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Why are technological spillovers spatially bounded ? A market orientated approach

  • Baranes, E.
  • Tropeano, J.-P.

According to empirical evidence, technological spillovers are spatially bounded. This is one of the main reasons why firms are induced to locate in close prox-imity despite tough competition. This paper is an attempt to endogenize such spillovers. For that purpose, we try to explain why spatial proximity gives more incentives to competing firms to share knowledge. We show that spatial proxim-ity is the best way for firms to prevent free-riding in case of knowledge sharing. Indeed, Þercer competition impedes free riding provided that such a behavior dampens firms efficiency and have a dramatic effect on profits. Moreover, our results have important implications for regional policy. We point out that a slight decrease in transport costs triggers spatial polarization which implies knowledge sharing and thereby enhances innovation. A more dramatic decrease in transport costs attains both the objectives of increasing innovation and regional equity.

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Paper provided by CREDEN (Centre de Recherche en Economie et Droit de l'Energie), Faculty of Economics, University of Montpellier 1 in its series Cahiers du CREDEN (CREDEN Working Papers) with number 02.06.29.

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Length: 21 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:mop:credwp:02.06.29
Contact details of provider: Postal: CREDEN, Faculté d'Economie, Avenue Raymond Dugrand, CS 79606, 34960 MONTPELLIER Cedex 2, France
Phone: 33 (0)4 67 15 83 60
Fax: 33 (0)4 67 15 84 04
Web page: http://www.creden.univ-montp1.fr
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  1. Diego Puga, 1996. "The rise and fall of regional inequalities," LSE Research Online Documents on Economics 20643, London School of Economics and Political Science, LSE Library.
  2. Wolfgang Keller, 2000. "Geographic Localization of International Technology Diffusion," NBER Working Papers 7509, National Bureau of Economic Research, Inc.
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  7. Schmidt, Klaus M, 1997. "Managerial Incentives and Product Market Competition," Review of Economic Studies, Wiley Blackwell, vol. 64(2), pages 191-213, April.
  8. Antonio Ciccone & Robert E. Hall, 1995. "Productivity and the density of economic activity," Economics Working Papers 120, Department of Economics and Business, Universitat Pompeu Fabra.
  9. Martin, Philippe, 1998. "Public Policies, Regional Inequalities and Growth," CEPR Discussion Papers 1841, C.E.P.R. Discussion Papers.
  10. Jaffe, A.B. & Trajtenberg, M., 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," Papers 14-92, Tel Aviv.
  11. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1999. "Competition, Financial Discipline and Growth," Review of Economic Studies, Wiley Blackwell, vol. 66(4), pages 825-52, October.
  12. Hanson, G.H., 1999. "`Market Potential, Increasing Returns, and Geographic Concentration," Working Papers 439, Research Seminar in International Economics, University of Michigan.
  13. Richard E. Baldwin & Philippe Martin, 1999. "Two Waves of Globalisation: Superficial Similarities, Fundamental Differences," NBER Working Papers 6904, National Bureau of Economic Research, Inc.
  14. Katsoulacos, Yannis & Ulph, David, 1998. "Endogenous Spillovers and the Performance of Research Joint Ventures," Journal of Industrial Economics, Wiley Blackwell, vol. 46(3), pages 333-57, September.
  15. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, August.
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