Abstract for:

Identifying Technology Spillovers and Product Market Rivalry

Nicholas  Bloom,  Mark  Schankerman,  John  Van Reenen,  February 2005
Paper No' CEPDP0675: | Full paper

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Keywords: Spillovers; R&D, market value, patents, productivity

JEL Classification: O31; O32; O33; F23

Is hard copy/paper copy available? YES - Paper Copy Still In Print.

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This Paper is published under the following series: CEP Discussion Papers

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Abstract:

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 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.