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Spillovers Reconsidered: Analysing Economic Welfare under complementarities in R&D

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Author Info
Georg von Graevenitz (Ludwig-Maximilians-Universität München, University of Munich, Kaulbachstr. 45, D-80539 Munich, Germany)

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Abstract

We analyse economic welfare in R&D intensive industries under varying assumptions on the spillover process. The focus lies on spillover processes with complementary R&D investments such as those modelling absorptive capacity. There spillovers give rise to both negative and positive externalities. We show that the rationale for public policy intervention is strengthened where spillovers also have positive effects. This conclusion is based on the supermodularity of the spillover process and the investment game. We characterise a large class of spillover processes with similar implications for public policy. We show that results of much empirical work on absorptive capacity extend to this class of models.

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Publisher Info
Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number 29.

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Date of creation: Nov 2004
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Handle: RePEc:trf:wpaper:29

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Related research
Keywords: spillovers; complementarity; absorptive capacity; supermodularity; oligopolistic R&D;

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Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives

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