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There is considerable interest in understanding how important market frictions are in stiffing the transmission of ideas from one firm to another. Although the theoretical literature emphasizes the importance of these frictions, direct empirical evidence on them is limited. We use comprehensive patent data from the European Patent Office and a multiple spells duration model to provide estimates that suggest that they are substantial. It is around 30% more costly to successfully discover and utilize new ideas created in another firm than in your own. This compares to the increased costs of accessing new ideas across national borders of around 5%, and across technologies of around 20%. These result point towards substantial imperfections in the market for technology.
Authors
CPP Co-Director, IFS Research Director
Rachel is Research Director and Professor at the University of Manchester. She was made a Dame for services to economic policy and education in 2021.
Research Fellow Columbia University
Sokbae is an IFS Research Fellow and a Professor at Columbia University, with an interest in Econometrics, Applied Microeconomics and Statistics.
Bas Straathof
Working Paper details
- DOI
- 10.1920/wp.cem.2014.4014
- Publisher
- Institute for Fiscal Studies
Suggested citation
R, Griffith and S, Lee and B, Straathof. (2014). Recombinant innovation and the boundaries of the firm. London: Institute for Fiscal Studies. Available at: https://ifs.org.uk/publications/recombinant-innovation-and-boundaries-firm (accessed: 28 March 2024).
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