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Cost-Reducing and Demand-Creating R&D with Spillovers

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Author Info
Richard C. Levin
Peter C. Reiss
Abstract

This article analyzes R&D policies when the returns to cost-reducing and demand-creating R&D are imperfectly appropriable and market structure is endogenous. We generalize previous characterizations of appropriability to permit the possibility that own and rival R&D are imperfect substitutes. We also describe how equilibrium expenditures on process and product R&D, as well as equilibrium market structure, depend on technological opportunities and spillovers. In contrast to previous work, diminished appropriability does not necessarily reduce R&D expenditures. For example, under some conditions, an increase in the extent of process (product) spillovers will lead to an increase in product (process) R&D. We estimate several variants of the model by using manufacturing line-of-business data and data from a survey of R&D executives.

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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 19 (1988)
Issue (Month): 4 (Winter)
Pages: 538-556
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Handle: RePEc:rje:randje:v:19:y:1988:i:winter:p:538-556

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  1. Bruno Cassiman, 1994. "Research Joint Ventures and Optimal R&D Policy with Asymmetric Information," Economics Working Papers 263, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 1997. [Downloadable!]
  2. Bruno Cassiman, 1994. "Research Joint Ventures and Optimal R&D Policy with Asymmetric Information," Discussion Papers 1105, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  3. Baldwin, John R. & Hanel, Peter, 2000. "Multinationals and the Canadian Innovation Process," Analytical Studies Branch Research Paper Series 2000151e, Statistics Canada, Analytical Studies Branch. [Downloadable!]
  4. Baldwin, John R. & Hanel, Peter & Sabourin, David, 2000. "Determinants of Innovative Activity in Canadian Manufacturing Firms: The Role of Intellectual Property Rights," Analytical Studies Branch Research Paper Series 2000122e, Statistics Canada, Analytical Studies Branch. [Downloadable!]
  5. Jeffrey I. Bernstein & M. Ishaq Nadiri, 1991. "Product Demand, Cost of Production, Spillovers, and the Social Rate of Return to R&D," NBER Working Papers 3625, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Ester Martínez Ros & Vicente Salas Fumás, . "The effect of innovation activity on innovating quasi-rents: an empirical application," Studies on the Spanish Economy 03, FEDEA. [Downloadable!]
  7. Gamal Atallah, 2002. "Vertical R&D Spillovers, Cooperation, Market Structure, and Innovation," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 11(3), pages 179-209, January. [Downloadable!] (restricted)
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  8. Juergen Peters & Wolfgang Becker, 1998. "Technological Opportunities, Academic Research, and Innovation Activities in the German Automobile Supply Industry," Discussion Paper Series 175, Universitaet Augsburg, Institute for Economics. [Downloadable!]
  9. Pekka Ilmakunnas, 2002. "Strategic behavior in a service industry," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(2), pages 69-82. [Downloadable!]
  10. Claudio A. Piga & Marco Vivarelli, 2003. "Internal and External R&D: A Sample Selection Approach," Papers on Entrepreneurship, Growth and Public Policy 2004-05, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group. [Downloadable!]
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  11. Lehner, Maria & Schnitzer, Monika, 2006. "Entry of Foreign Banks and their Impact on Host Countries," Discussion Papers in Economics 1208, University of Munich, Department of Economics. [Downloadable!]
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  12. Kaiser, Ulrich & Licht, Georg, 1998. "R&D cooperation and R&D intensity : theory and micro-econometric evidence for german manufacturing industries," ZEW Discussion Papers 98-32, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  13. Dietmar Harhoff, 1998. "Vertical Organization, Technology Flows and R&D Incentives: An Exploratory Analysis," CIG Working Papers FS IV 98-02, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
  14. Tuomas Takalo & Tanja Tanayama & Otto Toivanen, 2005. "Selection Or Self-Rejection? Applications Into A Treatment," Industrial Organization 0510002, EconWPA. [Downloadable!]
  15. Alvin K. Klevorick & Richard C. Levin & Richard R. Nelson & Sidney G. Winter, 1993. "On the Sources and Significance of Interindustry Differences in Technological Opportunities," Cowles Foundation Discussion Papers 1052, Cowles Foundation, Yale University. [Downloadable!]
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  16. C. Piga & M. Vivarelli, 2003. "Sample selection in estimating the determinants of cooperative R&D," Applied Economics Letters, Taylor and Francis Journals, vol. 10(4), pages 243-246, March. [Downloadable!] (restricted)
  17. Georg von Graevenitz, 2004. "Spillovers Reconsidered: Analysing Economic Welfare under complementarities in R&D," Discussion Papers 29, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
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  18. Wolfgang Becker & Juergen Peters, 2000. "Technological Opportunities, Absorptive Capacities, and Innovation," Discussion Paper Series 195, Universitaet Augsburg, Institute for Economics. [Downloadable!]
  19. Carmine Ornaghi, 2002. "Spillovers In Product And Process Innovation: Evidence From Manufacturing Firms," Economics Working Papers we023213, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  20. Wolfgang Becker, 2003. "Evaluation of the Role of Universities in the Innovation Process," Discussion Paper Series 241, Universitaet Augsburg, Institute for Economics. [Downloadable!]
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