Knowledge Generality, Competition and Growth

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 decide between general and firm-specific R\&D while competing for market leadership. General innovations strengthen firms’ ability to absorb and apply outside knowledge, creating spillovers both across and within industries, whereas firm-specific innovations primarily benefit the innovating firm. The model predicts—and the data confirms—that leaders tilt toward firm-specific R\&D, while followers rely on general innovations to catch up, and that the gap in innovation generality between them follows a U-shaped relationship with market concentration. Leveraging variation in the enforceability of non-compete agreements across states, I provide evidence consistent with the model’s spillover mechanisms. The findings highlight the importance of policies that encourage general R\&D—particularly among leading firms—for sustaining long-run growth.