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Innovation vs. Imitation and the Evolution of Productivity Distributions

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  • Michael Koenig

    ()
    (Stanford University)

  • Jan Lorenz

    ()
    (Carl-von-Ossietzky University)

  • Fabrizio Zilibotti

    ()
    (University of Zurich)

Abstract

We develop a tractable dynamic model of productivity growth and technology spillovers that is consistent with the emergence of real world empirical productivity distributions. Firms can improve productivity by engaging in in-house R&D, or alternatively, by trying to imitate other firms’ technologies subject to limits to their absorptive capacities. The outcome of both strategies is stochastic. The choice between in-house R&D and imitation is endogenous, and based on firms’ profit maximization motive. Firms closer to the technological frontier have less imitation opportunities, and tend to choose more often in-house R&D, consistent with the empirical evidence. The equilibrium choice leads to balanced growth featuring persistent productivity differences even when starting from ex-ante identical firms. The long run productivity distribution can be described as a traveling wave with tails following Zipf’s law as it can be observed in the empirical data. Idiosyncratic shocks to firms’ productivities of R&D

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Bibliographic Info

Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 11-008.

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Date of creation: Feb 2012
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Handle: RePEc:sip:dpaper:11-008

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Related research

Keywords: innovation; growth; quality ladder; absorptive capacity; productivity di?erences; spillovers;

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Citations

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Cited by:
  1. Ufuk Akcigit & Murat Alp Celik & Jeremy Greenwood, 2013. "Buy, Keep or Sell: Economic Growth and the Market for Ideas," PIER Working Paper Archive 13-069, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  2. Jess Benhabib & Jesse Perla & Christopher Tonetti, 2014. "Catch-up and fall-back through innovation and imitation," Journal of Economic Growth, Springer, vol. 19(1), pages 1-35, March.
  3. Erzo Luttmer, 2013. "Eventually, Noise and Imitation Implies Balanced Growth," 2013 Meeting Papers 91, Society for Economic Dynamics.
  4. Slivko, Olga, 2012. "Innovation strategies of German firms: The effect of competition and intellectual property protection," ZEW Discussion Papers 12-089, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Lafond, Francois, 2013. "Self-organization of knowledge economies," MERIT Working Papers 040, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

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