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Identifying Technology Spillovers and Product Market Rivalry

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  • Nicholas Bloom
  • Mark Schankerman
  • John Van Reenen

Abstract

The impact of R&D on growth through spillovers has been a major topic of economic research over the last thirty years. A central problem in the literature is that firm performance is affected by two countervailing "spillovers": a positive effect from technology (knowledge) spillovers and negative business stealing effects from product market rivals. We develop a general framework incorporating these two types of spillovers and implement this model using measures of a firm's position in technology space and product market space. Using panel data on U.S. firms we show that technology spillovers quantitatively dominate, so that the gross social returns to R&D are at least twice as high as the private returns. We identify the causal effect of R&D spillovers by using changes in Federal and state tax incentives for R&D. We also find that smaller firms generate lower social returns to R&D because they operate more in technological niches. Finally, we detail the desirable properties of an ideal spillover measure and how existing approaches, including our new Mahalanobis measure, compare to these criteria.

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Bibliographic Info

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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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: Spillovers; R&D; market value; patents; productivity;

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  1. Charles I. Jones & John C. Williams, . "Measuring the Social Return to R&D," Working Papers, Stanford University, Department of Economics 97002, Stanford University, Department of Economics.
  2. 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, MIT Press, vol. 108(3), pages 577-98, August.
  3. Acemoglu, Daron & Aghion, Philippe & Zilibotti, Fabrizio, 2002. "Distance to Frontier, Selection, and Economic Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3467, C.E.P.R. Discussion Papers.
  4. Tor Jakob Klette & Zvi Griliches, 1994. "The Inconsistency of Common Scales Estimators when Output Prices are Unobserved and Endogenous," Discussion Papers, Research Department of Statistics Norway 127, Research Department of Statistics Norway.
  5. Joris Pinkse & Margaret E. Slade & Craig Brett, 2002. "Spatial Price Competition: A Semiparametric Approach," Econometrica, Econometric Society, Econometric Society, vol. 70(3), pages 1111-1153, May.
  6. Wolfgang Keller, 2001. "International Technology Diffusion," NBER Working Papers 8573, National Bureau of Economic Research, Inc.
  7. Cockburn, Iain & Henderson, Rebecca, 1994. "Racing to Invest? The Dynamics of Competition in Ethical Drug Discovery," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 3(3), pages 481-519, Fall.
  8. Glenn C. Loury, 1976. "Market Structure and Innovation," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 256, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Jasjit Singh, 2005. "Collaborative Networks as Determinants of Knowledge Diffusion Patterns," Management Science, INFORMS, INFORMS, vol. 51(5), pages 756-770, May.
  10. Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 94(2), pages 429-36, March.
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  1. “Identifying Technology Spillovers and Product Market Rivalry,” N. Bloom, M. Schankerman & J. Van Reenen (2013)
    by afinetheorem in A Fine Theorem on 2013-11-18 08:28:05
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