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Labor Pooling in R&D Intensive Industries

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  • Gerlach, Heiko A.
  • Rønde, Thomas
  • Stahl, Konrad O.
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    Abstract

    We investigate the interplay between firms' R&D decisions and labor market competition, and how this influences equilibrium location choices and welfare. Firms engage in risky R&D activities and thus create stochastic product and implied labor demand. Spatial agglomeration is more likely in situations where the innovation step is large and the probability for a firm to be the only innovator is high. When firms agglomerate, they tend to invest more in R&D compared to spatially dispersed firms. Agglomeration is welfare maximizing, because expected labor productivity is higher and firms choose a more efficient, diversified portfolio of R&D projects at the industry level. The latter aspect is ascertained by data from German firms in R&D intensive industries. --

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    Bibliographic Info

    Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 08-074.

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    Date of creation: 2008
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    Handle: RePEc:zbw:zewdip:7417

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    1. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117 Elsevier.
    2. Glenn Ellison & Edward L. Glaeser, 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," NBER Working Papers 4840, National Bureau of Economic Research, Inc.
    3. Baumgardner, James R, 1988. "The Division of Labor, Local Markets, and Worker Organization," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 509-27, June.
    4. Guy Dumais & Glenn Ellison & Edward L Glaeser, 1998. "Geographic Concentration as a Dynamic Process," Working Papers 98-3, Center for Economic Studies, U.S. Census Bureau.
    5. Gerlach, Heiko A. & Rønde, Thomas & Stahl, Konrad O., 2005. "Labour Pooling in R&D Intensive Industries," CEPR Discussion Papers 5285, C.E.P.R. Discussion Papers.
    6. Glenn Ellison & Drew Fudenberg, 2003. "Knife-Edge Or Plateau: When Do Market Models Tip?," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1249-1278, November.
    7. Fosfuri, Andrea & Ronde, Thomas, 2004. "High-tech clusters, technology spillovers, and trade secret laws," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 45-65, January.
    8. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
    9. Jaffe, A.B. & Trajtenberg, M., 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," Papers 14-92, Tel Aviv.
    10. Audretsch, David B. & Feldman, Maryann P., 2004. "Knowledge spillovers and the geography of innovation," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 61, pages 2713-2739 Elsevier.
    11. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September.
    12. 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.
    13. Stahl, Konrad O. & Walz, Uwe, 2001. "Will there be a concentration of alikes? The impact of labor market structure on industry mix in the presence of product market shocks," HWWA Discussion Papers 140, Hamburg Institute of International Economics (HWWA).
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