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2023/2024  KAN-CCMVV2309U  Economics of Ideas and Innovation

English Title
Economics of Ideas and Innovation

Course information

Language English
Course ECTS 7.5 ECTS
Type Elective
Level Full Degree Master
Duration One Semester
Start time of the course Autumn
Timetable Course schedule will be posted at calendar.cbs.dk
Max. participants 50
Study board
Study Board for cand.merc. and GMA (CM)
Course coordinator
  • Anders Sørensen - Department of Economics (ECON)
Main academic disciplines
  • Entrepreneurship
  • Innovation
  • Economics
Teaching methods
  • Face-to-face teaching
Last updated on 16-02-2023

Relevant links

Learning objectives
  • Understand economics of ideas and different innovation based growth models.
  • Understand the micro-foundation of the knowledge production function, and the importance of key assumptions
  • Understand the importance of various econometrics concepts that are important for the interpretation of results
  • Understand when empirical results can be given a causal interpretation.
  • Obtain experience on working with data and run estimations
  • Hands on experience with the statistical software package STATA
Course prerequisites
The course requires a basic knowledge of microeconomics and statistics.
Economics of Ideas and Innovation:
Exam ECTS 7,5
Examination form Home assignment - written product
Individual or group exam Individual exam
Size of written product Max. 15 pages
Assignment type Project
Release of assignment Subject chosen by students themselves, see guidelines if any
Duration Written product to be submitted on specified date and time.
Grading scale 7-point grading scale
Examiner(s) One internal examiner
Exam period Winter
Make-up exam/re-exam
Same examination form as the ordinary exam
Description of the exam procedure

Students conduct a short empirical project with data of their choice. The project can be based on one of the papers – with available data set – on the reading list, a paper – with available data set – of their own choice or a project conducted on an own-identified data set. In the project, students are to show an understanding of the applied methods, discuss the empirical choices and interpret the results appropriately. The project is written in parallel with the course and is of 15 A4-pages.

Course content, structure and pedagogical approach

The aim of the course is to provide insight into why innovation is fundamentally important for success in firms and for prosperity of society. Why is this the case? The single firm can earn more money by creating new ideas and the aggregate economy will grow because of innovation.


This course begins with an introduction to the economics of ideas and to how innovation works as an engine for economic growth. In this part of the course, essential characteristics of ideas are described, and the consequences of these characteristics for production and market form are presented. Putting it all together, results in a description of the engine of growth based on new ideas of founders interested in profiting from their inventions.


The course then turns to various aspects of innovation, as innovation is multi-facetted concept. A range of questions related to innovation will be examined. Examples are: How important are new technologies for firm performance? How do organizational changes affect profits of firms, for example, working from home policies or delegation of decision-making authority? Who chooses to become an entrepreneur and who succeeds? Who decides to become innovators?


More generally, the course will provide an introduction to the following topics on (1) artificial intelligence and automation, (2) organizational changes and management practices, (3) the relationship between ideas and innovation, (4) characteristics of innovators and (5) and entrepreneurship.


The second part of the course will to a high extent focus on empirical applications. An independent aspect is, however, to understand the underlying innovation theories applied. Another independent aspect in this respect is causal inference. This means, can we really say that it is “innovation that generates higher profits or growth” based on the specific empirical studies? Or is it rather “firms with high profits or growth that perform innovation”? To give insight into this important question, econometric tools for causal inference– such as difference-in-difference, Regression discontinuity design (RDD) and instrumental variables (IV) – are discussed and presented.

Description of the teaching methods
The course is composed as a mix of lectures and computer based hands-on tutorials in which students will learn to carry out their own data analyses.
Feedback during the teaching period
We aim to give constant feedback to students in the form of Q and A in the classroom. We encourage students to ask questions and participate in class discussion. Finally, students can take advantage of office hours
Student workload
Lectures 20 hours
Exercises 13 hours
Preparation 100 hours
Exam 73 hours
Expected literature

Jones, Charles I. Chapter 4 and 5 in Introduction to Economic Growth. New York: W. W. Norton & Company. (Latest edition)

Bell, Alex, Raj Chetty, Xavier Jaravel, Neviana Petkova, and John Van Reenen. 2017. “Who Becomes an Inventor in America? The Importance of Exposure to Innovation” The Quarterly Journal of Economics, 647-713

Ross Levine and Yona Rubinstein (2017), “Smart and Illicit: Who becomes an entrepreneur and do they earn more?”, Quarterly Journal of Economics, 963-1018

More literature to be announced.



Joshua Angrist and Jörn-Steffen Pischke, “Master ‘Metrics”, Princeton University Press (Latest edition)

Last updated on 16-02-2023