Seminario 21/13: Jose Luis Zofío (Universidad Autónoma de Madrid) : Is more always better? On the relevance of decreasing returns to scale on innovation

Información

We contribute to the literature on the assessment of innovation systems by relating the

amount of inputs available to the system and its performance through the concept of

returns to scale (increasing, constant or decreasing). We study to what extent the size

or scale of innovation systems relates to their performance, which is estimated through

frontier Data Envelopment Analysis-TOPSIS methods, which overcome several

limitations of the standard DEA approach. Using the same data provided by the

European Innovation Scoreboard ( EIS) for years 2010, 2013 and 2016, our results

indicate that countries with a high innovation scale tend to overinvest in innovation

inputs. This results into scale inefficiencies stemming from decreasing returns and

leading to lower productivity levels. Thanks to DEA-TOPSIS we identify the best and

worst performing innovation systems. This provides helpful information by setting

suitable reference benchmarks for policy analysis and decision-making. Our results

question the current allocation of resources and call for a reconsideration of how

innovation policies are designed in many European countries. We conclude that for the

EIS to become a useful instrument for the definition of innovation policies, it should

consider the nature of returns to scale. This would allow policymakers to identify

problems and limitations related to the size of their respective innovation systems, and

hence, design holistic innovation policies to act upon them