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Labor Pooling in R&D Intensive Industries

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  • Gerlach, Heiko A.
  • Rønde, Thomas
  • Stahl, Konrad O.

Abstract

We investigate the interplay between firms' R&D decisions and labor market competition, and how this influences equilibrium location choices and welfare. Firms engage in risky R&D activities and thus create stochastic product and implied labor demand. Spatial agglomeration is more likely in situations where the innovation step is large and the probability for a firm to be the only innovator is high. When firms agglomerate, they tend to invest more in R&D compared to spatially dispersed firms. Agglomeration is welfare maximizing, because expected labor productivity is higher and firms choose a more efficient, diversified portfolio of R&D projects at the industry level. The latter aspect is ascertained by data from German firms in R&D intensive industries.

Suggested Citation

  • Gerlach, Heiko A. & Rønde, Thomas & Stahl, Konrad O., 2008. "Labor Pooling in R&D Intensive Industries," ZEW Discussion Papers 08-074, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:7417
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    More about this item

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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