Endogenous Spillovers and Incentives to Innovate
18 Pages Posted: 8 Jun 1999
Date Written: January 1999
Abstract
We present a new approach to endogenizing technological spillovers. Firms choose continuous levels of a cost-reducing innovation before they engage in competition for each other's R&D-employees. Successful bids for the competitor's employee then result in higher levels of cost-reduction. Finally, firms enter product market competition. We apply the approach to the long-standing debate on the effects of the mode of competition on innovation incentives. We show that incentives to acquire spillovers are stronger and incentives to prevent spillovers are weaker under quantity competition than under price competition. As a result, for a wide range of parameters, price competition gives stronger innovation incentives than quantity competition.
JEL Classification: L11, O31
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Global Income Divergence, Trade and Industrialization: The Geography of Growth Take-Offs
-
Global Income Divergence, Trade and Industrialization: The Geography of Growth Take-Offs
-
Incremental Trade and Endogenous Growth: A Q-Theory Approach
By Richard E. Baldwin and Rikard Forslid
-
Trade Liberalization and Endogenous Growth: A Q-Theory Approach
By Richard E. Baldwin and Rikard Forslid
-
Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Looses from it?
-
The Core-Periphery Model and Endogenous Growth: Stabilising and De-Stabilising Integration
By Richard E. Baldwin and Rikard Forslid
-
Spatial Agglomeration Dynamics
By Danny Quah