Endogenous Spillovers and Incentives to Innovate

Hans Gersbach and Armin Schmutzler

No 9902, SOI - Working Papers from Socioeconomic Institute - University of Zurich

Abstract: We present a new approach to endogenizing technological spillovers. Firms choose continuous levels of a cost-reducing innovation before they engage in competition for each other's R&D-employees. Successful bids for the competitor's employee then result in higher levels of cost reduction. Finally, firms enter product market competition. We apply the approach to the long-standing debate on the effects of the mode of competition on innovation incentives. We show that incentives to acquire spillovers are stronger and incentives to prevent spillovers are weaker under quantity competition than under price competition. As a result, for a wide range of parameters, price competition gives stronger innovation incentives than quantity competition.

Keywords: spillovers; innovation incentives; product market competition (search for similar items in EconPapers)
JEL-codes: D43 L43 (search for similar items in EconPapers)
Date: 1999-01
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Citations: View citations in EconPapers (6)

Published in Economic Theory 21, 2003, pages 59-79

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https://www.zora.uzh.ch/id/eprint/51851/1/wp9902.pdf First version, 1999 (application/pdf)

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Journal Article: Endogenous spillovers and incentives to innovate (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:soz:wpaper:9902

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