Advanced Search
MyIDEAS: Login

The Impact of Cost-Reducing R&D Spillovers on the Ergodic Distribution of Market Structures

Contents:

Author Info

  • Christopher A. Laincz

    ()
    (Drexel University)

  • Ana Rodrigues

    ()
    (Autoridade da Concorrência)

Abstract

We extend the literature on knowledge spillovers between firms by studying a dynamic duopoly model of R&D. Our analysis highlights the previously ignored welfare effects of spillovers through dynamic changes in industry concentration. In addition, we find that the impact of imperfect appropriability of R&D on concentration and welfare depends crucially on the manner in which spillovers are obtained. To date, the analysis of the impact of knowledge spillovers between firms has been largely restricted to static two-stage models (R&D decisions followed by product market decisions). These models generally predict suboptimal R&D expenditures and lower welfare. Such models are silent on the evolution of the market structure, and the resulting welfare implications, because they need to assume initial conditions (symmetry or asymmetry). We find that when spillovers require absorptive capacity investment in own R&D, larger spillovers lead to declines in concentration while rates of innovation increase and welfare rises. In contrast, when spillovers are costlessly obtained increases in the extent of spillovers rates of innovation fall leading to losses in welfare through both reduced consumer surplus and firm values, while the effect on concentration is ambiguous.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.concorrencia.pt/download/wp23_lainczrodrigues_june_2007.pdf
Our checks indicate that this address may not be valid because: 404 NOT FOUND. If this is indeed the case, please notify (Duarte Brito)
File Function: First version, 2007
Download Restriction: no

Bibliographic Info

Paper provided by Portuguese Competition Authority in its series Working Papers with number 23.

as in new window
Length: 50 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:pca:wpaper:23

Contact details of provider:
Postal: Rua laura Alves, no.4 7o, 1050-138 Lisboa
Phone: (351) 21 790 20 00
Fax: (351) 21 790 20 99
Email:
Web page: http://www.autoridadedaconcorrencia.pt/
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Suzumura, Kotaro, 1992. "Cooperative and Noncooperative R&D in an Oligopoly with Spillovers," American Economic Review, American Economic Association, vol. 82(5), pages 1307-20, December.
  2. Flaherty, M Therese, 1980. "Industry Structure and Cost-Reducing Investment," Econometrica, Econometric Society, vol. 48(5), pages 1187-1209, July.
  3. Glenn C. Loury, 1976. "Market Structure and Innovation," Discussion Papers 256, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
  5. Budd, Christopher & Harris, Christopher & Vickers, John, 1993. "A Model of the Evolution of Duopoly: Does the Asymmetry between Firms Tend to Increase or Decrease?," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 543-73, July.
  6. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-37, December.
  7. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
  8. Klette, Tor Jakob & Kortum, Samuel S, 2002. "Innovating Firms and Aggregate Innovation," CEPR Discussion Papers 3248, C.E.P.R. Discussion Papers.
  9. Howitt, Peter & Griffith, Rachel & Aghion, Philippe & Blundell, Richard & Bloom, Nick, 2005. "Competition and Innovation: An Inverted-U Relationship," Scholarly Articles 4481507, Harvard University Department of Economics.
  10. Minjae Song, 2011. "A Dynamic Analysis Of Cooperative Research In The Semiconductor Industry," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(4), pages 1157-1177, November.
  11. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  12. Dasgupta, Partha & Stiglitz, Joseph, 1980. "Industrial Structure and the Nature of Innovative Activity," Economic Journal, Royal Economic Society, vol. 90(358), pages 266-93, June.
  13. Simpson, R David & Vonortas, Nicholas S, 1994. "Cournot Equilibrium with Imperfectly Appropriable R&D," Journal of Industrial Economics, Wiley Blackwell, vol. 42(1), pages 79-92, March.
  14. Jim Jin & Juan Perote-Peña & Michael Troege, 2004. "Learning by doing, spillovers and shakeouts," Journal of Evolutionary Economics, Springer, vol. 14(1), pages 85-98, January.
  15. Ghemawat, Pankaj & Spence, A Michael, 1985. "Learning Curve Spillovers and Market Performance," The Quarterly Journal of Economics, MIT Press, vol. 100(5), pages 839-52, Supp..
  16. Laincz, Christopher A., 2005. "Market structure and endogenous productivity growth: how do R&D subsidies affect market structure?," Journal of Economic Dynamics and Control, Elsevier, vol. 29(1-2), pages 187-223, January.
  17. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  18. Ziss, Steffen, 1994. "Strategic R&D with Spillovers, Collusion and Welfare," Journal of Industrial Economics, Wiley Blackwell, vol. 42(4), pages 375-93, December.
  19. Henriques, Irene, 1990. "Cooperative and Noncooperative R&D in Duopoly with Spillovers: Comment," American Economic Review, American Economic Association, vol. 80(3), pages 638-40, June.
  20. Grunfeld, Leo A., 2003. "Meet me halfway but don't rush: absorptive capacity and strategic R&D investment revisited," International Journal of Industrial Organization, Elsevier, vol. 21(8), pages 1091-1109, October.
  21. Rosenberg, Nathan, 1974. "Science, Invention and Economic Growth," Economic Journal, Royal Economic Society, vol. 84(333), pages 90-108, March.
  22. Ulrich Doraszelski & Mark Satterthwaite, 2010. "Computable Markov-perfect industry dynamics," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 215-243.
  23. Kamien, Morton I & Schwartz, Nancy L, 1972. "Timing of Innovations Under Rivalry," Econometrica, Econometric Society, vol. 40(1), pages 43-60, January.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Borkovsky, Ron N. & Doraszelski, Ulrich & Kryukov, Yaroslav, 2009. "A Dynamic Quality Ladder Model with Entry and Exit: Exploring the Equilibrium Correspondence Using the Homotopy Method," CEPR Discussion Papers 7560, C.E.P.R. Discussion Papers.
  2. Hall, Joshua & Laincz, Christopher, 2012. "Optimal R&D Subsidies with Heterogeneous Firms in a Dynamic Setting," School of Economics Working Paper Series 2012-13, LeBow College of Business, Drexel University.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pca:wpaper:23. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Duarte Brito).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.