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
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.:
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- Davis, Morris A. & Palumbo, Michael G., 2008.
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- 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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