Events at CERGE-EI

Chenchuan Shi

University of Oxford, United Kingdom

Abstract: This paper studies how the generality of knowledge—its applicability across technologies and industries—shapes firms’ innovation strategies, market structure, and aggregate growth. I build an endogenous growth model in which firms choose between general and firm-specific R&D while competing for market leadership. General innovations enhance firms’ capacity to absorb and apply outside knowledge, creating spillovers within and across industries, whereas firm-specific innovations yield mainly private gains. The model predicts, and the data confirm, that (1) leaders favor firm-specific R&D while followers rely on general innovations to catch up, and (2) the gap in innovation generality between them follows a U-shaped pattern with market concentration. Leveraging variation in the enforceability of non-compete agreements across U.S. states, I provide empirical evidence consistent with the model’s spillover mechanisms. The findings point to a novel growth policy: encouraging general R&D, particularly among leading firms, can improve knowledge diffusion and sustain long-run growth.

Full Text: Knowledge Generality, Competition and Growth