Here what I mean by spillover is the diffusion of knowledge, particularly leaked research, from one firm to another. The standard theory implies that firms reduce research when knowledge spills out, especially to rivals. I believe companies invest enough in research if they think they can appropriate benefits by restricting spillover. However, when they fear spillover, they may focus more on development or commercialization, leaving the research task to other innovative entities such as universities. If there are no incentives for upstream research, firms may opt for downstream research instead.( upstream research refers to the initial phase of scientific investigation where fundamental knowledge is generated, while downstream research involves the application of this knowledge to develop practical solutions or products.)
Nevertheless, I think the net effect of spillover is positive for society. Many anecdotal examples support this view. For instance, Xerox invented various things, like the operating system, which others saw and then developed. Bill Gates and Steve Jobs toured Xerox's lab, observed an early Xerox PC, and later recreated it in their own ways.
Kodak invented an early digital camera that they did nothing with, but we still have digital cameras today. Even if spillover may have discouraged some major firms from publishing research (evident in GE, Xerox, AT&T exhibiting a sharp decline in research publication in the 1980s, 1990s, and 2000s), the positive benefits of spillover remain.
However, these are just anecdotal pieces of evidence. I could be way off. I do not possess any expertise on this subject matter and would like to know what this sub thinks about it.