The Economics of Innovation

It is widely believed that innovation is the key driver behind economic growth in developed economies, and even more so in Western Europe, Japan and the US. All three economic areas are short of natural resources and their most important good is human capital, e.g. well educated labor force that creates innovations which can be sold on world markets.

Innovation sometimes is the offspring of coincidence but most often it is the outcome of targeted research. Successful research in turn depends both on human capital and on physical capital, such as research laboratories.

Economic policy sets the incentive structure for research and innovation. Intellectual property rights (e.g. patents and trademarks) ensure that innovators receive a fair share of their efforts and governments try to set standards such that new technologies can reach a critical mass as soon as possible. This course discusses the economics behind innovation and offers answers for questions like:

• How can innovation be protected?
• To what extent does competition matter for innovation?
• What type of incentives does public policy create for innovation?
• How can firms use intellectual property rights as business strategy devices?

This course hence endows students with the elementary skills necessary to understand the driving forces behind innovation at the firm level which enables them to judge and rate a firm's innovation policy.

This course is aimed at graduate students of management and economics who plan to work in academia, with high technology firms, or institutions that finance innovative firms such as banking, private equity or venture capital.

The text for the class is: Scotchmer, S. 2006. Innovation and Incentives, Cambridge, MA: MIT Press.

Additional readings can be announced during the progress of the course.

* Tutorials start on February 25th, 2015.

This class gives 6 ECTS points. Students from Business Administration and Management and Economics can use the credits for the following modules:

• MA: Wahlpflichtbereich BWL 5
• MA: Pflichtmodule ME

Final written exam is scheduled for June 16, 2015 from 10:15 to 12:00 in room SOC-1-106. It is a closed book exam.