Kiel Working Papers, Kiel Institute for World Economics
No 903:
Direct Communication, Costs of Networking and Localization of Technical Knowledge
Andreas Kopp
Abstract: We investigate the localization of technical knowledge in
a setup where firms or researchers compete for the value of a preemptive
innovation. All researchers could gain by sharing information due to the
uncertainty of the arrival time of the discovery. As receiving information
while withholding expertise improves the competitive position of the actor
there is a short-run incentive not to cooperate. Informal trade of
technical know-how in a matching market is brought about by pre-trade
communication on the reputation of players and the refusal to disclose
information to agents with a bad reputation. This community enforcement
results without the players following contagious strategy profiles. If the
communication on the reputation of players is associated with costs
depending on geographic distances, researchers have a strong incentive to
cluster in geographical space. The number and pattern of agglomerations
depends on the initial distribution of firms over geographical space and
relocation costs.
Keywords: community enforcement, cooperation in R&D, economic geography; (follow links to similar papers)
46 pages, January 1999
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