<HTML>
<P><I>Martin Schiller wrote:</I>
<BLOCKQUOTE TYPE=CITE><I>In a message of 7/22/99 4:39 PM from Brad De Long,</I>
<BR><I><<A HREF="mailto:delong@econ.Berkeley.EDU">mailto:delong@econ.Berkeley.EDU</A>></I><I></I>
<P><I>>Yeah. But where are the profits going to come from? Profits from
R&D</I>
<BR><I>>arise only if the R&D allows you to set up some very strong
barriers</I>
<BR><I>>to entry behind which you can shelter. And I can't figure out what</I>
<BR><I>>those are going to be...</I><I></I>
<P><I>Why does the profit or the value have to accrue to the original investor</I>
<BR><I>or developer (I mean for practical reasons, not just because they
*want*</I>
<BR><I>it?) Knowledge is only valuable in relation to how widely it's broadcast.</I>
<BR><I>Widely broadcast, widely used and widely productive.</I><I></I>
<P><I>There are no secrets in Silicon Valley, but there is an economy of</I>
<BR><I>setting up "some very strong barriers". That's counterproductive
activity.</I>
<BR> </BLOCKQUOTE>
In US most of the R&D is made by private firms so there are externalities
and appropriation problem that limit the productive capacity of innovative
activities. In case of private R&D "some very strong barriers" are
needed to overcome these problems. But public R&D has some drawbacks
too. Slicon Valley is an exception like Third Italy. In addition
R&D is also the most important input for organizational innovations
which is used to decrease costs and increase explotation. This issue is
also important for understanding "network economy"
<P>EMRE OZBERK</HTML>