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Identifying technology spillovers and product market rivalry

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  • Bloom, Nick
  • Schankerman, Mark
  • Van Reenen, John

Abstract

Support for many R&D and technology policies relies on empirical evidence that R&D ‘spills over’ between firms. But there are two countervailing R&D spillovers: positive effects from technology spillovers and negative effects from business stealing by product market rivals. We develop a general framework showing that technology and product market spillovers have testable implications for a range of performance indicators, and exploit these using distinct measures of a firm’s position in technology space and product market space. We show using panel data on US firms between 1981 and 2001 that both technology and product market spillovers operate, but that net social returns are several times larger than private returns. The spillover effects are also revealed when we analyze three high-tech sectors in detail - pharmaceuticals, computer hardware and telecommunication equipment. Using the model we evaluate three R&D subsidy policies and show that the typical focus of support for small and medium firms may be misplaced.

Suggested Citation

  • Bloom, Nick & Schankerman, Mark & Van Reenen, John, 2005. "Identifying technology spillovers and product market rivalry," LSE Research Online Documents on Economics 5077, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:5077
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    Keywords

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    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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