On additive spillovers and returns to scale in R&D
This paper explores economically meaningful forms of cost functions for process research and development in the presence of imperfect appropriability of inventive output. We propose, as a central criterion to be satisfied by the knowledge production process, that a given R&D investment should always produce more cost reduction if devoted to one lab rather than two independent labs operated under natural spillovers. With input spillovers this postulate is broadly satisfied. However, with output spillovers this is generally not the case for R&D technologies having decreasing returns to scale. We identify economically plausible restrictions on the size of spillovers and on the properties of the R&D cost function so as to bring about compatibility with the above postulate. Some empirical evidence in support of both the criterion and of its theoretical implications is discussed.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:26:y:2008:i:3:p:695-703. 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: (Zhang, Lei)
If references are entirely missing, you can add them using this form.