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R&D Portfolio and Market Structure

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Author Info

  • Illoong Kwon

Abstract

This article analyses how firms allocate their resources when they compete for multiple patents in heterogeneous research projects simultaneously. A simple model shows that firms' resource allocation is biased away from risky and basic research, even when imitation is not possible and firms are fully rational. Therefore a market may lack major innovations despite large aggregate research expenditure and strong patent protection. This article also shows that as a market becomes more competitive, firms invest relatively less in basic research but more in risky research. These results provide a novel explanation for an ambiguous empirical relationship between innovation and market concentration. Copyright � The Author(s). Journal compilation � Royal Economic Society 2009.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0297.2009.02294.x
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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 120 (2010)
Issue (Month): 543 (03)
Pages: 313-323

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Handle: RePEc:ecj:econjl:v:120:y:2010:i:543:p:313-323

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Cited by:
  1. Igor Letina, 2013. "The road not taken: competition and the R&D portfolio," ECON - Working Papers 127, Department of Economics - University of Zurich.
  2. Barge-Gil, Andrés & López, Alberto, 2012. "R&D Determinants: accounting for the differences between research and development," MPRA Paper 41270, University Library of Munich, Germany.

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