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Identifying Technology Spillovers and Product Market Rivalry

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Author Info
Nick Bloom
Mark Schankerman
John Van Reenen

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Abstract

Government policies to support R&D are predicated on empirical evidence of R&D"spillovers" between firms. But there are two countervailing R&D spillovers: positive effectsfrom technology spillovers and negative effects from business stealing by product marketrivals. We develop a general framework showing that technology and product marketspillovers have testable implications for a range of performance indicators, and exploit theseusing distinct measures of a firm's position in technology space and product market space.We show using panel data on U.S. firms between 1981 and 2001 that both technology andproduct market spillovers operate, but that net social returns are several times larger thanprivate returns. The spillover effects are also revealed when we analyze three high-techsectors in detail - pharmaceuticals, computer hardware and telecommunication equipment.Using the model we evaluate three R&D subsidy policies and show that the typical focus ofsupport for small and medium firms may be misplaced.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0675.

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Date of creation: Feb 2005
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Handle: RePEc:cep:cepdps:dp0675

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Related research
Keywords: Spillovers; R&D; market value; patents;

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Find related papers by JEL classification:
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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  1. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September. [Downloadable!] (restricted)
    Other versions:
  2. Klette, Tor Jakob & Griliches, Zvi, 1996. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Endogenous," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(4), pages 343-61, July-Aug.. [Downloadable!] (restricted)
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  3. Jaffe, Adam B & Trajtenberg, Manuel & Henderson, Rebecca, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 577-98, August. [Downloadable!] (restricted)
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  4. Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, vol. 94(2), pages 429-36, March. [Downloadable!] (restricted)
  5. Cockburn, Iain. & Henderson, Iain., 1994. "Racing to invest? : the dynamics of competition in ethical drug discovery," Working papers 3710-94., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
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  6. Acemoglu, Daron & Aghion, Philippe & Zilibotti, Fabrizio, 2002. "Distance to Frontier, Selection, and Economic Growth," CEPR Discussion Papers 3467, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Joris Pinkse & Margaret E. Slade & Craig Brett, 2002. "Spatial Price Competition: A Semiparametric Approach," Econometrica, Econometric Society, vol. 70(3), pages 1111-1153, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Maurice Kugler, 2006. "Spillovers From Foreign Direct Investment:Within Or Between Industries?," BORRADORES DE ECONOMIA 003523, BANCO DE LA REPÚBLICA. [Downloadable!]
    Other versions:
  2. Ralph Siebert & Georg von Graevenitz, 2006. "How Licensing Resolves Hold-Up: Evidence from a Dynamic Panel Data Model with Unobserved Heterogeneity," Discussion Papers 105, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  3. Stéphane Lhuillery, 2009. "In search of lost disincentive effect from intra-industry spillovers," CEMI Working Papers cemi-workingpaper-2009-00, Ecole Polytechnique Fédérale de Lausanne, Collège du Management de la Technologie, Management of Technology and Entrepreneurship Institute, Chaire en Economie et Management de l'Innovation. [Downloadable!]
  4. Alberto Galasso, 2007. "Broad Cross-License Agreements andPersuasive Patent Litigation: Theory andEvidence from the Semiconductor Industry," STICERD - Economics of Industry Papers 45, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
  5. Capolupo, Rosa, 2008. "The New Growth Theories and Their Empirics after Twenty Years," Economics Discussion Papers 2008-27, Kiel Institute for the World Economy. [Downloadable!]
  6. Paolo Giorgio GARELLA & Emanuele BACCHIEGA, 2007. "Disclosing vs. withholding technology knowledge in a duopoly," Departemental Working Papers 2007-01, Department of Economics University of Milan Italy. [Downloadable!]
    Other versions:
  7. Chrysovalantou Milliou, 2006. "Endogenous Protection Of R&D Investments," Economics Working Papers we066325, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  8. A. Jorge Padilla & Damien Geradin & Anne Layne-Farrar, 2007. "Royalty Stacking In High Tech Industries: Separating Myth From Reality," Working Papers wp2007_0701, CEMFI. [Downloadable!]
  9. repec:bep:glecon:7:2007:1:5 is not listed on IDEAS
  10. Ryo Horii, 2006. "Wants and Past Knowledge: Growth Cycles with Emerging Industries," Discussion Papers in Economics and Business 06-03, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP). [Downloadable!]
    Other versions:
  11. Missaka Warusawitharana, 2008. "Research and development, profits and firm value: a structural estimation," Finance and Economics Discussion Series 2008-52, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  12. Czarnitzki, Dirk & Kraft, Kornelius, 2007. "Spillovers of Innovation Activities and Their Profitability," ZEW Discussion Papers 07-073, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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