Econometrica: Jul 2013, Volume 81, Issue 4

Identifying Technology Spillovers and Product Market Rivalry
p. 1347-1393

Nicholas Bloom, Mark Schankerman, John Van Reenen

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 space and 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.

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Supplement to "Identifying Tehcnology Spillovers and Product Market Rivalry"

This zip file contains the replication files for the manuscript.

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Supplement to "Identifying Tehcnology Spillovers and Product Market Rivalry"

This appendix contains three generalizations of the simple model presented in Section 2.  It examines tournament models of R&D. It allows patenting decision to be an endogenous choice for the firm.

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