being of important to policy makers in providing them necessary background to design proper promotion mechanism on innovation activity. References Furman, J.L., Michael E. P., and Scott S. (2002), "The determinants of national innovative capacity." Research Policy, 31(2), 899-933. Seiford, L.M. and Joe Z. (1999), "Profitability and marketability of the top 55 U.S. commercial banks." Management Science, 45(9), 1270-1288.