Research and Development with Asymmetric Firm Sizes
AbstractThis article presents a theoretical model of research and development (R&D) competition among firms. The goal of the model is to simultaneously explain two empirical observations pertaining to the persistence of dominant firms: small firms make a disproportionate share of major innovations, while large firms tend to spend more (in absolute terms) on R&D than small firms do. In the model here, firms choose investment levels and R&D project riskiness. In equilibrium, a large firm invests more than a smaller firm but, by choosing safer R&D projects, makes fewer major innovations.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 22 (1991)
Issue (Month): 3 (Autumn)
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Web page: http://www.rje.org
Other versions of this item:
- Richard J. Rosen, 1988. "Research and development with asymmetric firm sizes," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 17, Board of Governors of the Federal Reserve System (U.S.).
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