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Spillover feedback loops and strategic complements in R&D
Author(s) -
Chalioti Evangelia
Publication year - 2019
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12397
Subject(s) - competitor analysis , spillover effect , productivity , product (mathematics) , economics , homogeneous , product market , industrial organization , intellectual property , market power , microeconomics , product innovation , business , monetary economics , incentive , monopoly , physics , geometry , mathematics , management , operating system , computer science , macroeconomics , thermodynamics
This paper studies, in a two‐period model, the effects of knowledge spillovers among product market competitors on R&D levels. It argues that when firms' R&D decisions are strategic complements, in industries in which spillovers increase the marginal productivity of a firm's R&D, both incoming and outgoing spillovers spur R&D in equilibrium. Outgoing spillovers can foster innovation even in a homogeneous‐product industry. In these industries, the intellectual property law should be such that facilitates knowledge diffusion. If firms have power in deciding the level of knowledge spillovers, we show that a firm will choose to disclose its knowledge to its product market competitors.