Firm size, rivalry and the extent of the market in endogenous technological change
AbstractEvidence shows that firms build their market position by accumulating knowledge protected by secrecy, patents and other appropriation devices. I explore the implications of this fact in a model economy where oligopolistic firms establish in-house R&D programs. In symmetric equilibrium, the number of firms determines concentration and firm size. These determine the scale and the efficiency of R&D operations and the rate of innovation. The number of firms, moreover, is endogenous and determined jointly with the rate of growth by the zero-profit condition. This property yields new results. For example, the scale effect of population size may be negative. The market allocation of resources is not Pareto optimal. I discuss the nature of this distortion.
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Bibliographic InfoArticle provided by Elsevier in its journal European Economic Review.
Volume (Year): 43 (1999)
Issue (Month): 9 (October)
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Web page: http://www.elsevier.com/locate/eer
Other versions of this item:
- Peretto, Pietro F., 1996. "Firm Size, Rivalry and the Extent of the Market in Endogenous Technological Change," Working Papers 96-07, Duke University, Department of Economics.
- E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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