We investigate the interplay between firms' R&D decisions and labor market competition, and how this influences equilibrium location choices and welfare. Firms engage in risky R&D activities and thus create stochastic product and implied labor demand. Spatial agglomeration is more likely in...

Using newly available data at the firm level, this study provides convincing evidence of the importance of financial constraints in explaining the timing of innovations in the German services sector. Based on a dynamic model of firms' optimal R&D behavior under financial constraints, we estimate...

Many writers have claimed that R&D has two 'faces'. In addition to the conventional role of stimulating innovation, R&D enhances technology transfer by improving the ability of firms to learn about advances in the leading edge ('absorptive capacity'). In this paper we document that there has...

Defensive innovations in developed countries can explain the empirical phenomenon that openness towards trade with less-developed countries does not necessarily induce a substantial increase in the wage differential and trade volumes. Building on step-by-step innovations as introduced by Aghion...

This note explores the relationship between the price elasticity of demand and the R&D intensity of the product. We introduce the concept of R&D intensity into a standard Dixit-Stiglitz/Krugman-type setting. R&D activity is treated as a fixed cost of production. Within this framework, sectors...