Endogenous spillovers in the trade-off between centralization and decentralization

In this paper, we revisit the classical trade-off between centralized and decentralized provision of local public goods, in a setting where interregional spillovers depend on the level of a national public good. We compare the standard benevolent planner approach with a political economy in which decisions, in a centralized system, are undertaken by a non-cooperative legislature with no separation of powers. We observe that the policy-maker in a centralized system is able to play both with local public goods and spillovers, a mechanism that is not available under a decentralized system. When compared to the traditional exogenous spillovers assumption, this improves the case for centralization under the standard benevolent planner approach. However, the same is not necessarily true in the non-cooperative legislature, as in this case the interests of the legislator do not need to be aligned with those of the society. Finally, we extend the traditional political economy analysis by considering a legislature in which decisions are undertaken by different committees (separation of powers), and show that it performs better than the original non-cooperative legislature, greatly improving the case for centralization.

Endogenous spillovers, increased competition and re-organization waves

We consider an entrepreneur that is the sole producer of a costreducing skill, but the entrepreneur that hires a team to usethe skill cannot prevent collusive trade for the innovation related knowledge between employees and competitors. We showthat there are two types of diffusion avoiding strategies forthe entrepreneur to preempt collusive communication i) settingup a large productive capacity (the traditional firm) and ii)keeping a small team (the lean firm). The traditional firm ischaracterized by its many "marginal" employees that work shortdays, receive flat wages and are incompletely informed about the innovation. The lean firm is small in number of employees,engages in complete information sharing among members, that are paid with stock option schemes. We find that the lean firm is superior to the traditional firm when technological entry costsare low and when the sector is immature.

Inefficient commuting in a city with spillovers

A Masters Thesis, presented as part of the requirements for the award of a Research Masters Degree in Economics from NOVA – School of Business and Economics

New ideas need new space

We develop a setting with weak intellectual property rights, where firms' boundaries, location and knowledge spillovers are endogenous. We have two main results. The first one is that, if communication costs increase with distance, entrepreneurs concerned about information leakage have a benefit from locating away from the industry center: distance is an obstacle to collusive trades between members andnon-members. The second result is that we identify a trade-off for the entrepreneur between owning a facility (controlling all its characteristics) and sharing a facility with a {\it non-member} (an agent not involved in production), therefore losing control over some of its characteristics. We focus on ``location" as the relevant characteristic of the facility, but location can be used as a spatial metaphor for other relevant characteristics of the facility. For theentrepreneur, sharing the facility with non-members implies that the latter, as co-owners, know the location (even if they do not have access to it). Knowledge of the location for the co-owners facilitates collusion with employees, what increases leakage. The model yields a benefit for new plants from spatial dispersion (locating at the periphery of the industry), particularly so for new plants of new firms.We relate this result with recent empirical findings on the dynamics of industry location.

The growth and diffusion of knowlegde and the theory of the firm

We analyze the implications of a market imperfection related to the inability to establish intellectual property rights, that we label {\it unverifiable communication}. Employees are able to collude with external parties selling ``knowledge capital'' of the firm. The firm organizer engages in strategic interaction simultaneously with employees and competitors, as she introduces endogenous transaction costs in the market for information between those agents. Incentive schemes and communication costs are the key strategic variables used by the firm to induce frictions in collusive markets. Unverifiable communication introduces severe allocative distortions, both at internal product development and at intended sale of information (technology transfer). We derive implications of the model for observable decisions like characteristics of the employment relationship (full employment, incompatibility with other jobs), firms' preferences over cluster characteristics for location decisions, optimal size at entry, in--house development vs sale strategies for innovations and industry evolution.

R&D spillovers in an endogenous growth model with physical capital, human capital and varieties

There is a family of models with Physical, Human capital and R&D for which convergence properties have been discussed (Arnold, 2000a; Gómez, 2005). However, spillovers in R&D have been ignored in this context. We introduce spillovers in this model and derive its steady-state and stability properties. This new feature implies that the model is characterized by a system of four differential equations. A unique Balanced Growth Path along with a two dimensional stable manifold are obtained under simple and reasonable conditions. Transition is oscillatory toward the steady-state for plausible values of parameters.

Innovation or Imitation? The effect of spillovers and competitive pressure on firms' R&D strategy choice

This article provides a theoretical and empirical analysis of a firm's optimal R&D strategy choice. In this paper a firm's R&D strategy is assumed to be endogenous and allowed to depend on both internal firms. characteristics and external factors. Firms choose between two strategies, either they engage in R&D or abstain from own R&D and imitate the outcomes of innovators. In the theoretical model this yields three types of equilibria in which either all firms innovate, some firms innovate and others imitate, or no firm innovates. Firms'equilibrium strategies crucially depend on external factors. We find that the efficiency of intellectual property rights protection positively affects firms'incentives to engage in R&D, while competitive pressure has a negative effect. In addition, smaller firms are found to be more likely to become imitators when the product is homogeneous and the level of spillovers is high. These results are supported by empirical evidence for German .rms from manufacturing and services sectors. Regarding social welfare our results indicate that strengthening intellectual property protection can have an ambiguous effect. In markets characterized by a high rate of innovation a reduction of intellectual property rights protection can discourage innovative performance substantially. However, a reduction of patent protection can also increase social welfare because it may induce imitation. This indicates that policy issues such as the optimal length and breadth of patent protection cannot be resolved without taking into account specific market and firm characteristics. Journal of Economic Literature Classification Numbers: C35, D43, L13, L22, O31. Keywords: Innovation; imitation; spillovers; product differentiation; market competition; intellectual property rights protection.

Knowledge Licensing in a Model of R&D-driven Endogenous Growth

In this paper I present an endogenous growth model where the engine of growth is in-house R&D performed by high-tech firms. I model knowledge (patent) licensing among high-tech firms. I show that if there is knowledge licensing, high-tech firms innovate more and economic growth is higher than in cases when there are knowledge spillovers or there is no exchange of knowledge among high-tech firms. However, in case when there is knowledge licensing the number of high-tech firms is lower than in cases when there are knowledge spillovers or there is no exchange of knowledge.

Knowledge Licensing in a Model of R&D-driven Endogenous Growth

In this paper I present an endogenous growth model where the engine of growth is in-house R&D performed by high-tech firms. I model knowledge (patent) licensing among high-tech firms. I show that if there is knowledge licensing, high-tech firms innovate more and economic growth is higher than in cases when there are knowledge spillovers or there is no exchange of knowledge among high-tech firms. However, in case when there is knowledge licensing the number of high-tech firms is lower than in cases when there are knowledge spillovers or there is no exchange of knowledge.

Cooperative R&D with endogenous technology differentiation

We study a nontournament R&D duopoly. Before the standard R&D investment and quantity-setting stages, we consider a stage in which firms choose their R&D technologies. Spillovers negatively depend on R&D technology differentiation. We show that, in equilibrium, firms will choose identical or very similar R&D processes. Such equilibria may entail less differentiation than would be dictated by social welfare maximization.

ESSAYS ON INTERNATIONAL RESEARCH AND DEVELOPMENT SPILLOVERS

The dissertation consists of three essays on international research and development spillovers. In the first essay, I investigate the degree to which differences in institutional arrangements among Sub-Saharan African countries determine the extent of benefits they derive from foreign research and development spillovers. In particular, I compare the international research and development spillovers for English common law and French civil law Sub-Saharan African countries. I show that differences in the legal origin of the company law or commercial codes in these countries may reflect the extent of barriers they place in the paths of firms that engage in the investment process. To tests this hypothesis, I constructed foreign R&D spillovers variable using imports as weights and employed the endogenous growth framework to estimate elasticities of productivity with respect to foreign R&D spillovers for a sample of 17 English common law and French Civil law Sub-Saharan African countries over the period 1980-2004. My results find support for the hypothesis. In particular, foreign R&D spillovers were higher in the English common law countries than in the French civil law countries. In the second essay, I examine the question of whether technical cooperation grants and overseas development assistance grants induce R&D knowledge spillovers in Sub-Saharan African countries. I test this hypothesis using data for 11 Sub-Saharan African countries over the period 1980-2004. I constructed foreign R&D spillovers using the technical cooperation grants and overseas development assistance grants as weights and employed the endogenous growth framework to provide quantitative estimates of foreign R&D spillover effects in 11 Sub-Saharan African countries. I find that technical cooperation grants and overseas development assistance grants are major mechanisms through which returns to R&D investments in G7 countries flows to Sub-Saharan African countries. However, their influence has declined over the years. Finally, the third essay tests the hypothesis that the relationship between a country's exporters and their foreign purchasing agents may lead to the exchange of ideas and thereby improve the manufacturing process and productivity in the exporting country. I test this hypothesis using disaggregated export data from OECD countries. The foreign R&D capital stock in this essay was constructed as exports weighted average of domestic R&D capital stock. I find empirical support for the hypothesis. In particular, capital goods exports generate more learning effects and therefore best explain productivity in OECD countries than non-capital goods exports.

What does endogenous growth theory tell about regional economies? Empirics of R&D worker-based productivity growth

What does endogenous growth theory tell about regional economies? Empirics of R&D worker-based productivity growth, Regional Studies. Endogenous growth theory emerged in the 1990s as ‘new growth theory’ accounting for technical progress in the growth process. This paper examines the role of research and development (R&D) workers underlying the Romer model (1990) and its subsequent modifications, and compares it with a model based on the accumulation of human capital engaged in R&D. Cross-section estimates of the models against productivity growth of European regions in the 1990s suggest that each R&D worker has a unique set of knowledge while his/her contributions are enhanced by knowledge sharing within a region as well as spillovers from other regions in proximity.

The effects of intellectual property rights on knowledge spillovers and innovation: An empirical investigation

FDI is believed to be a conduit of new technologies between countries. The first chapter of this dissertation studies the advantages of outward FDI for the home country of multinationals conducting research and development abroad. We use patent citations as a proxy for technology spillovers and we bring empirical evidence that supports the hypothesis that a U.S. subsidiary conducting research and development overseas facilitates the flow of knowledge between its host and home countries.^ The second chapter examines the impact of intellectual property rights (IPR) reforms on the technology flows between the U.S. and host countries of U.S. affiliates. We again use patent citations to examine whether the diffusion of new technology between the host countries and the U.S. is accelerated by the reforms. Our results suggest that the reforms favor innovative efforts of domestic firms in the reforming countries rather than U.S. affiliates efforts. In other words, reforms mediate the technology flows from the U.S. to the reforming countries.^ The third chapter deals with another form of IPR, open source (OS) licenses. These differ in the conditions under which licensors and OS contributors are allowed to modify and redistribute the source code. We measure OS project quality by the speed with which programming bugs are fixed and test whether the license chosen by project leaders influences bug resolution rates. In initial regressions, we find a strong correlation between the hazard of bug resolution and the use of highly restrictive licenses. However, license choices are likely to be endogenous. We instrument license choice using (i) the human language in which contributors operate and (ii) the license choice of the project leaders for a previous project. We then find weak evidence that restrictive licenses adversely affect project success.^

Islet Neogenesis-associated Protein (ingap): The Role Of Its Endogenous Production As A Positive Modulator Of Insulin Secretion.

Islet neogenesis-associated protein (INGAP) is a peptide found in pancreatic exocrine-, duct- and islet- non-β-cells from normal hamsters. Its increase induced by either its exogenous administration or by the overexpression of its gene enhances β-cell secretory function and increases β-cell mass by a combination of stimulation of cell replication and islet neogenesis and reduction of β-cell apoptosis. We studied the potential modulatory role of endogenous INGAP in insulin secretion using two different experimental approaches. Hamster islets transfected with INGAP-small interfering RNA (INGAP-siRNA) were used to study glucose-stimulated insulin secretion (GSIS). In parallel, freshly isolated islets were incubated with high glucose and the same concentration of either a specific anti-INGAP rabbit serum or normal rabbit serum. INGAP-siRNA transfected islets reduced their INGAP mRNA and protein content by 35.1% and 47.2%, respectively whereas GSIS decreased by 25.8%. GSIS by transfected islets attained levels comparable to those recorded in control islets when INGAP pentadecapeptide (INGAP-PP) was added to the culture medium. INGAP antibody in the medium decreased significantly GSIS in a dose-dependent manner. These results indicate that endogenous INGAP plays a physiological positive modulatory role in insulin secretion, supporting its possible use in the treatment of prediabetes and Type 2 diabetes.

Hypobromous Acid, A Powerful Endogenous Electrophile: Experimental And Theoretical Studies.

Hypobromous acid (HOBr) is an inorganic acid produced by the oxidation of the bromide anion (Br(-)). The blood plasma level of Br(-) is more than 1,000-fold lower than that of chloride anion (Cl(-)). Consequently, the endogenous production of HOBr is also lower compared to hypochlorous acid (HOCl). Nevertheless, there is much evidence of the deleterious effects of HOBr. From these data, we hypothesized that the reactivity of HOBr could be better associated with its electrophilic strength. Our hypothesis was confirmed, since HOBr was significantly more reactive than HOCl when the oxidability of the studied compounds was not relevant. For instance: anisole (HOBr, k2=2.3×10(2)M(-1)s(-1), HOCl non-reactive); dansylglycine (HOBr, k2=7.3×10(6)M(-1)s(-1), HOCl, 5.2×10(2)M(-1)s(-1)); salicylic acid (HOBr, k2=4.0×10(4)M(-1)s(-1), non-reactive); 3-hydroxybenzoic acid (HOBr, k2=5.9×10(4)M(-1)s(-1), HOCl, k2=1.1×10(1)M(-1)s(-1)); uridine (HOBr, k2=1.3×10(3)M(-1)s(-1), HOCl non-reactive). The compounds 4-bromoanisole and 5-bromouridine were identified as the products of the reactions between HOBr and anisole or uridine, respectively, i.e. typical products of electrophilic substitutions. Together, these results show that, rather than an oxidant, HOBr is a powerful electrophilic reactant. This chemical property was theoretically confirmed by measuring the positive Mulliken and ChelpG charges upon bromine and chlorine. In conclusion, the high electrophilicity of HOBr could be behind its well-established deleterious effects. We propose that HOBr is the most powerful endogenous electrophile.