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Agglomeration and Endogenous Absorptive Capacities: Hotelling Revisited

Author

Listed:
  • Caroline Hussler

    () (RECITS - Universite de Technologie de Belfort Montbeliard; BETA - Univeriste Louis Pasteur)

  • Andre Lorentz

    () (Max Planck Institute of Economics, Evolutionary Economics Group, Jena)

  • Patrick Ronde

    () (GRAICO - Universite de Haute Alsace)

Abstract

This paper proposes a theoretical model of spatial duopoly, where the location, on the one hand, and the absorptive capacity of ï¬ rms as function of their internal R+D investment, on the other hand, endogenously determine the maximum level of knowledge spillovers ï¬ rms might absorb. Our goal is to test whether this new modelling of spillovers affects the traditional outcomes in terms of ï¬ rms location choices . We solve a three-stage game, where ï¬ rms choose their geographical location, prior to their level of internal R+D expenditures, and ï¬ nally compete in prices. We found that, at the optimum, ï¬ rms choose the same level of internal R+D and set the same price, independently of their location. Moreover, ï¬ rms locate symmetrically and tends to agglomerate in the center of the market as the transportation costs increase, knowledge spillovers being in that case maximum.

Suggested Citation

  • Caroline Hussler & Andre Lorentz & Patrick Ronde, 2007. "Agglomeration and Endogenous Absorptive Capacities: Hotelling Revisited," Jena Economic Research Papers 2007-102, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2007-102
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    File URL: http://zs.thulb.uni-jena.de/receive/jportal_jparticle_00084260
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    Citations

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    Cited by:

    1. Yang, Chih-Hai & Lin, Hui-Lin & Li, Hsiao-Yun, 2013. "Influences of production and R&D agglomeration on productivity: Evidence from Chinese electronics firms," China Economic Review, Elsevier, vol. 27(C), pages 162-178.
    2. Bouguezzi, Fehmi, 2010. "Technology transfer in a linear city with symmetric locations," MPRA Paper 21055, University Library of Munich, Germany.
    3. Leppälä, Samuli, 2014. "Theoretical Perspectives on Localised Knowledge Spillovers and Agglomeration," Cardiff Economics Working Papers E2014/10, Cardiff University, Cardiff Business School, Economics Section.

    More about this item

    Keywords

    Spatial Agglomeration; Endogenous Spillovers; Absorptive Capacity; Non-Cooperative Game;

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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