On The Variance of Market Innovation with the Number of Firms
Cowan, Robin (2001). On The Variance of Market Innovation with the Number of Firms. UNU-MERIT Research Memoranda. UNU-MERIT.
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Sub-type Working paper Author Cowan, Robin Title On The Variance of Market Innovation with the Number of Firms Series Title UNU-MERIT Research Memoranda Volume/Issue No. 34 Publication Date 2001 Publisher UNU-MERIT Language eng Abstract This paper models a dynamic innovation process to examine the relationship between levels of R&D and market structure. In contrast to most of the literature the model includes positive feedbacks within the R&D process of a firm, wherein one output of R&D is knowledge, and accumulating knowledge in the present makes future R&D less costly. This creates a feedback by which market structures can affect steady state levels of R&D. We find that in general while an increase in the number of firms in an industry reduces R&D per firm this effect is sub-linear so industry R&D increases. The model also endogenizes the number of firms, using a zero profit condition. Finally, welfare effects are discussed. Copyright Year 2001 Copyright type All rights reserved -
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