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Theoretical perspectives on localized knowledge spillovers and agglomeration
Author(s) -
Leppälä Samuli
Publication year - 2018
Publication title -
papers in regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.937
H-Index - 64
eISSN - 1435-5957
pISSN - 1056-8190
DOI - 10.1111/pirs.12256
Subject(s) - economies of agglomeration , context (archaeology) , spillover effect , cournot competition , economics , phenomenon , microeconomics , empirical evidence , work (physics) , epistemology , physics , paleontology , philosophy , biology , thermodynamics
Empirical evidence shows that innovation is geographically concentrated, but whether localized knowledge spillovers provide a logically valid explanation for this phenomenon is unclear. I show that in the context of cost‐reducing R&D spillovers between Cournot oligopolists the explanation is plausible: localized knowledge spillovers encourage agglomeration, but whether this leads to higher levels of effective R&D depends on the extent of the spillovers, the number of firms, and the industry's R&D efficiency. Contrary to the earlier theoretical work, this illustrates a context, in which the localized knowledge spillover explanation is actualized, and provides necessary conditions, which can be empirically tested.