Endogeneizing know-how flows through the nature of R&D investments

Bruno Cassiman, David Perez-Castrillo and Reinhilde Veugelers

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: In this paper we carefully link knowledge flows to and from a firm’s innovation process with this firm’s investment decisions. Three types of investments are considered: investments in applied research, investments in basic research, and investments in intellectual property protection. Only when basic research is performed, can the firm effectively access incoming knowledge flows and these incoming spillovers serve to increase the efficiency of own applied research. The firm can at the same time influence outgoing knowledge flows, improving appropriability of its innovations, by investing in protection. Our results indicate that firms with small budgets for innovation will not invest in basic research. This occurs in the short run, when the budget for know-how creation is restricted, or in the long-run, when market opportunities are low, when legal protection is not very important, or, when the pool of accessible and relevant external know-how is limited. The ratio of basic to applied research is non-decreasing in the size of the pool of accessible external know-how, the size and opportunity of the market, and, the effectiveness of intellectual property rights protection. This indicates the existence of economies of scale in basic research due to external market related factors. Empirical evidence from a sample of innovative manufacturing firms in Belgium confirms the economies of scale in basic research as a consequence of the firm’s capacity to access external knowledge flows and to protect intellectual property, as well as the complementarity between legal and strategic investments.

Keywords: Spillovers; basic R&D; intellectual property protection (search for similar items in EconPapers)
JEL-codes: L13 O32 O34 (search for similar items in EconPapers)
Date: 2000-08, Revised 2001-03
New Economics Papers: this item is included in nep-dev
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Endogenizing know-how flows through the nature of R&D investments (2002)
Working Paper: Endogeneizing know-how flows through the nature of R&D investments (2000)
Working Paper: Endogenizing Know-How Flows Through the Nature of R&D Investments (2000)
Working Paper: Endogenizing know-how flows through the nature of R&D investments (2000)
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