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From Mind to Market: A Global, Dynamic Analysis of R&D

  • Hinloopen, J.

    ()

    (University of Amsterdam)

  • Smrkolj, G.

    ()

    (University of Amsterdam)

  • Wagener, F.O.O.

    ()

    (University of Amsterdam)

Existing models of R&D are not easily reconciled with four observable aspects of R&D: initial technologies (“ideas”) need to be developed further, only a minority of initial ideas is successfully brought to the market, production and process innovations take place simultaneously (whereby, initially, there is no production at all), and process innovations are implemented for technologies that are destined to leave the market. We present a detailed bifurcation analysis for a dynamic model of R&D that captures these observations in one, unifying framework. As we provide a global analysis, we do not limit initial technologies to carry marginal costs that are below the choke price. We show that there always exists a critical value of initial marginal cost above which the firm does not initiate any (R&D) activity; the saddle-point steady state is never globally optimal. We also sketch some policy implications of our analysis.

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Paper provided by Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance in its series CeNDEF Working Papers with number 11-11.

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Date of creation: 2011
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Handle: RePEc:ams:ndfwpp:11-11
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  1. Wagener, F. O. O., 2003. "Skiba points and heteroclinic bifurcations, with applications to the shallow lake system," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages 1533-1561, July.
  2. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-37, December.
  3. Kiseleva, Tatiana & Wagener, F.O.O., 2010. "Bifurcations of optimal vector fields in the shallow lake model," Journal of Economic Dynamics and Control, Elsevier, vol. 34(5), pages 825-843, May.
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  8. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-306, December.
  9. Eugen Kovac & Viatcheslav Vinogradov & Krešimir Žigiæ, 2009. "Technological Leadership and Persistence of Monopoly under Endogenous Entry: Static versus Dynamic Analysis," CERGE-EI Working Papers wp401, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
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  15. Kiseleva, T. & Wagener, F.O.O., 2011. "Bifurcations of Optimal Vector Fields," CeNDEF Working Papers 11-05, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
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  17. Qiu, Larry D., 1997. "On the Dynamic Efficiency of Bertrand and Cournot Equilibria," Journal of Economic Theory, Elsevier, vol. 75(1), pages 213-229, July.
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  19. Vernon, John M & Gusen, Peter, 1974. "Technical Change and Firm Size: The Pharmaceutical Industry," The Review of Economics and Statistics, MIT Press, vol. 56(3), pages 294-302, August.
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  21. David Besanko & Ulrich Doraszelski & Yaroslav Kryukov & Mark Satterthwaite, 2010. "Learning-by-Doing, Organizational Forgetting, and Industry Dynamics," Econometrica, Econometric Society, vol. 78(2), pages 453-508, 03.
  22. C. Lanier Benkard, 2000. "A Dynamic Analysis of the Market for Wide-Bodied Commercial Aircraft," NBER Working Papers 7710, National Bureau of Economic Research, Inc.
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  25. James Adams & Zvi Griliches, 1996. "Measuring Science: An Exploration," Harvard Institute of Economic Research Working Papers 1749, Harvard - Institute of Economic Research.
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