We endogenize the market risk (at given technical risk) in firms’ R&D decisions by introducing stochastic R&D in the Hotelling model. It is shown that if the technical risk is sufficiently high, the market risk remains low even if firms pursue similar projects. This leads firms to focus on the...

We investigate firms' incentives to locate in the same region to gain access to a large pool of skilled labour. Firms engage in risky R&D activities and thus create stochastic product and implied labour demand. Agglomeration in a cluster is more likely in situations where the innovation step is...

We introduce stochastic R&D in the Hotelling model and show that if the technical risk is sufficiently high, all firms focus on the most valuable market segment. We then endogenize technical risk by allowing firms to choose between a safe and a risky R&D technology. In equilibrium, firms either...

We investigate the interplay between firms' R&D decisions and local labor market competition and how this influences equilibrium location choices and welfare. Firms engage in risky R&D activities that generate stochastic product and derived labor demand. We show that firms located in a cluster...

I study the incentives of innovating firms to announce their entry in markets in which consumers incur a cost of switching from one product to another. Announcing entry can prevent the lock-in of potential demand before the launch of the new product. At the same time, however, the incumbent firm...