Absorptive capacity, knowledge spillovers and incentive contracts

• We focus on the identification of spillovers in particular case regulation urban transportation firms with incentive contracts. build and estimate a structural cost model where service is regulated by local government provided large industrial corporation which operates several networks simultaneously. Diversity knowledge across operators same improves absorptive capacity increases flow spillovers. observe significant reductions total operating following enlargement groups. attempt to identify measure French transport sector, strongly few groups are charge networks. single operator. Knowledge directly linked know-how specific group, but they also depend power regulatory contract shapes effort managers. Exerting an network allows reduction this network, it benefits other that members group. find diversity group Simulation exercises provide evidence costs