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Absorptive Capacity, Knowledge Spillovers and Incentive Contracts

Author

Listed:
  • Luis Aguiar

    (UZH - Universität Zürich [Zürich] = University of Zurich)

  • Philippe Gagnepain

    (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We attempt to identify and measure potential knowledge spillovers in the French urban transport sector, which is strongly regulated and where a few large corporations are in charge of operating several urban networks simultaneously. We build and estimate a structural cost model where the service is regulated by a local government and is provided by a single operator. Knowledge spillovers are directly linked to the know-how of a specific corporation, but they also depend on the incentive power of the regulatory contract which shapes the effort of the local managers. Exerting an effort in a specific network allows a cost reduction in this network, but it also benefit other networks that are members of the same corporation. Our model provides us with estimates of the operators' absorptive capacity, which is their in-house knowledge power in order to optimally benefit from spillovers. We find that diversity of knowledge across operators of a same corporation improves absorptive capacity and increases the flow of spillovers. Simulation exercises provide evidence of significant reductions in total operating cost following the enlargement of industrial groups.

Suggested Citation

  • Luis Aguiar & Philippe Gagnepain, 2021. "Absorptive Capacity, Knowledge Spillovers and Incentive Contracts," Working Papers halshs-03110851, HAL.
  • Handle: RePEc:hal:wpaper:halshs-03110851
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-03110851
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    References listed on IDEAS

    as
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    Keywords

    Knowledge spillovers; Absorptive capacity; Cost incentives; Effort; Diversity of knowledge; Public transport;
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