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Waves of Creative Destruction: Firm-Specific Learning-by-Doing and the Dynamics of Innovation

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  • Jeremy C. Stein

Abstract

This paper develops a model of repeated innovation with knowledge spillovers. The model's novel feature is that firms compete on two dimensions: (1) product quality, where one firm's innovation ultimately spills over to other firms; and (2) distribution costs, where there are no spillovers across firms and where learning-by-doing on the part of incumbent firms gives them a competitive advantage over would-be entrants. Such firm-specific learning-by-doing has two important consequences: (1) it can in some circumstances dramatically reduce the long-run average level of innovation; (2) it leads to endogeneous bunching, or waves, in innovative activity.

Suggested Citation

  • Jeremy C. Stein, 1997. "Waves of Creative Destruction: Firm-Specific Learning-by-Doing and the Dynamics of Innovation," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 265-288.
  • Handle: RePEc:oup:restud:v:64:y:1997:i:2:p:265-288.
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    File URL: http://hdl.handle.net/10.2307/2971712
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    Cited by:

    1. repec:bla:stratm:v:38:y:2017:i:5:p:995-1017 is not listed on IDEAS
    2. Peter Thompson, 2012. "The Relationship between Unit Cost and Cumulative Quantity and the Evidence for Organizational Learning-by-Doing," Journal of Economic Perspectives, American Economic Association, vol. 26(3), pages 203-224, Summer.
    3. Lucia Foster & John C. Haltiwanger & C. J. Krizan, 2001. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Chapters,in: New Developments in Productivity Analysis, pages 303-372 National Bureau of Economic Research, Inc.
    4. Erik Canton & Harald Uhlig, 1999. "Growth and the cycle: Creative destruction versus entrenchment," Journal of Economics, Springer, vol. 69(3), pages 239-266, October.
    5. Denicolo, Vincenzo, 2001. "Growth with non-drastic innovations and the persistence of leadership," European Economic Review, Elsevier, vol. 45(8), pages 1399-1413, August.
    6. Thompson, Peter, 2010. "Learning by Doing," Handbook of the Economics of Innovation, Elsevier.
    7. Xiangkang Yin & Ehud Zuscovitch, 1999. "Interaction of Drastic and Incremental Innovations: Economic Development Through Schumpeterian Waves," Working Papers 1999.02, School of Economics, La Trobe University.
    8. João Marcelo Alves, 2008. "Determining Knowledge-Intensive Companies Acquisition Value For M&A Purposes: An Intellectual Capital Approach," Portuguese Journal of Management Studies, ISEG, Universidade de Lisboa, vol. 0(3), pages 385-402.
    9. Ilya Segal & Michael D. Whinston, 2007. "Antitrust in Innovative Industries," American Economic Review, American Economic Association, vol. 97(5), pages 1703-1730, December.
    10. Cevikarslan, Salih, 2013. "Heterogeneity in innovation strategies, evolving consumer preferences and market structure: An evolutionary multi-agent based modelling approach," MERIT Working Papers 019, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    11. repec:eee:labchp:v:3:y:1999:i:pb:p:2711-2805 is not listed on IDEAS
    12. Dai, Darong & Shen, Kunrong, 2011. "A New Exploration of Optimal IPR Protection and International Policy Cooperation," MPRA Paper 40039, University Library of Munich, Germany.
    13. Stadler, Manfred, 2013. "Scientific breakthroughs, innovation clusters and stochastic growth cycles," University of Tuebingen Working Papers in Economics and Finance 60, University of Tuebingen, Faculty of Economics and Social Sciences.
    14. Liu, Huju & Tang, Jianmin, 2017. "Age-productivity profiles of entrants and exits: evidence from Canadian manufacturing," Structural Change and Economic Dynamics, Elsevier, vol. 40(C), pages 26-36.
    15. Leonard I. Nakamura, 2001. "What is the U.S. gross investment in intangibles? (At least) one trillion dollars a year!," Working Papers 01-15, Federal Reserve Bank of Philadelphia.
    16. Piercarlo Zanchettin & Vincenzo Denicolò, 2009. "Leadership Cycles," Discussion Papers in Economics 09/25, Department of Economics, University of Leicester.
    17. Emmanuel Duguet & Stéphanie Monjon, 2004. "Is innovation persistent at the firm Level . An econometric examination comparing the propensity score and regression methods," Cahiers de la Maison des Sciences Economiques v04075, Université Panthéon-Sorbonne (Paris 1).
    18. Mariagrazia Squicciarini, 2008. "Science Parks’ tenants versus out-of-Park firms: who innovates more? A duration model," The Journal of Technology Transfer, Springer, vol. 33(1), pages 45-71, February.
    19. Iyigun, Murat, 2006. "Clusters of invention, life cycle of technologies and endogenous growth," Journal of Economic Dynamics and Control, Elsevier, vol. 30(4), pages 687-719, April.
    20. Maliranta, Mika, 2002. "From R&D to Productivity Through Micro-Level Restructuring," Discussion Papers 795, The Research Institute of the Finnish Economy.
    21. Wälde, Klaus, 1999. "A Poisson-Ramsey growth model: Creative destruction, endogenous cycles and growth," Technical Reports 1999,32, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.

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