|About the Book|
In the second half of the 20th century---spurred by findings that technological change played an important role in determining economic growth---research on innovation and Research and Development (R&D) became more common. The positiveMoreIn the second half of the 20th century---spurred by findings that technological change played an important role in determining economic growth---research on innovation and Research and Development (R&D) became more common. The positive externalities, or spillovers, associated with R&D have been a source of much confusion and debate. The first chapter examines the history of this research, with an emphasis on the emergence of a new way of modeling R&D and spillovers, namely the construction of pools of knowledge.-In the second chapter, it is noted that spillovers of R&D are now typically modeled as either benefiting everyone by expanding the pool of knowledge for everyone (symmetric), or as benefiting only those who are behind, by some measure, the investing firm (asymmetric). In addition to the changes in R&D efforts that theoretical models would suggest based purely on profit maximization, it is possible that behavioral norms could effect decisions in ways that are not currently accounted for. The implications of these different assumptions about the nature of spillovers (symmetric vs. asymmetric) is examined in an experimental setting to determine if the behavioral norms that have been observed elsewhere, notably inequality aversion, are likely to be observed in the area of R&D investment as well. Aggregate results give little evidence that the nature of spillovers matters, but there is considerable heterogeneity among the subjects, casting doubt on usefulness of aggregate analysis. When analyzed at the individual level, between a fourth and a third of subjects appear to significantly change their investments based on the nature of spillovers, however, some invest more and others invest less when spillovers are asymmetric.-In the third chapter, an implication of the two dominant assumptions made about the nature of spillovers of R&D is examined empirically. If the nature of spillovers varies by field, then that should be apparent in the pattern of federal funding of R&D. Fields in which spillovers are asymmetric should have federal funding concentrated at the leading schools, because the R&D of the leading schools is the most productive socially. To determine if that is indeed the case, two separate methods are used to determine the nature of spillovers. The first relied on a survey of faculty at Florida State University, and the second on journal citation statistics. Importantly, these methods often gave conflicting classifications, indicating that the symmetric vs. asymmetric distinction may be nothing more than a theoretical construct. Using these classifications of the nature of spillovers, the study examines the actual pattern of federal funding of R&D in various fields. The results indicate that the nature of spillovers does not effect the concentration of federal R&D funding.