Innovation in Space
This paper shows how competition for land may lead firms to optimally innovate in spite of the market being perfectly competitive. When bidding for a location, firms can enhance their bid by investing in innovations that make the land more valuable. Firms are willing to innovate because the non-replicability of land implies that they will not be undercut by some other producer leading to losses as in the standard theory. In the absence of spillovers over space and over time, firms will optimally innovate. Empirical evidence from U.S. metropolitan areas supports the predictions of the theory.
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Volume (Year): 102 (2012)
Issue (Month): 3 (May)
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References listed on IDEAS
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- Mansfield, Edwin, 1985. "How Rapidly Does New Industrial Technology Leak Out?," Journal of Industrial Economics, Wiley Blackwell, vol. 34(2), pages 217-223, December.
- Hellwig, Martin & Irmen, Andreas, 1999.
"Endogenous Technical Change in a Competitive Economy,"
Sonderforschungsbereich 504 Publications
99-53, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- Hellwig, Martin & Irmen, Andreas, 2001. "Endogenous Technical Change in a Competitive Economy," Journal of Economic Theory, Elsevier, vol. 101(1), pages 1-39, November.
- Hellwig, Martin & Irmen, Andreas, 1999. "Endogenous technical change in a competitive economy," Papers 99-53, Sonderforschungsbreich 504.
- Morris A. Davis & Michael G. Palumbo, 2006.
"The price of residential land in large U.S. cities,"
Finance and Economics Discussion Series
2006-25, Board of Governors of the Federal Reserve System (U.S.).
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