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Identifying Technology Spillovers and Product Market Rivalry

  • Nicholas Bloom
  • Mark Schankerman
  • John Van Reenen

Support for R&D subsidies relies on empirical evidence that R&D "spills over" between firms. But firm performance is affected by two countervailing R&D spillovers: positive effects from technology spillovers and negative business stealing effects from R&D 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 then exploit these using distinct measures of a firm's position in technology space and product market space. Using panel data on U.S. firms between 1980 and 2001 we show that both technology and product market spillovers operate, but technology spillovers quantitatively dominate. The spillover effects are also present when we analyze three high tech sectors in finer detail. Using the model we evaluate the net spillovers from three alternative R&D subsidy policies.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13060.

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Date of creation: Apr 2007
Date of revision:
Publication status: published as Nick Bloom & Mark Schankerman & John Van Reenen, 2005. "Identifying technology spillovers and product market rivalry," Proceedings, Federal Reserve Bank of San Francisco.
Handle: RePEc:nbr:nberwo:13060
Note: IO PR
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  1. Jaffe, A.B. & Trajtenberg, M., 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," Papers 14-92, Tel Aviv.
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  6. Tor Jakob Klette & Zvi Griliches, 1994. "The Inconsistency of Common Scales Estimators when Output Prices are Unobserved and Endogenous," Discussion Papers 127, Statistics Norway, Research Department.
  7. Cockburn, Iain. & Henderson, Iain., 1994. "Racing to invest? : the dynamics of competition in ethical drug discovery," Working papers 3710-94., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  8. Glenn C. Loury, 1976. "Market Structure and Innovation," Discussion Papers 256, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September.
  10. Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, vol. 94(2), pages 429-36, March.
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