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Random walk to innovation: Why productivity follows a power law

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  • Ghiglino, Christian

Abstract

This paper examines a search model in which knowledge is created as rational, but poorly informed, innovators obtain new ideas from combinations of existing ideas. We assume that the productivity of an idea is stochastic and depends on the productivity of the parental ideas. Importantly, we assume that the contribution of these parents to the productivity of the final idea is enhanced by prior use of these in knowledge creation. We identify conditions on the search costs leading to two properties: 1) the tail of the distribution of the productivity of innovations is a power law, and 2) the number of citations, i.e., times an idea is used in the process of innovation, follows a displaced power law. Both these properties are consistent with the available empirical evidence on the productivity of innovations and on patent citations.

Suggested Citation

  • Ghiglino, Christian, 2012. "Random walk to innovation: Why productivity follows a power law," Journal of Economic Theory, Elsevier, vol. 147(2), pages 713-737.
  • Handle: RePEc:eee:jetheo:v:147:y:2012:i:2:p:713-737
    DOI: 10.1016/j.jet.2011.02.004
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Daron Acemoglu & Pablo D. Azar, 2017. "Endogenous Production Networks," NBER Working Papers 24116, National Bureau of Economic Research, Inc.
    2. repec:eee:respol:v:47:y:2018:i:1:p:252-265 is not listed on IDEAS
    3. Acemoglu, Daron, 2012. "Introduction to economic growth," Journal of Economic Theory, Elsevier, vol. 147(2), pages 545-550.
    4. König, Michael David, 2016. "The formation of networks with local spillovers and limited observability," Theoretical Economics, Econometric Society, vol. 11(3), September.
    5. Zilibotti, Fabrizio & König, Michael & Lorenz, Jan, 2016. "Innovation vs. imitation and the evolution of productivity distributions," Theoretical Economics, Econometric Society, vol. 11(3), September.
    6. Teteryatnikova, Mariya, 2014. "Systemic risk in banking networks: Advantages of “tiered” banking systems," Journal of Economic Dynamics and Control, Elsevier, vol. 47(C), pages 186-210.
    7. Ghiglino, Christian & Tabasso, Nicole, 2015. "The dynamics of innovations and citations," Economics Letters, Elsevier, vol. 131(C), pages 94-97.

    More about this item

    Keywords

    Economic growth; Technological progress; Innovations; Random growing networks; Ideas; Scale-free distributions; Patent citations;

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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