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From Mind to Market: A Global, Dynamic Analysis of R&D

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  • Jeroen Hinloopen

    (University of Amsterdam)

  • Grega Smrkolj

    (University of Amsterdam)

  • Florian Wagener

    (University of Amsterdam)

Abstract

Existing models of R&D are not easily reconciled with four observable aspects of R&D: initial technologies ('ideas') need to be developed further, only a minority of initial ideas is successfully brought to the market, production and process innovations take place simultaneously (whereby, initially, there is no production at all), and process innovations are implemented for technologies that are destined to leave the market. We present a detailed bifurcation analysis for a dynamic model of R&D that captures these observations in one, unifying framework. As we provide a global analysis, we do not limit initial technologies to carry marginal costs that are below the choke price. We show that there always exists a critical value of initial marginal cost above which the firm does not initiate any (R&D) activity; the path to the saddle-point steady state is never globally optimal. We also sketch some tentative policy implications of our analysis.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 11-139/1.

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Date of creation: 30 Sep 2011
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Handle: RePEc:dgr:uvatin:20110139

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Web page: http://www.tinbergen.nl

Related research

Keywords: Bifurcations; Innovation; Monopoly; Optimal control; R&D;

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References

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Cited by:
  1. Kiseleva, T. & Wagener, F.O.O., 2011. "Bifurcations of Optimal Vector Fields," CeNDEF Working Papers 11-05, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  2. Jeroen Hinloopen & Grega Smrkolj & Florian Wagener, 2013. "In Defense of Trusts: R&D Cooperation in Global Perspective," Tinbergen Institute Discussion Papers 13-045/II, Tinbergen Institute, revised 04 Mar 2014.

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