Scandinavian Working Papers in Economics
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Department of Economics, Copenhagen Business School Working Paper Series, Department of Economics, Copenhagen Business School

No 07-2002:
High-tech clusters, technology spillovers, and trade secret laws

Andrea Fosfuri and Thomas Rønde

Abstract: We analyze firms’ incentives to cluster in an industrial district to benefit from

reciprocal technology spillovers. A simple model of cumulative innovation is presented

where technology spillovers arise endogenously through labor mobility. It is

shown that firms’ incentives to cluster are the strongest when the following three

conditions are met: 1) technological progress is rapid; 2) competition in the product

market is relatively soft; 3) the probability of a single firm to develop an innovation

is neither very high nor very low. We show that some trade secret protection is always

beneficial for firms’ profits and stimulates clustering. Excessive protection may

impede technology spillovers and reduce firms’ incentives to cluster.

Keywords: Cumulative innovation; industrial districts; intellectual property rights; technology spillovers; (follow links to similar papers)

JEL-Codes: J30; K20; L10; O32; O34; (follow links to similar papers)

22 pages, May 1, 2002

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