Innovation is perhaps the single most important driver of productivity and growth. However, firms do not innovate in isolation but rather within an ecosystem of their technological peers, as many classic studies show. More recent work finds that a given firm’s innovation, productivity, and value increase as a result of technology spillovers from other firms.
Like knowledge spillovers generally, inventions have social value that can far exceed their private value to the inventor. Technological progress can create technologies not just for the inventor firm, but also for its peers. In a virtuous circle, the resulting technological progress of the peer … Read more