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Innovating Firms and Aggregate Innovation

Author

Listed:
  • Klette, Tor Jakob

    (Dept. of Economics, University of Oslo)

  • Kortum, Samuel

    (Dept. of Economics, University of Oslo)

Abstract

De develop a parsimonious model of innovating firms rich enough to confront firm-level evidence. It captures the dynamic behavior of individual heterogeneous firms, describes the evolution of an industry with simultaneous entry and exit, and delivers a general equilibrium model of technological change. While unifying the theoretical analysis of firms, industries, and the aggregate economy, the models yields insight into empirical work on innovating firms. It accounts for the persistence over time of firms’ R & D investments, the concentration of R & D among incumbents firms, and the link between R & D and patenting . Furthermore, it explains why R & D as a fraction of revenues is strongly related to firm productivity yet largely unrelated to firm size or growth.

Suggested Citation

  • Klette, Tor Jakob & Kortum, Samuel, 2002. "Innovating Firms and Aggregate Innovation," Memorandum 02/2002, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2002_002
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    File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2002/Memo-02-2002.pdf
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    Keywords

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    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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