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Spillover Asymmetry and Why It Matters

Author

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  • Anne Marie Knott

    () (Olin Business School, Washington University, St. Louis, Missouri 63130)

  • Hart E. Posen

    () (Stephen M. Ross School of Business, University of Michigan, Ann Arbor, Michigan 48109)

  • Brian Wu

    () (Stephen M. Ross School of Business, University of Michigan, Ann Arbor, Michigan 48109)

Abstract

Although spillovers are a crucial factor in determining the optimal environment for innovation, there is no consensus regarding their impact on firm behavior. One reason for this may be that models differ in their assumptions for the functional form of the spillover pool. In industrial organization and economic geography, for example, the predominant convention is that all innovation within an industry/region contributes to a spillover pool that has a common value for all firms. An alternative convention prevalent in endogenous growth and evolutionary economics is that spillovers have directionality--the size of the relevant pool differs across firms. Knowing the correct functional form may facilitate theoretical consensus, either analytically (by modifying models' assumptions) or empirically (by supporting a critical test of competing theories). We characterize and test the functional form of spillover pools for efficiency-enhancing innovation across 50 markets in the banking industry. Our results in that setting are consistent with expectations for asymmetric spillovers but inconsistent with expectations for pooled spillovers.

Suggested Citation

  • Anne Marie Knott & Hart E. Posen & Brian Wu, 2009. "Spillover Asymmetry and Why It Matters," Management Science, INFORMS, vol. 55(3), pages 373-388, March.
  • Handle: RePEc:inm:ormnsc:v:55:y:2009:i:3:p:373-388
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    File URL: http://dx.doi.org/10.1287/mnsc.1080.0950
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    References listed on IDEAS

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    Cited by:

    1. Edward Lorenz & Jana Schmutzler, 2015. "Tolerance, Agglomeration and Enterprise Innovation Performance: A Multi-Level Analysis of Latin American Regions," GREDEG Working Papers 2015-43, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
    2. Tan Tai Loong Alex & Chew Si Jun Petrina, 2017. "Decoding the Committee on the Future Economy (CFE) Report 2017: Structuring Partnerships, Changing Mindsets and Nurturing Creativity," Working Papers id:11954, eSocialSciences.
    3. Evan Rawley & Robert Seamans, 2015. "Intra-Firm Spillovers? The Stock and Flow Effects of Collocation," Working Papers 15-01, Center for Economic Studies, U.S. Census Bureau.
    4. Elias Carayannis & Stephen Clark & Dora Valvi, 2013. "Smartphone Affordance: Achieving Better Business Through Innovation," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 4(4), pages 444-472, December.
    5. Livanis, Grigorios & Lamin, Anna, 2016. "Knowledge, Proximity and R&D Exodus," Research Policy, Elsevier, vol. 45(1), pages 8-26.
    6. Chien-Ming Chen & Magali A. Delmas & Marvin B. Lieberman, 2015. "Production frontier methodologies and efficiency as a performance measure in strategic management research," Strategic Management Journal, Wiley Blackwell, vol. 36(1), pages 19-36, January.
    7. Xin (Shane) Wang & Yuying Xie & Harsharanjeet S. Jagpal & Sengun Yeniyurt, 2016. "Coordinating R&D, Product Positioning, and Pricing Strategy: A Duopoly Model," Customer Needs and Solutions, Springer;Institute for Sustainable Innovation and Growth (iSIG), vol. 3(2), pages 104-114, June.
    8. Fu, Xiaolan & Helmers, Christian & Zhang, Jing, 2012. "The two faces of foreign management capabilities: FDI and productive efficiency in the UK retail sector," International Business Review, Elsevier, vol. 21(1), pages 71-88.
    9. Veldman, Jasper & Gaalman, Gerard J.C., 2015. "Competitive investments in cost reducing process improvement: The role of managerial incentives and spillover learning," International Journal of Production Economics, Elsevier, vol. 170(PB), pages 701-709.
    10. Kafouros, Mario I. & Forsans, Nicolas, 2012. "The role of open innovation in emerging economies: Do companies profit from the scientific knowledge of others?," Journal of World Business, Elsevier, vol. 47(3), pages 362-370.
    11. Martzoukos, Spiros H. & Zacharias, Eleftherios, 2013. "Real option games with R&D and learning spillovers," Omega, Elsevier, vol. 41(2), pages 236-249.
    12. repec:bla:stratm:v:38:y:2017:i:12:p:2390-2423 is not listed on IDEAS
    13. Elias Carayannis & Stephen Clark, 2011. "Do Smartphones Make for Smarter Business? The Smartphone CEO Study," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 2(2), pages 201-233, June.

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    Keywords

    spillovers; innovation; banking;

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