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Impact of Technology Assimilation on Investment Policy: Dynamic Optimization and Econometric Identification

Author

Listed:
  • B. K. Ane

    (Tokyo Institute of Technology)

  • A. M. Tarasyev

    (Institute of Mathematics and Mechanics
    International Institute for Applied Systems Analysis)

  • C. Watanabe

    (Tokyo Institute of Technology)

Abstract

The paper introduces a dynamic model of optimization of R&D intensity under the effect of technology assimilation. The model involves R&D investments, technology stock, production, and technology productivity as main variables. The model characterizes the “growth” and “decline” trends that describe the interaction between R&D investments and transformation process of production factors. The technology stock is constructed as a function of indigenous and exogenous technology stocks and their growth rates. The research focuses on the issue of a reasonable balance between the indigenous technology stock and assimilated technology flow. Econometric linearization of the technology assimilation effect is used to construct a reasonable optimal control model. The existence of the value function for the problem of the optimal economic growth on the infinite horizon is proved and the basic features of the value function are outlined. The property of strong invariance for the main proportions of the model such as technology productivity and R&D intensity is proved. The model is calibrated on the aggregate data of the Japanese automotive industry.

Suggested Citation

  • B. K. Ane & A. M. Tarasyev & C. Watanabe, 2007. "Impact of Technology Assimilation on Investment Policy: Dynamic Optimization and Econometric Identification," Journal of Optimization Theory and Applications, Springer, vol. 134(2), pages 321-338, August.
    • Handle: RePEc:spr:joptap:v:134:y:2007:i:2:d:10.1007_s10957-007-9258-1
    DOI: 10.1007/s10957-007-9258-1
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    References listed on IDEAS

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    1. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-938, July.
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