Uncertainty and the size distribution of rewards from innovation
AbstractPrevious research has shown that the distribution of profit outcomes from technological innovations is highly skew. This paper builds upon those detailed findings to ask: what stochastic processes can plausibly be inferred to have generated the observed distributions? After reviewing the evidence, this paper reports on several stochastic model simulations, including a pure Gibrat random walk with monthly changes approximating those observed for high-technology startup company stocks and a more richly specified model blending internal and external market uncertainties. The most highly specified simulations suggest that the set of profit potentials tapped by innovators is itself skew-distributed and that the number of entrants into innovation races is more likely to be independent of market size than stochastically dependent upon it.
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Bibliographic InfoArticle provided by Springer in its journal Journal of Evolutionary Economics.
Volume (Year): 10 (2000)
Issue (Month): 1 ()
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Web page: http://link.springer.de/link/service/journals/00191/index.htm
Find related papers by JEL classification:
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
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