Theoretical Perspectives on Localised Knowledge Spillovers and Agglomeration
17 Pages Posted: 13 Jul 2014
Date Written: July 11, 2014
Abstract
There is substantial empirical evidence that innovation is geographically concentrated. Unlike what is generally assumed, however, it is not clear that localised knowledge spillovers provide a theoretically valid explanation for this. Studying spillovers of cost-reducing technology between Cournot oligopolists we show that 1) localised knowledge spillovers of any level do encourage agglomeration, but 2) whether this leads to higher levels of effective R&D depends on the type and level of knowledge spillovers, the number of firms, and the industry's R&D efficiency.
Keywords: knowledge spillovers, agglomeration economies, innovation, location.
JEL Classification: O33, R32, L13.
Suggested Citation: Suggested Citation