Working Paper: CEPR ID: DP4130
Authors: Andrea Fosfuri; Thomas Rønde
Abstract: We analyse firms? incentives to cluster in an industrial district to benefit from reciprocal technology spillovers. A simple model of cumulative innovation is presented where technology spillovers arise endogenously through labour mobility. It is shown that firms? incentives to cluster are the strongest when the following three conditions are met: 1) the growth potential of an industry is high; 2) competition in the product market is relatively soft; 3) the probability of a single firm to develop an innovation is neither very high nor very low. Trade secret protection based on punitive damages is, except in some extreme cases, beneficial for firms? profits, stimulates clustering, and is not an impediment to technology spillovers.
Keywords: Cumulative Innovation; Industrial Districts; Intellectual Property Rights; Technology Spillovers
JEL Codes: J30; K20; L10; O32; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| soft product market competition (L17) | clustering incentives (C38) |
| high growth potential of an industry (O25) | clustering (C38) |
| intermediate probability of single firm innovation (L19) | clustering (C38) |
| trade secret protection based on punitive damages (L49) | firms' profits (L21) |
| trade secret protection based on punitive damages (L49) | clustering (C38) |
| excessive trade secret protection (L49) | profits (L21) |
| excessive trade secret protection (L49) | clustering (C38) |
| technology spillovers (O33) | clustering incentives (C38) |