Endogenous Technological Spillovers: Causes and Consequences

Endogenous Technological Spillovers: Causes and Consequences We develop a new approach to endogenizing technological spillovers. We analyze a game in which firms can first invest in cost‐reducing R&D, then compete on the human‐capital market for their knowledge‐bearing employees, and finally enter the product market. If R&D employees change firms, spillovers arise. We show that technological spillovers are most likely when they increase total industry profits. We use this result to show that innovation incentives are usually stronger for endogenous than for exogenous spillovers and that endogenous spillovers may reverse the result that innovation incentives are stronger under quantity competition than under price competition. Finally, we explore the robustness of our results with respect to contractual incompleteness and the number of R&D workers. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economics & Management Strategy Wiley

Endogenous Technological Spillovers: Causes and Consequences

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Publisher
Wiley
Copyright
Copyright © 2003 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1058-6407
eISSN
1530-9134
DOI
10.1111/j.1430-9134.2003.00179.x
Publisher site
See Article on Publisher Site

Abstract

We develop a new approach to endogenizing technological spillovers. We analyze a game in which firms can first invest in cost‐reducing R&D, then compete on the human‐capital market for their knowledge‐bearing employees, and finally enter the product market. If R&D employees change firms, spillovers arise. We show that technological spillovers are most likely when they increase total industry profits. We use this result to show that innovation incentives are usually stronger for endogenous than for exogenous spillovers and that endogenous spillovers may reverse the result that innovation incentives are stronger under quantity competition than under price competition. Finally, we explore the robustness of our results with respect to contractual incompleteness and the number of R&D workers.

Journal

Journal of Economics & Management StrategyWiley

Published: Jun 1, 2003

References

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