Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Economics

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

Andrea Fosfuri and Thomas Rønde
Additional contact information
Andrea Fosfuri: Universidad Carlos III de Madrid, Postal: Universidad Carlos III de Madrid, Departamento de Economía de la Empresa, Calle Madrid 126, 28903 - Getafe, Madrid
Thomas Rønde: University of Mannheim, Postal: University of Mannheim, Copenhagen Business School, and C.E.P.R.; London

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

JEL-codes: J30; K20; L10; O32; O34

22 pages, May 1, 2002

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