Innovation for Social Progress: When Imperfect Appropriability Meets Incorrect Prices | Jacquelyn Pless
Jacquelyn Pless is the Fred Kayne Career Development Professor of Entrepreneurship and an Assistant Professor at the MIT Sloan School of Management.
She will be presenting her paper ‘Innovation for Social Progress: When Imperfect Appropriability Meets Incorrect Prices’
Abstract
Innovation for social progress—that which tackles society’s greatest challenges like climate change and poverty—is critical for fostering economic growth and development. However, it is uniquely characterized by a double-externality challenge: knowledge spillovers due to imperfect appropriability and “incorrect” prices due to production or consumption externalities. We develop a general model showing how these two market failures are interdependent, which changes the theoretical predictions of how pricing mechanisms addressing externalities and subsidies addressing appropriability impact the direction of innovation. To test our model’s predictions, we implement a heterogeneous difference-in-discontinuity research design to estimate the effects of carbon taxes and technology-neutral R&D tax credits on R&D, patenting, and productivity for firms in the UK’s energy, transportation, and manufacturing sectors. Preliminary results for manufacturing firms indicate that a 1 GBP increase in the carbon tax increases R&D expenditures by 2% for firms in directly regulated industries but reduces it by 9% for those in less pollution-intensive industries. The opposite effects are found for total factor productivity. Increasing R&D tax credit rates substantially (and surprisingly) attenuates all of the effects. Results for the energy and transportation sectors are forthcoming.
Please email gri.events@lse.ac.uk to request the Zoom joining details for this workshop by by 5pm on Tuesday, 9th November 2021.