Specialization, Knowledge Dilution, and Scale Effects in an IO-Based Growth Model
We present a model where accumulation on non-rival knowledge drives growth but where the scale effect, which may be positive or negative, vanishes asymptotically. This result stems from the interaction between technological differentiation and market structure dynamics. Firms are linked to each other in networks of spillovers determined by the technological proximity of their activities. These spillovers-networks span only a fraction of the total economy and the average technological distance between firms increases with the size of the economy. When the economy expands, less related activities become profitable and specialization increases. As a result, the networks expand at a slower pace than the overall economy. In the limit, the networks cease to grow with the size of the economy. A larger economy, therefore, accumulates a larger tock of total knowledge but not necessarily a larger effective stock of knowledge that is useful to the individual firm. The reason is that the latter expands with the size of the network to which the firm belongs. The scale effect vanishes asymptotically because the stock of effective knowledge that each firm exploits is unrelated to the size of the economy when this is very large.
|Date of creation:||1998|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097|
Phone: (919) 660-1800
Fax: (919) 684-8974
Web page: http://econ.duke.edu/
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.:
- Dosi, Giovanni, 1988. "Sources, Procedures, and Microeconomic Effects of Innovation," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1120-71, September.
- James D. Adams & Adam B. Jaffe, 1996.
"Bounding the Effects of R&D: An Investigation Using Matched Establishment-Firm Data,"
RAND Journal of Economics,
The RAND Corporation, vol. 27(4), pages 700-721, Winter.
- James D. Adams & Adam B. Jaffe, 1996. "Bounding the Effects of R&D: An Investigation Using Matched Establishment-Firm Data," NBER Working Papers 5544, National Bureau of Economic Research, Inc.
- Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107 Elsevier.
- repec:fth:harver:1473 is not listed on IDEAS
- Thompson, Peter & Waldo, Doug, 1994. "Growth and trustified capitalism," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 445-462, December.
- Paul M Romer, 1999.
"Endogenous Technological Change,"
Levine's Working Paper Archive
2135, David K. Levine.
- Peretto, Pietro F., 1999.
"Firm size, rivalry and the extent of the market in endogenous technological change,"
European Economic Review,
Elsevier, vol. 43(9), pages 1747-1773, October.
- Peretto, Pietro F., 1996. "Firm Size, Rivalry and the Extent of the Market in Endogenous Technological Change," Working Papers 96-07, Duke University, Department of Economics.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
- Smulders, Sjak & van de Klundert, Theo, 1995.
"Imperfect competition, concentration and growth with firm-specific R & D,"
European Economic Review,
Elsevier, vol. 39(1), pages 139-160, January.
- Smulders, J.A. & van de Klundert, T.C.M.J., 1995. "Imperfect competition, concentration and growth with firm-specific R&D," Other publications TiSEM 3287368d-bf5d-421a-91c1-e, Tilburg University, School of Economics and Management.
- Zvi Griliches, 1990.
"Patent Statistics as Economic Indicators: A Survey,"
NBER Working Papers
3301, National Bureau of Economic Research, Inc.
- Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 287-343 National Bureau of Economic Research, Inc.
- Griliches, Zvi, 1990. "Patent Statistics as Economic Indicators: A Survey," Journal of Economic Literature, American Economic Association, vol. 28(4), pages 1661-1707, December.
- Rustichini, Aldo & Schmilz, James Jr., 1991. "Research and imitation in long-run growth," Journal of Monetary Economics, Elsevier, vol. 27(2), pages 271-292, April.
- Yang, Xiaokai & Borland, Jeff, 1991. "A Microeconomic Mechanism for Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 460-82, June.
- Malerba, Franco & Orsenigo, Luigi, 1995. "Schumpeterian Patterns of Innovation," Cambridge Journal of Economics, Oxford University Press, vol. 19(1), pages 47-65, February.
- Alwyn Young, 1995. "Growth Without Scale Effects," NBER Working Papers 5211, National Bureau of Economic Research, Inc.
- Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-96, September.
When requesting a correction, please mention this item's handle: RePEc:duk:dukeec:98-07. 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: (Department of Economics Webmaster)
If references are entirely missing, you can add them using this form.