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External spillovers, internal spillovers and the geography of production and innovation


Gersbach, Hans; Schmutzler, Armin (1999). External spillovers, internal spillovers and the geography of production and innovation. Regional Science and Urban Economics, 29(6):679-696.

Abstract

We consider a three-location duopoly model such that (i) firms choose production and innovation locations before (Bertrand) competition takes place and (ii) there are internal and external knowledge spillovers. We show: (1) agglomerations where firms earn negative profits may exist when there are both external and internal knowledge spillovers; (2) greater external spillovers do not necessarily favor agglomeration; (3) decreasing communication costs tend to favor agglomeration; (4) there are exactly two types of agglomeration equilibria: either both firms innovate in the agglomeration, or there is an innovator and an imitator; and (5) if there is a location where both firms produce, then innovation must take place in this location.

Abstract

We consider a three-location duopoly model such that (i) firms choose production and innovation locations before (Bertrand) competition takes place and (ii) there are internal and external knowledge spillovers. We show: (1) agglomerations where firms earn negative profits may exist when there are both external and internal knowledge spillovers; (2) greater external spillovers do not necessarily favor agglomeration; (3) decreasing communication costs tend to favor agglomeration; (4) there are exactly two types of agglomeration equilibria: either both firms innovate in the agglomeration, or there is an innovator and an imitator; and (5) if there is a location where both firms produce, then innovation must take place in this location.

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20 citations in Web of Science®
26 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:8 October 1999
Deposited On:11 Feb 2008 12:21
Last Modified:06 Dec 2017 13:13
Publisher:Elsevier
ISSN:0166-0462
Publisher DOI:https://doi.org/10.1016/S0166-0462(99)00026-5

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