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Endogenous protection of R&D investments

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  • Chrysovalantou Milliou

Abstract

We examine firms' incentives to protect their non-cooperative R&D investments from spilling over to competitors. We show that, contrary to findings in most of the literature, the lack of full appropriability can lead to an increase in R&D investments. Consequently, as long as the R&D spillovers are not too strong, firms decide to let their R&D knowledge flow. Since, as we show, welfare is higher when R&D spillovers are present, it follows that public policies that promote the dissemination of technological knowledge could be welfare-enhancing.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 42 (2009)
Issue (Month): 1 (February)
Pages: 184-205

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Handle: RePEc:cje:issued:v:42:y:2009:i:1:p:184-205

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References

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  1. Jeffrey I. Bernstein & M. Ishaq Nadiri, 1989. "Research and Development and Intraindustry Spillovers: An Empirical Application of Dynamic Duality," NBER Working Papers 2002, National Bureau of Economic Research, Inc.
  2. María José Gil Moltó & Nikolaos Georgantzís & Vicente Orts, 2004. "Cooperative R&D with Endogenous Technology Differentiation," Industrial Organization 0401009, EconWPA.
  3. Fosfuri, Andrea & Motta, Massimo & Rønde, Thomas, 2001. "Foreign direct investment and spillovers through workers' mobility," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/13207, Universidad Carlos III de Madrid.
  4. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-306, December.
  5. Nick Bloom & Mark Schankerman & John Van Reenen, 2005. "Identifying technology spillovers and product market rivalry," Proceedings, Federal Reserve Bank of San Francisco.
  6. Hans Gersbach & Armin Schmutzler, 2003. "Endogenous spillovers and incentives to innovate," Economic Theory, Springer, vol. 21(1), pages 59-79, 01.
  7. Paul Almeida & Bruce Kogut, 1999. "Localization of Knowledge and the Mobility of Engineers in Regional Networks," Management Science, INFORMS, vol. 45(7), pages 905-917, July.
  8. Arundel, Anthony, 2001. "The relative effectiveness of patents and secrecy for appropriation," Research Policy, Elsevier, vol. 30(4), pages 611-624, April.
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  10. Arundel, Anthony & Kabla, Isabelle, 1998. "What percentage of innovations are patented?: empirical estimates for European firms," Open Access publications from Maastricht University urn:nbn:nl:ui:27-19063, Maastricht University.
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  13. Joanna Poyago-Theotoky, 1999. "A Note on Endogenous Spillovers in a Non-Tournament R & D Duopoly," Review of Industrial Organization, Springer, vol. 15(3), pages 253-262, November.
  14. Fosfuri, Andrea & Rønde, Thomas, 2004. "High-tech clusters, technology spillovers, and trade secret laws," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/13208, Universidad Carlos III de Madrid.
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  16. Adam B. Jaffe, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits and Market Value," NBER Working Papers 1815, National Bureau of Economic Research, Inc.
  17. Arundel, Anthony, 2001. "The relative effectiveness of patents and secrecy for appropriation," Open Access publications from Maastricht University urn:nbn:nl:ui:27-19185, Maastricht University.
  18. De Bondt, Raymond, 1997. "Spillovers and innovative activities," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/101206, Katholieke Universiteit Leuven.
  19. Kamien, Morton I. & Zang, Israel, 2000. "Meet me halfway: research joint ventures and absorptive capacity," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 995-1012, October.
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  24. Fosfuri, Andrea & Ronde, Thomas, 2004. "High-tech clusters, technology spillovers, and trade secret laws," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 45-65, January.
  25. Motta, Massimo & Rønde, Thomas, 2002. "Trade Secret Laws, Labour Mobility and Innovations," CEPR Discussion Papers 3615, C.E.P.R. Discussion Papers.
  26. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1988. "Appropriating the Returns from Industrial R&D," Cowles Foundation Discussion Papers 862, Cowles Foundation for Research in Economics, Yale University.
  27. Bester, H. & Petrakis, E., 1991. "The Incentives for Cost Reduction in a Differentiated Industry," Discussion Paper 1991-36, Tilburg University, Center for Economic Research.
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Citations

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Cited by:
  1. Emanuele Bacchiega & Paolo Garella, 2006. "Disclosing vs. Withholding Technology Knowledge in a Duopoly," Working Papers 0609, University of Crete, Department of Economics.
  2. Clark, Derek J. & Sand, Jan Yngve, 2009. "Endogenous Technology Sharing in R&D Intensive Industries," Economics Discussion Papers 2009-28, Kiel Institute for the World Economy.
  3. Ben Youssef, Slim & Zaccour, Georges, 2009. "Absorptive Capacity, R&D Spillovers, Emissions Taxes and R&D Subsidies," MPRA Paper 16984, University Library of Munich, Germany, revised Aug 2009.
  4. Ben Youssef, Slim, 2009. "Transboundary Pollution and Absorptive Capacity," MPRA Paper 17158, University Library of Munich, Germany.

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