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Spillovers, absorptive capacity and agglomeration

Sergey Lychagin

Journal of Urban Economics, 2016, vol. 96, issue C, 17-35

Abstract: I study knowledge spillovers in an industry where firms are heterogeneous in their ability to adopt knowledge (absorptive capacity). I set up a model in which firms choose locations anticipating potential gains and losses from other firms’ R&D activity. I apply the model to the US software industry and obtain the following results: the data supports localized knowledge spillovers; firms that have higher absorptive capacity are sorted into more agglomerated counties; ignoring firm heterogeneity leads to biased estimates of gains from spillovers; spillovers play an important role in explaining the geographic distribution of firms, but only within regions with high R&D activity.

Keywords: Firm location; Knowledge diffusion (search for similar items in EconPapers)
JEL-codes: R32 O33 L86 (search for similar items in EconPapers)
Date: 2016
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Handle: RePEc:eee:juecon:v:96:y:2016:i:c:p:17-35