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SPILLOVERS AND ABSORPTIVE CAPACITY IN A PATENT RACE
Author(s) -
HALMENSCHLAGER CHRISTINE
Publication year - 2006
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2006.00484.x
Subject(s) - absorptive capacity , pace , race (biology) , economics , outcome (game theory) , microeconomics , industrial organization , neoclassical economics , sociology , physics , gender studies , astronomy
This paper explores the impacts of absorptive capacity on the behavior of innovating firms competing in a dynamic patent race. We introduce spillovers and absorptive capacities in the Fudenberg, Gilbert, Stiglitz and Tirole patent race with memory. First, we show that incorporating absorptive capacity has different effects according as the firm leads or follows in the race. While the leader is getting soft, the follower revives, allowing him to possibly catch up with the leader. Second, we find that spillovers with absorptive capacities tend to increase the pace of innovation, a somewhat paradoxical outcome.