What are the Innovation Effects of Pilot and Demonstration Plants? : The Case of Advanced Biofuels in the Transport Sector

Pilot and demonstration plants (PDPs) may be important for fostering technological innovation. They constitute a bridge between basic knowledge generation and technological breakthroughs on the one hand, and industrial application and commercial adoption of new technology on the other. The aim of this paper is to examine the innovation impacts of publicly funded PDP activities in the empirical context of production technology for advanced biofuels. The study is conducted by employing patent data for eight European countries over the time period 1980-2011, and it is acknowledged that PDPs have two main objectives: testing and optimization of technology (experimental PDPs), and diffusion and commercialization of technology (exemplary PDPs). The results are overall robust to alternative model specifications, and indicate that: (a) PDP activities are overall positively correlated with biofuel patenting activity; (b) both experimental and exemplary PDPs encourage biofuel innovation although the impact of the former is more profound; and (c) development activities in experimental PDPs encourage innovation also indirectly through knowledge spillovers across countries.<p>Godkänd; 2015; 20150604 (kribac)