TY - JOUR
T1 - Endogenizing know-how flows through the nature of R&D investments
AU - Cassiman, Bruno
AU - Pérez-Castrillo, David
AU - Veugelers, Reinhilde
N1 - Funding Information:
The authors are grateful for the comments received from Stephen Martin, Frank Verboven, Massimo Colombo, participants at the 1st World Congress of the Game Theory Society, Bilbao and the EARIE Conference in Lausanne and two very helpful referees. Financial support from the FWO (G.0131.98), PBO (98/B/3/24) for Veugelers, and DGES (PB97-018), BEC2000-0172 & SGR96-75 for Pérez-Castrillo and BEC2000-1026 for Bruno Cassiman is gratefully acknowledged. The authors are grateful to DWTC and IWT for providing the data. The paper started off when Perez-Castrillo was visiting KU Leuven, and continued while Veugelers was visiting ECARES, UL Brussels.
Copyright:
Copyright 2018 Elsevier B.V., All rights reserved.
PY - 2002/6
Y1 - 2002/6
N2 - In this paper we carefully link knowledge flows to and from a firm's innovation process with this firm's investment decisions. We present a model of a leading technological firm facing a competitive fringe. The leading firm considers three types of investments: investments in applied research, investments in basic research, and investments in intellectual property protection. By doing basic research, the leading firm can effectively access incoming knowledge flows. These incoming spillovers serve to increase the efficiency of own applied research. The leading firm can at the same time influence outgoing knowledge flows, improving appropriability of its innovations, by investing in protection. Our results indicate that the leading firm with a small budget 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. Once this firm starts accessing external know-how by spending on basic research, 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.
AB - In this paper we carefully link knowledge flows to and from a firm's innovation process with this firm's investment decisions. We present a model of a leading technological firm facing a competitive fringe. The leading firm considers three types of investments: investments in applied research, investments in basic research, and investments in intellectual property protection. By doing basic research, the leading firm can effectively access incoming knowledge flows. These incoming spillovers serve to increase the efficiency of own applied research. The leading firm can at the same time influence outgoing knowledge flows, improving appropriability of its innovations, by investing in protection. Our results indicate that the leading firm with a small budget 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. Once this firm starts accessing external know-how by spending on basic research, 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.
UR - http://www.scopus.com/inward/record.url?scp=31244431685&partnerID=8YFLogxK
U2 - 10.1016/S0167-7187(01)00084-4
DO - 10.1016/S0167-7187(01)00084-4
M3 - Article
AN - SCOPUS:31244431685
VL - 20
SP - 775
EP - 799
JO - International Journal of Industrial Organization
JF - International Journal of Industrial Organization
SN - 0167-7187
IS - 6
ER -