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Tacit knowledge with innovative entrepreneurship

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  • Spulber, Daniel F.

Abstract

Tacit knowledge affects the trade-off between entrepreneurship and technology transfer. I present a formal model in which an inventor and the existing firm engage in a strategic innovation game by choosing whether to compete or to cooperate through technology transfer. The model highlights how the problem of tacit knowledge affects the inventor's R&D investment and the existing firm's investment in absorptive capacity. The inventor's tacit knowledge implies that benefits from own-use through entrepreneurship can exceed the benefits from technology transfer. In equilibrium, higher-quality inventions result in entrepreneurship and lower-quality inventions result in technology transfer. R&D investment and absorption investment are strategic substitutes in the innovation game with the option of entrepreneurship. The possibility of entrepreneurship increases R&D investment and reduces absorption investment. The equilibrium probability of entrepreneurship is decreasing in the costs of R&D, increasing in the costs of absorption, and decreasing in the set-up costs of new firms.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 30 (2012)
Issue (Month): 6 ()
Pages: 641-653

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Handle: RePEc:eee:indorg:v:30:y:2012:i:6:p:641-653

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Web page: http://www.elsevier.com/locate/inca/505551

Related research

Keywords: Tacit knowledge; R&D; Invention; Innovation; Entrepreneur;

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References

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Cited by:
  1. Colombo, Luca & Dawid, Herbert & Piva, Mariacristina & Vivarelli, Marco, 2013. "Does Easy Start-Up Formation Hamper Incumbents' R&D Investment? A Theoretical and Empirical Analysis," IZA Discussion Papers 7302, Institute for the Study of Labor (IZA).
  2. Cunningham, Thomas, 2013. "Biases and Implicit Knowledge," MPRA Paper 50292, University Library of Munich, Germany.

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