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Knowledge appropriability, firm size, and growth

  • Minniti, Antonio

Empirical evidence shows that the number of patents per R&D dollar declines with firm size. In this paper, we propose a Schumpeterian growth model that accounts for this evidence. We analyze an economy with firms that engage in cost-reducing innovation resulting from the accumulation of both codified and tacit knowledge: the former occurs through the purchase of patents, while the latter is the result of R&D conducted in-house by firms. We study the relation between knowledge appropriability and market structure, and we show that a shift from patents to in-house research occurs as firm size gets larger. Since innovation statistics concentrate mainly on patents, this process of research reallocation results into an under-estimation of innovative activity and is responsible for the declining ratio of patents to R&D expenditure. Survey data on UK-based firms provide support to our results.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 33 (2011)
Issue (Month): 3 (September)
Pages: 438-454

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Handle: RePEc:eee:jmacro:v:33:y:2011:i:3:p:438-454
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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  19. Holmström, Bengt, 1989. "Agency Costs and Innovation," Working Paper Series 214, Research Institute of Industrial Economics.
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