Agglomeration and Endogenous Absorptive Capacities: Hotelling Revisited
AbstractThis paper proposes a theoretical model of spatial duopoly, where the location, on the one hand, and the absorptive capacity of ï¬rms as function of their internal R+D investment, on the other hand, endogenously determine the maximum level of knowledge spillovers ï¬rms might absorb. Our goal is to test whether this new modelling of spillovers affects the traditional outcomes in terms of ï¬rms location choices . We solve a three-stage game, where ï¬rms choose their geographical location, prior to their level of internal R+D expenditures, and ï¬nally compete in prices. We found that, at the optimum, ï¬rms choose the same level of internal R+D and set the same price, independently of their location. Moreover, ï¬rms locate symmetrically and tends to agglomerate in the center of the market as the transportation costs increase, knowledge spillovers being in that case maximum.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2007-102.
Date of creation: 18 Dec 2007
Date of revision:
Spatial Agglomeration; Endogenous Spillovers; Absorptive Capacity; Non-Cooperative Game;
Find related papers by JEL classification:
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-05 (All new papers)
- NEP-GEO-2008-01-05 (Economic Geography)
- NEP-KNM-2008-01-05 (Knowledge Management & Knowledge Economy)
- NEP-URE-2008-01-05 (Urban & Real Estate Economics)
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- Bouguezzi, Fehmi, 2010. "Technology transfer in a linear city with symmetric locations," MPRA Paper 21055, University Library of Munich, Germany.
- Yang, Chih-Hai & Lin, Hui-Lin & Li, Hsiao-Yun, 2013. "Influences of production and R&D agglomeration on productivity: Evidence from Chinese electronics firms," China Economic Review, Elsevier, Elsevier, vol. 27(C), pages 162-178.
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