Innovation and Growth: Theoretical Models and Analytical Simulations of Spatial, Clustering and Competition Effects
Bond-Smith, S. C. (2014). Innovation and Growth: Theoretical Models and Analytical Simulations of Spatial, Clustering and Competition Effects (Thesis, Doctor of Philosophy (PhD)). University of Waikato, Hamilton, New Zealand. Retrieved from http://hdl.handle.net/10289/8929
Permanent Research Commons link: http://hdl.handle.net/10289/8929
This thesis expands upon endogenous growth theory to incorporate a more detailed understanding of innovation. The similarities in modelling techniques between endogenous growth theory and the New Economic Geography (NEG) in the existing literature creates an opportunity to incorporate features of innovation within a model of both geography and growth. The thesis explores three key areas. Firstly, innovation is based on knowledge spillovers. But knowledge spillovers are also subject to spatial characteristics in its transfer between firms, locations, regions and nations. Similarly, knowledge is used by innovators in many sectors, not just the sector where the knowledge was originally developed. As a result, innovating firms have an incentive to agglomerate alongside other innovators to benefit from each other’s knowledge. The geographic constraints of knowledge spillovers are incorporated into a regional model of growth with creative destruction. However, spillovers between industries are not equal. Industries or firms producing products which are closely related have a strong incentive to locate in close proximity to benefit from related-technology spillovers. Some of these related innovation clusters could potentially be isolated, but sustainable due to knowledge transfer between related firms within the cluster. It is this innovation clustering which could provide the opportunity for distant or isolated economies to sustain high levels of productivity. Lastly, the thesis considers a way in which firms enter a market such that entry is not necessarily available to all potential entrants. This limit on the market supplied by innovating firms is characterised by discrete instead of free entry. Entry by discrete firms allows entering firms to invest in innovation in response to actual (instead of potential) competitors. They are able to escape competition by sustaining incremental innovations. Greater competition in larger markets has greater investment in innovation by all participants. This thesis provides new insights for endogenous growth theory, emphasising the need for policies regarding innovation and economic growth that are industry and location specific.
University of Waikato
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