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Simultaneous Innovation and the Cyclicality of R&D

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  • Miroslav Gabrovski

    (University of Hawaii at Manoa Ministry of Strategy and Finance, Republic of Korea)

Abstract

There is ample evidence that R&D investment is mildly pro-cyclical. Whereas the existing literature can explain the positive correlation between investment in R&D and output, the moderate strength of the relationship remains under-explored. This paper develops a stochastic expanding-variety endogenous growth model that accounts for the observed mild pro-cyclicality of R&D. In the model, several firms may simultaneously make the same innovation. Research projects innovated by many firms simultaneously are of higher quality, on average, and contribute relatively more to the expansion of the knowledge stock in the economy. This delivers an endogenous mechanism that breaks the otherwise perfect correlation between R&D and output. A calibration of our model closely matches the cyclical properties of R&D.

Suggested Citation

  • Miroslav Gabrovski, 2018. "Simultaneous Innovation and the Cyclicality of R&D," Working Papers 201813, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:201813
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    References listed on IDEAS

    as
    1. Gabrovski, Miroslav, 2023. "Coordination frictions and economic growth," Macroeconomic Dynamics, Cambridge University Press, vol. 27(6), pages 1528-1548, September.
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    Cited by:

    1. Ahmad, Manzoor, 2021. "Non-linear dynamics of innovation activities over the business cycles: Empirical evidence from OECD economies," Technology in Society, Elsevier, vol. 67(C).
    2. Manzoor Ahmad & Zahoor Ul Haq & Shehzad Khan, 2024. "Business Cycles and the Dynamics of Innovation: a Theoretical Perspective," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 1418-1436, March.
    3. Manzoor Ahmad & Jianghuai Zheng, 2023. "The Cyclical and Nonlinear Impact of R&D and Innovation Activities on Economic Growth in OECD Economies: a New Perspective," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(1), pages 544-593, March.

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    Keywords

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    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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