We study a quality-ladder model of endogenous growth that produces stochastic leadership cycles. Over a cycle, industry leaders can innovate several successive times in the same industry, gradually increasing the magnitude of their technological lead before being replaced by a new entrant. Initially, new leaders are eager to enlarge their lead and do much of the research, but if they innovate repeatedly, their propensity to invest in R\&D decreases. Eventually they stop doing research altogether, and as they are overtaken a new cycle starts. The model generates a skewed firm size distribution and a deviation from Gibrat’s law that accord with the empirical evidence. We also consider various policy measures, showing that in some cases policy should favour R\&D by incumbents, not outsiders, and that stronger patent protection may reduce innovation and growth.
A Schumpeterian Growth Model with Heterogenous Firms / Minniti, A.; Parello, Carmelo Pierpaolo; Segerstrom, P. S.. - ELETTRONICO. - 645:(2008), pp. 1-31.
A Schumpeterian Growth Model with Heterogenous Firms
PARELLO, Carmelo Pierpaolo;
2008
Abstract
We study a quality-ladder model of endogenous growth that produces stochastic leadership cycles. Over a cycle, industry leaders can innovate several successive times in the same industry, gradually increasing the magnitude of their technological lead before being replaced by a new entrant. Initially, new leaders are eager to enlarge their lead and do much of the research, but if they innovate repeatedly, their propensity to invest in R\&D decreases. Eventually they stop doing research altogether, and as they are overtaken a new cycle starts. The model generates a skewed firm size distribution and a deviation from Gibrat’s law that accord with the empirical evidence. We also consider various policy measures, showing that in some cases policy should favour R\&D by incumbents, not outsiders, and that stronger patent protection may reduce innovation and growth.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.