IDENTIFYING TECHNOLOGY SPILLOVERS AND PRODUCT MARKET RIVALRY

The impact of R&D on growth through spillovers has been a major topic of economic research over the last thirty years. A central problem in the literature is that firm performance is affected by two countervailing "spillovers" : a positive effect from technology (knowledge) spillovers...

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Bibliographic Details
Published in:Econometrica 2013-07, Vol.81 (4), p.1347-1393
Main Authors: Bloom, Nicholas, Schankerman, Mark, Van Reenen, John
Format: Article
Language:English
Subjects:
Business structures
Coefficients
Economic research
Enterprises
Financial performance
Growth models
Industrial market
Market value
Product markets
Productivity
R&D
Rates of return
Research & development
Research and development
Rivalry
Space technology
Spillovers
Studies
Tax incentives
Technology
U.S.A
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Summary:The impact of R&D on growth through spillovers has been a major topic of economic research over the last thirty years. A central problem in the literature is that firm performance is affected by two countervailing "spillovers" : a positive effect from technology (knowledge) spillovers and a negative business stealing effects from product market rivals. We develop a general framework incorporating these two types of spillovers and implement this model using measures of a firm's position in technology space and product market space. Using panel data on U.S. firms, we show that technology spillovers quantitatively dominate, so that the gross social returns to R&D are at least twice as high as the private returns. We identify the causal effect of R&D spillovers by using changes in federal and state tax incentives for R&D. We also find that smaller firms generate lower social returns to R&D because they operate more in technological niches. Finally, we detail the desirable properties of an ideal spillover measure and how existing approaches, including our new Mahalanobis measure, compare to these criteria.
ISSN:0012-9682
1468-0262
DOI:10.3982/ECTA9466