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Knowledge diffusion through employee mobility

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  • April Mitchell Franco
  • Darren Filson

Abstract

In high-tech industries, one important method of diffusion is through employee mobility: many of the entering firms are started by employees from incumbent firms using some of their former employers’ technological know-how. This paper explores the effect of incorporating this mechanism in a general industry framework by allowing employees to imitate their employers’ know-how. The equilibrium is Pareto optimal since the employees “pay” for the possibility of learning their employers’ know-how. The model’s implications are consistent with data from the rigid disk drive industry. These implications concern the effects of know-how on firm formation and survival.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 272.

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Date of creation: 2000
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Handle: RePEc:fip:fedmsr:272

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Keywords: Technological innovations ; Research and development;

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  1. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
  2. Boyan Jovanovic & Glenn MacDonald, 1993. "The Life-Cycle of a Competitive Industry," NBER Working Papers 4441, National Bureau of Economic Research, Inc.
  3. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-53, September.
  4. Josh Lerner, 1997. "An Empirical Exploration of a Technology Race," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 228-247, Summer.
  5. Boyan Jovanovic & Yaw Nyarko, 1994. "The Transfer of Human Capital," NBER Working Papers 4823, National Bureau of Economic Research, Inc.
  6. Macdonald, G.M., 1988. "Competitive Diffusion," University of Chicago - Economics Research Center 88-10, Chicago - Economics Research Center.
  7. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
  8. Boyan Jovanovic & Glenn MacDonald, 1993. "Competitive Diffusion," NBER Working Papers 4463, National Bureau of Economic Research, Inc.
  9. Irwin, Douglas A & Klenow, Peter J, 1994. "Learning-by-Doing Spillovers in the Semiconductor Industry," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1200-1227, December.
  10. Chari, V V & Hopenhayn, Hugo, 1991. "Vintage Human Capital, Growth, and the Diffusion of New Technology," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1142-65, December.
  11. Jovanovic, Boyan & Rosenthal, Robert W., 1988. "Anonymous sequential games," Journal of Mathematical Economics, Elsevier, vol. 17(1), pages 77-87, February.
  12. Prusa, Thomas J & Schmitz, James A, Jr, 1994. "Can Companies Maintain Their Initial Innovation Thrust? A Study of the PC Software Industry," The Review of Economics and Statistics, MIT Press, vol. 76(3), pages 523-40, August.
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