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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

    Contact details of provider:
    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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    References

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    1. Paul Almeida & Bruce Kogut, 1999. "Localization of Knowledge and the Mobility of Engineers in Regional Networks," Management Science, INFORMS, vol. 45(7), pages 905-917, July.
    2. Pierre-Philippe Combes & Gilles Duranton, 2001. "Labor pooling, labor poaching and spatial clustering," LSE Research Online Documents on Economics 20103, London School of Economics and Political Science, LSE Library.
    3. Hans Gersbach & Armin Schmutzler, 2003. "Endogenous spillovers and incentives to innovate," Economic Theory, Springer, vol. 21(1), pages 59-79, 01.
    4. Jaffe, A.B. & Trajtenberg, M., 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," Papers 14-92, Tel Aviv.
    5. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
    6. Cheung, Steven N S, 1982. "Property Rights in Trade Secrets," Economic Inquiry, Western Economic Association International, vol. 20(1), pages 40-53, January.
    7. James Bessen & Eric Maskin, 2006. "Sequential Innovation, Patents, and Imitation," Economics Working Papers 0025, Institute for Advanced Study, School of Social Science.
    8. Pakes, Ariel & Nitzan, Shmuel, 1983. "Optimum Contracts for Research Personnel, Research Employment, and the Establishment of "Rival" Enterprises," Journal of Labor Economics, University of Chicago Press, vol. 1(4), pages 345-65, October.
    9. Motta, Massimo & Rønde, Thomas, 2002. "Trade Secret Laws, Labour Mobility and Innovations," CEPR Discussion Papers 3615, C.E.P.R. Discussion Papers.
    10. Cooper, David P., 2001. "Innovation and reciprocal externalities: information transmission via job mobility," Journal of Economic Behavior & Organization, Elsevier, vol. 45(4), pages 403-425, August.
    11. Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, vol. 86(3), pages 630-40, June.
    12. Jerry R. Green & Suzanne Scotchmer, 1995. "On the Division of Profit in Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 20-33, Spring.
    13. 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.
    14. 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.
    15. Thomas Rønde, 2001. "Trade Secrets and Information Sharing," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(3), pages 391-417, 09.
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