Why is Apple sitting on a pile of cash?

Recently I stumbled over this picture on the internet. I have not checked the numbers, but everybody knows that Apple is sitting on a huge pile of cash (the same goes for Microsoft, by the way). Of course, this number makes a good conspiracy theory about what might really be going on in Cupertino. Is Apple the last fire-drake of California jealously hoarding a pile of gold in his lair? I would like to object. There are actually good economic reasons for Apple to have large cash holdings. Continue reading Why is Apple sitting on a pile of cash?

How to get knowledge out of the ivory tower?

Technology transfer is a big topic for scholars and policy makers.We would like to know how we can harvest the knowledge and ideas that are produced at universities and research institutes and to make them available to society. The invention of new technologies is only a first step. They need to be commercialized as innovative products and services to further foster a society’s wealth. Especially Europe could do better here. Continue reading How to get knowledge out of the ivory tower?

Economic History: Antibiotics

Some time ago I wrote about a paper of mine (Hünermund et al., 2015) in which my coauthors and me develop a model to explain the occurrence of industry shakeouts. Shakeouts are a phenomenon which we encounter frequently in new industries. At one point in time, a large number of relatively small firms, previously operating in a market, becomes unsustainable. Within a short period of time a lot of firms exit and, eventually, the industry becomes dominated by a few large players. Our model explains this frequently observed pattern by technological factors that change over the lifespan of an industry. Cost advantages — because of more efficient production technologies — allow a few firm to take over and squeeze all others out of the market. Continue reading Economic History: Antibiotics

Welcome to the Eurozone, Lithuania!

With the beginning of 2015 Lithuania, as the last of the three Baltic states, will adopt the euro. A first attempt to join the single currency in 2007 failed because the inflation rate was above Maastricht requirements. Seven years later, Lithuania is considered to be ready to be a part of the eurozone. But what are the prospects of the small country of only 3 million inhabitants in a currency area which, according to theory, is far from being optimal? Continue reading Welcome to the Eurozone, Lithuania!

Step by step to innovation success?

This year I had the opportunity to attend the Lindau Nobel Laureate Meeting in Economic Sciences. Afterwards, I contributed a short excerpt about my ongoing research on innovation management and resource allocation to the Lindau blog, which I like to reblog here. The corresponding paper appeared as a ZEW discussion paper.


Being an innovative company is easier said (or included in a mission statement) than done. Managers of innovative companies have to spend large R&D budgets on projects with highly uncertain outcomes. In high-tech industries such as automobiles, biotech and pharma, R&D intensities of more than 15% of annual sales are not uncommon (EU R&D Scoreboard, 2013). How to invest these funds in the most efficient manner, that is, maximising the success rate of the conducted innovation projects, is of great interest to practitioners and academics alike. Continue reading Step by step to innovation success?

Hurry up and wait

In a previous post I argued that a lot more work needs to be done by economists to understand the implications of dynamic strategic incentives. Actually, this was an act of shameless self-promotion. Because I have written a paper* together with Philipp Schmidt-Dengler and Yuya Takahashi on strategic interaction and how it can shape the evolution of industries over time. Continue reading Hurry up and wait

What’s wrong with policy advice?

John Cochrane recently released a blog post about the discrepancy between academic work and policy advice in macroeconomics. He criticizes that consulting for the policy world is most often based on economic methodology such as static IS-LM/AS-AD models. These date back 40 years and have largely disappeared from the academic landscape.

This current state is puzzling. At least one of the reasons why we do economic research is to better guide policy makers to more sensible interventions to the economy. So either “academic research ran off the rails for 40 years producing nothing of value” or we hold back the diamonds for our little elite circle in the ivory tower. I have seen quite some policy related work myself. Thus,  I want report from my own field – innovation economics. Continue reading What’s wrong with policy advice?