DP4130 High-Tech Clusters, Technology Spillovers and Trade Secret Laws

Author(s): Andrea Fosfuri, Thomas Rønde
Publication Date: December 2003
Keyword(s): Cumulative innovation, industrial districts, intellectual property rights, technology spillovers
JEL(s): J30, K20, L10, O32, O34
Programme Areas: Industrial Organization, International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4130

We analyse 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 labour mobility. It is shown that firms? incentives to cluster are the strongest when the following three conditions are met: 1) the growth potential of an industry is high; 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. Trade secret protection based on punitive damages is, except in some extreme cases, beneficial for firms? profits, stimulates clustering, and is not an impediment to technology spillovers.