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 17, Board of Governors of the Federal Reserve System (U.S.).
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