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Endogenous R&D spillovers and locational choice
journal contributionposted on 30.05.2006, 11:44 authored by Claudio Piga, Joanna Poyago-Theotoky
We present a three-stage game where two firms choose location, R&D and price, under the assumption that R&D spillovers depend on firms’ location. That is, the closer firms are to each other, the greater the benefit they receive from their rivals’ efforts in quality-enhancing R&D. We show that the distance between firms’ location increases with the degree of product differentiation. Further, we find that minimal quality differentiation always occurs. Finally, investment in R&D is positively associated with the degree of product differentiation.
- Business and Economics