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A dynamic analysis of investment in process and product innovation with learning-by-doing

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  • Li, Shoude
  • Ni, Jian

Abstract

This paper investigates the optimal control problem of a monopolist’s investments in process and product innovation under learning-by-doing in a dynamic setting. We show that: (i) there exists the saddle stable steady state under monopolist optimum and social optimum; (ii) the learning rates of product and process innovation affect not only the monopolist’s process or product innovation investments, but also the complementarity (substitutability) relationship between product and process innovation; (iii) the social incentive towards both product and process innovation is always larger than the private incentive characterizing the profit-seeking monopolist. These results are valuable complement and development to the results drawn from the standard product and process innovation model.

Suggested Citation

  • Li, Shoude & Ni, Jian, 2016. "A dynamic analysis of investment in process and product innovation with learning-by-doing," Economics Letters, Elsevier, vol. 145(C), pages 104-108.
    • Handle: RePEc:eee:ecolet:v:145:y:2016:i:c:p:104-108
    DOI: 10.1016/j.econlet.2016.05.031
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    Cited by:

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    6. Lambertini, Luca & Orsini, Raimondello & Palestini, Arsen, 2017. "On the instability of the R&D portfolio in a dynamic monopoly. Or, one cannot get two eggs in one basket," International Journal of Production Economics, Elsevier, vol. 193(C), pages 703-712.
    7. Pensri, Jaroenwanit & Supot Deboonmee & Uraiporn Kattiyapornpong, 2017. "The Development of Innovative Product Concept: A Case of Organic Rice in Thailand," Journal of Emerging Trends in Marketing and Management, The Bucharest University of Economic Studies, vol. 1(1), pages 171-180, October.
    8. Jürgen Antony & Torben Klarl, 2020. "Knowledge Transfer, Transitional Dynamics and Optimal Research & Development Policy in a Dynamic Monopoly Setting," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(3), pages 579-606, November.
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    10. Fan Zhang & Susu Cheng, 2021. "Behavioral choices in a dynamic duopoly with process innovation and sticky price: Myopia versus farsightedness," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 662-674, April.
    11. Davide Antonioli & Alberto Marzucchi & Francesco Rentocchini & Simone Vannuccini, 2022. "Robot Adoption and Innovation Activities (last revised: December 2023)," Munich Papers in Political Economy 21, Munich School of Politics and Public Policy and the School of Management at the Technical University of Munich.
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    13. Kumar, Maneesh & Rodrigues, Vasco Sanchez, 2020. "Synergetic effect of lean and green on innovation: A resource-based perspective," International Journal of Production Economics, Elsevier, vol. 219(C), pages 469-479.
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