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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
Contact details of provider: Postal: Dept. of Economics and Econometrics, Universiteit van Amsterdam, Roetersstraat 11, NL - 1018 WB Amsterdam, The Netherlands
Phone: + 31 20 525 52 58
Fax: + 31 20 525 52 83
Web page: http://www.fee.uva.nl/cendef/
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