R&D, INNOVATION AND COMPETITIVENESS IN THE EUROPEAN CHEMICAL INDUSTRY

R&D, INNOVATION AND COMPETITIVENESS IN THE EUROPEAN CHEMICAL INDUSTRY

R&D, Innovation and Competitiveness in the European Chemical Industry Edited by Fabrizio Cesaroni Laboratory of Economics and Management, St. Anna School of Advanced Studies, Pisa, Italy Alfonso Gambardella Laboratory of Economics and Management, St. Anna School of Advanced Studies, Pisa, Italy and Walter Garcia-Fontes Universitat Pompeu Fabra, and Centre de Referencia d'economia Analftica, Barcelona, Spain KLUWER ACADEMIC PUBLISHERS BOSTON I DORDRECHT I LONDON

A c.i.p. Catalogue record for this book is available from the Library of Congress. Published by Kluwer Academic Publishers, P.O. Box 17, 3300 AA Dordrecht, The Netherlands. Sold and distributed in North, Central and South America by Kluwer Academic Publishers, 101 Philip Drive, Norwell, MA 02061, U.S.A. In all other countries, sold and distributed by Kluwer Academic Publishers, P.O. Box 322, 3300 AH Dordrecht, The Netherlands. Printed on acid-free paper ISBN 978-1-4757-1071-7 ISBN 978-1-4020-7942-9 (ebook) DOI 10.1007/978-1-4020-7942-9 Softcover reprint of the hardcover 1 st edition 2004 All Rights Reserved 2004 Kluwer Academic Publishers, Boston No part of this work may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, microfilming, recording or otherwise, without written permission from the Publisher, with the exception of any material supplied specifically for the purpose of being entered and executed on a computer system, for exclusive use by the purchaser of the work.

Contents Preface INTRODUCTION Fabrizio Cesaroni*, Alfonso Gambardella* and Walter Garcia-Fontes** 1. Objective 2. How this book is organised 3. Policy concerns 3.1 Public research 3.2 Innovation policies and the large chemical firms 4. References xiii-xiv 1-21 1 5 11 11 13 21 Part 1: MARKET STRUCTURE AND INNOVATION MARKET STRUCTURE, COMPETITION, AND INNOVATION IN THE EUROPEAN AND US CHEMICAL INDUSTRIES. Pedro L. Marin and Georges Siotis 1. Introduction 25-43 25

VI 2. Theoretical motivation 27 3. Data and variables from the chemical industry 31 4. Empirical findings 38 5. Conclusions 42 6. References 43 MERGERS AND ACQUISITIONS IN THE CHEMICAL INDUSTRY: SIMILARITIES AND DISSIMILARITIES ACROSS THE ATLANTIC Carmine Omaghi*, Pedro L. Marin** and Georges Siotis* 45-68 1. Introduction 45 2. The data 47 3. Overview of M&As flows 49 4. Analysis of investment flows by sector 54 5. Diversification strategies 61 6. Conclusions 67 7. References 68 CORPORATE RESTRUCTURING AND R&D: A PANEL DATA ANALYSIS FOR THE CHEMICAL INDUSTRY Ashish Arora, Marco Ceccagnoli and Marco Da Rin 69-90 1. Introduction 70 2. Data description 73 3. R&D and corporate restructuring 78 3.1 A Model of R&D Expenditure 78 3.2 The Impact of Restructuring on Firm-Level R&D 83

R&D, innovation and competitiveness in the European chemical industry VII 4. Conclusions 88 5. References 89 Part 2: TECHNOLOGY DEVELOPMENT AND DIFFUSION WATCHING PAINT DRY? Stefano Brusoni 93-118 1. Introduction 93 2. Some Definitions 95 3. Industry structure in the 1990s 97 4. Innovation: Sources, Trends, and Appropriability 100 4.1 The drivers 101 4.2 Appropriability and innovation 103 5. Environmental regulation and innovation 104 6. The development oflow solvents and solvent-free coatings 106 7. The adoption of waterborne formulations 108 7.1 The vehicle coatings sector: proactive customers 109 7.2 The decorative coatings sector. 111 7.3 Sources and organization 112 7.4 The impact of regulation 115 8. Discussion and conclusions 116 9. References 118

Vlll RESEARCH COLLABORATIONS AMONG INVENTORS AND THE LOCATION OF R&D IN THE EUROPEAN CHEMICAL INDUSTRY Myriam Mariani 1. Introduction 2. Organisational vs. geographical proximity 3. Insights from the data 3.1 The geographical distribution of chemical and pharmaceutical research in Europe 3.2 Home-country vs. foreign location 3.3 Geographical vs. organisational proximity as coordination mechanisms for research collaborations. 4. Multiple correlations: Probit and OLS regressions. 5. Conclusions 6. Main References 7. Appendix COLLABORATION BETWEEN A RESEARCH UNIVERSITY AND FIRMS AND OTHER INSTITUTIONS Aldo Geuna*, Patrick Llerena**, Mireille Matt * * and Maria Savona' 1. Introduction 2. University-industry relationships: the core topics 2.1 Firms' point of view 2.2 Channels used by both actors to interact 2.3 University point of view 2.4 Our contribution 3. ULP contractual relationships 3.1 ULP - A general presentation 119-143 119 120 124 125 128 131 135 139 140 142 145-173 145 148 148 149 150 151 152 152

R&D, innovation and competitiveness in the European chemical industry 3.2 The evolution of contractual activities at University Louis Pasteur 4. Characteristics of Chemistry domain contracts 4.1 How does the duration of links between ULP laboratories and their partners evolve? 4.2 Does the type of contract with university laboratories change? 4.3 What are the changes in monetary value of contracts? 5. Entry, exit and persistence of collaboration 5.1 Entry, exit and persistence in collaborations: F&I 5.2 Entry, exit and persistence in collaborations: university labs 5.3 Persistent relationships between F&I and laboratories 5.4 What drives changes in contract characteristics? A preliminary analysis 6. Conclusions 7. References THE NATURE AND THE EXTENT OF THE MARKET FOR TECHNOLOGY IN BIOPHARMACEUTICALS Ashish Arora, Alfonso Gambardella, Fabio Pammolli and Massimo Riccaboni 1. Introduction 2. The sample of drug R&D projects 3. The NBFs as an american phenomenon 4. "risky" projects 5. Probability of success: licensed vs. in-house projects 6. Assessing development capabilities 7. Assessing the originators capabilities IX 153 156 157 158 160 162 163 164 167 167 169 171 175-202 176 178 181 183 186 189 191

x 8. Failing at earlier stages 194 9. Conclusions 198 10. Appendix 199 11. References 202 Part 3: POLICY REGULATION AND THE ENVIRONMENT DEVELOPMENT AND DIFFUSION OF ENVIRONMENTAL TECHNOLOGIES Roberta Arduini and Fabrizio Cesaroni 205-230 1. Introduction 205 2. Background 207 2.1 Definition of Environmental Technologies 210 3. Methodology 212 4. End-of-pipe and recycling technologies 215 4.1 The Role of the Chemical Industry 218 4.2 The Role of Small, Independent Firms in Developing Environmental Technologies 220 5. Clean technologies and green products 223 6. Conclusions 227 7. References 229 IS BIG BUSINESS GOOD FOR THE ENVIRONMENT? Frank Becker and Frank C. Englmann 231-246 1. Introduction 231 2. Inventive activities and the firm size 232

R&D, innovation and competitiveness in the European chemical industry Xl 3. Selection of patent classes and keywords 233 3.1 Water benign process technologies 233 3.2 Patent classes and keywords 235 4. Description of the sample of firms 237 5. Empirical results 240 5.1 Inventive activities in the field of end-of-pipe technologies 240 5.2 Inventive activities in the field of recycling technologies 242 6. Conclusions 244 7. References 246 Subject index 247

Preface This book is the outcome of a two year project involving a group of European economists and business scholars. Why the chemical industry? There are many reasons. First this is an industry in which Europe has been competitive for a long time. It was natural to think of it as a test-bed for understanding the sources of its performance. Second, the chemical industry is ideal for scholars who want to understand the complexity of industrial phenomena. The industry is large and it encompasses many sub-sectors. The latter are heterogeneous, and this implies that the industry as a whole can be used as a case to understand several phenomena, ranging from R&D and innovation to market structure, government regulation, business strategy, economies of scale and scope at the level of firms or at the level of entire markets. In this respect, the book attempted specifically at "fixing" industry characteristics to look, within the context of the chemical sector, at a number of topic that help us better understand the economics of industries and firms. The spirit of the book continues the tradition initiated with a previous long term research project on the sources of competitive advantages and long-term growth of the US chemical industry. We tried to reproduce, for the European chemical sector, the approach taken by Ashish Arora, Ralph Landau, and Nate Rosenberg in the earlier book. The US project/book hinged on the breadth and complexity of the industry to understand industry structure and dynamics from different perspectives. The strength and success of its approach provided a natural thrust for repeating it here. At the same time, beside the focus on Europe rather than the US, this book developed other topics that were not addressed by the earlier book, and presented some newer perspectives. But like

xiv Preface the previous one, it highlights the virtues of collective research among groups of motivated scholars who provide their special skills, interests, and expertise in different areas to contribute to an integrated output. This is also why our recognition of the support of the DG Science & Technology ofthe European Commission (TSER Contract N SOEl-CT97) goes beyond a mere grateful acknowledgement. It was the nature and the spirit of the TSER grants that allowed groups of scholars from different European countries, and with different backgrounds, to come together, and accomplish a project that integrated their diversities of approaches, knowledge, skills and expertise. We can only wish that the Commission feels encouraged from outputs like ours that there is serious value in enhancing collaborative projects such as the one that we had the fortune to undertake. In this context, we would like to warmly thank Virginia Vitorino, who was our scientific officer on behalf of the Commission, for her clear guidance in all administrative matters but also for her scientific advise as well as for her permanent support and kindness. We would also like to thank Paul David and Ed Stenmueller, who were active participants in some of the seminars leading to the production of this book, and gave invaluable suggestions that improved the papers and the editorial process. We carried onto this book a number of the lessons that we received from Nate Rosenberg an Ralph Landau in the realization of the previous projects, and more generally as their students. None of the above can of course be held responsible for the contents of this book. We finally acknowledge the patience of all our authors, and the enthusiasm with which they undertook this effort, going through several tedious revisions and demands from us. A lot of the credit for whatever good is in this book goes to them. We, as editors, will take all the blame. Fabrizio Cesaroni Alfonso Gambardella Walter Garcia-Fontes