This dissertation studies various aspects of economic environments that are characterized by the presence of externalities. Chapters 2 and 3 deal with the production and dissemination of knowledge, and knowledge externalities between R&D-performing manufacturing firms. Chapter 4 turns to a market characterized by network externalities, and studies the provision of advertisements to consumers by a broadcasting duopoly.

In chapter 2, I test the hypothesis that the mobility of scientific and technical personnel is a conduit for knowledge spillovers among innovative firms. Using a variant of the standard Tobin's Q equation, I show that firms who have access to large pools of externally created knowledge in their industrial and technological neighborhoods enjoy additional market value as a result of higher scientific labor mobility, while they suffer from higher mobility whenever external knowledge is limited. Specifically, a percentage point increase in the mobility rate increases market value by 1% to 3.1% through spillovers for a firm facing the average spillover pool. This effect is largely offset by a negative impact of comparable magnitude.

In chapter 3, I study the relationship between firm size and R&D productivity for a large panel of U.S. manufacturing firms. I employ two measures of a firm's R&D performance: number of citations received per patented innovation, and the number of citations received per dollar of R&D expenditures. I find that citations received per patent exhibits no dependence on firm size, but citations received per R&D dollar decreases with it. A quantile regression analysis suggests that citations per patent falls with firm size at the highest quantiles of its conditional distribution, while showing positive dependence on firm size otherwise.

Chapter 4 studies a model of advertising on competing broadcasting channels, a market characterized by two-sided network externalities. Advertising is considered a nuisance, but it may also intensify price competition among producers depending on how information is disseminated among consumers. Two classes of equilibria are identified, and exclusive dealings emerge endogenously. Equilibria with complete exclusivity offer higher revenues for broadcasters. Surprisingly, in equilibria with higher information surplus, total consumer surplus is necessarily lower and producer surplus is higher.