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The Cleansing Effect Of R&D Subsidies

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  • Tetsugen Haruyama

Abstract

The paper develops a patent race model with a particular emphasis upon heterogeneity of competing R&D firms. It is demonstrated that R&D subsidies generate the cleansing effect where relatively lower productivity firms drop out of the race and innovation accelerates due to expanded R&D investment by the remaining firms as well as new entrants with higher productivity than exiting firms.

Suggested Citation

  • Tetsugen Haruyama, 2018. "The Cleansing Effect Of R&D Subsidies," Bulletin of Economic Research, Wiley Blackwell, vol. 70(4), pages 452-458, October.
    • Handle: RePEc:bla:buecrs:v:70:y:2018:i:4:p:452-458
    DOI: 10.1111/boer.12150
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    References listed on IDEAS

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    1. Tom Lee & Louis L. Wilde, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(2), pages 429-436.
    2. David A. Malueg & Shunichi O. Tsutsui, 1997. "Dynamic R&D Competition with Learning," RAND Journal of Economics, The RAND Corporation, vol. 28(4), pages 751-772, Winter.
    3. Reinganum, Jennifer F., 1981. "Dynamic games of innovation," Journal of Economic Theory, Elsevier, vol. 25(1), pages 21-41, August.
    4. Cohen, Wesley M & Klepper, Steven, 1992. "The Anatomy of Industry R&D Intensity Distributions," American Economic Review, American Economic Association, vol. 82(4), pages 773-799, September.
    5. Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(3), pages 395-410.
    6. Pankaj Tandon, 1983. "Rivalry and the Excessive Allocation of Resources to Research," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 152-165, Spring.
    7. Ljungqvist, Lars & Sargent, Thomas J., 2012. "Recursive Macroeconomic Theory, Third Edition," MIT Press Books, The MIT Press, edition 3, volume 1, number 0262018748, December.
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    More about this item

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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