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High-tech clusters, technology spillovers, and trade secret laws

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  • Fosfuri, Andrea

    (Universidad Carlos III de Madrid)

  • Rønde, Thomas

    (University of Mannheim)

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    Abstract

    We analyze firms’ incentives to cluster in an industrial district to benefit from reciprocal technology spillovers. A simple model of cumulative innovation is presented where technology spillovers arise endogenously through labor mobility. It is shown that firms’ incentives to cluster are the strongest when the following three conditions are met: 1) technological progress is rapid; 2) competition in the product market is relatively soft; 3) the probability of a single firm to develop an innovation is neither very high nor very low. We show that some trade secret protection is always beneficial for firms’ profits and stimulates clustering. Excessive protection may impede technology spillovers and reduce firms’ incentives to cluster.

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    File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/6784
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    Bibliographic Info

    Paper provided by Copenhagen Business School, Department of Economics in its series Working Papers with number 07-2002.

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    Length: 22 pages
    Date of creation: 01 May 2002
    Date of revision:
    Handle: RePEc:hhs:cbsnow:2002_007

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    Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
    Phone: 38 15 25 75
    Fax: 38 15 34 99
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    Web page: http://www.cbs.dk/departments/econ/
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    Related research

    Keywords: Cumulative innovation; industrial districts; intellectual property rights; technology spillovers;

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    1. Combes, Pierre-Philippe & Duranton, Gilles, 2006. "Labour pooling, labour poaching, and spatial clustering," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 36(1), pages 1-28, January.
    2. Pakes, Ariel & Nitzan, Shmuel, 1983. "Optimum Contracts for Research Personnel, Research Employment, and the Establishment of "Rival" Enterprises," Scholarly Articles 3428538, Harvard University Department of Economics.
    3. Suzanne Scotchmer, 1991. "Standing on the Shoulders of Giants: Cumulative Research and the Patent Law," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 29-41, Winter.
    4. Green, J.R. & Scotchmer, S., 1993. "On the Division of Profit in Sequential Innovation," Harvard Institute of Economic Research Working Papers 1638, Harvard - Institute of Economic Research.
    5. Motta, Massimo & Rønde, Thomas, 2002. "Trade Secret Laws, Labour Mobility and Innovations," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3615, C.E.P.R. Discussion Papers.
    6. 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.
    7. Hans Gersbach & Armin Schmutzler, 1999. "Endogenous Spillovers and Incentives to Innovate," SOI - Working Papers 9902, Socioeconomic Institute - University of Zurich.
    8. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(3), pages 483-99, June.
    9. Paul Almeida & Bruce Kogut, 1999. "Localization of Knowledge and the Mobility of Engineers in Regional Networks," Management Science, INFORMS, INFORMS, vol. 45(7), pages 905-917, July.
    10. Cheung, Steven N S, 1982. "Property Rights in Trade Secrets," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 20(1), pages 40-53, January.
    11. James Bessen & Eric Maskin, 2009. "Sequential innovation, patents, and imitation," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 611-635.
    12. Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, American Economic Association, vol. 86(3), pages 630-40, June.
    13. Cooper, David P., 2001. "Innovation and reciprocal externalities: information transmission via job mobility," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 45(4), pages 403-425, August.
    14. Thomas Rønde, 2001. "Trade Secrets and Information Sharing," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 10(3), pages 391-417, 09.
    15. Acs, Zoltan J & Audretsch, David B & Feldman, Maryann P, 1994. "R&D Spillovers and Recipient Firm Size," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 336-40, May.
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