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

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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," Economie d'Avant Garde Research Reports 21, Economie d'Avant Garde.
  2. Jess Benhabib & Jesse Perla & Christopher Tonetti, 2012. "Catch-up and Fall-back through Innovation and Imitation," NBER Working Papers 18091, National Bureau of Economic Research, Inc.
  3. 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).
  4. Erzo Luttmer, 2013. "Eventually, Noise and Imitation Implies Balanced Growth," 2013 Meeting Papers 91, Society for Economic Dynamics.
  5. 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.

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