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Cumulative Investment and Spillovers in the Formation of Technological Landscapes

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  • Gilles Duranton

Abstract

In this paper, the evolution of product differentiation in industries is modeled as the result of a cumulative cost‐reduction process subject to spillovers in a differentiated oligopoly. Our results suggest that the long‐run outcome is dependent on the intensity of spillovers and the shape of their diffusion function. With weak spillovers, firms dig their niche over time, differentiation remains important and cost‐reduction keeps going. By contrast, if spillovers are strong and have a concave diffusion function, firms gradually use more similar technologies. This standardization process involves less and less investment. For spillovers of intermediate strength, complex technological landscapes may arise.

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  • Gilles Duranton, 2000. "Cumulative Investment and Spillovers in the Formation of Technological Landscapes," Journal of Industrial Economics, Wiley Blackwell, vol. 48(2), pages 205-213, June.
    • Handle: RePEc:bla:jindec:v:48:y:2000:i:2:p:205-213
    DOI: 10.1111/1467-6451.00119
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    Cited by:

    1. E. Cefis & S. Rosenkranz & U. Weitzel, 2005. "Effects of Acquisitions on Product and Process Innovation and R&D Performance," Working Papers 05-28, Utrecht School of Economics.
    2. Jinwen Qiu & Wenjian Liu & Ning Ning, 2020. "Evolution of Regional Innovation with Spatial Knowledge Spillovers: Convergence or Divergence?," Networks and Spatial Economics, Springer, vol. 20(1), pages 179-208, March.
    3. Isabel Freitas & Tommy Clausen & Roberto Fontana & Bart Verspagen, 2011. "Formal and informal external linkages and firms’ innovative strategies. A cross-country comparison," Journal of Evolutionary Economics, Springer, vol. 21(1), pages 91-119, February.
    4. Petit, Maria Luisa & Sanna-Randaccio, Francesca & Sestini, Roberta, 2009. "Asymmetric knowledge flows and localization with endogenous R&D: A dynamic analysis," Economic Modelling, Elsevier, vol. 26(2), pages 536-547, March.
    5. Heiko A. Gerlach & Thomas Rønde & Konrad Stahl, 2005. "Project Choice And Risk In R&D," Journal of Industrial Economics, Wiley Blackwell, vol. 53(1), pages 53-81, March.
    6. Stahl, Konrad & Gerlach, Heiko A. & Rønde, Thomas, 2002. "Market and Technical Risk in R&D," CEPR Discussion Papers 3450, C.E.P.R. Discussion Papers.

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