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The Invariance of R&D to the Number of Firms in the Industry

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  • Raaj Kumar Sah
  • Joseph E. Stiglitz

Abstract

Thi spaper presents certain remarkably simple results concerning market's allocation to R&D and its comparison to socially efficient allocations. We posit that a firm can undertake more than one project aimed at the same innovation, and consider a product market characterized by Bertrand competition. Among the results we obtain is that the market R&D (that is, the number of projects undertaken, and the effort spent on different projects) is invariant to the number of firms. We also examine the effects of the number of firms on the gains from innovation to consumers, firms, and society, and show, in particular, that the market undertakes less R&D than is socially desirable.

Suggested Citation

  • Raaj Kumar Sah & Joseph E. Stiglitz, 1986. "The Invariance of R&D to the Number of Firms in the Industry," NBER Working Papers 1798, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1798
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    References listed on IDEAS

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    1. Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(3), pages 395-410.
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    Cited by:

    1. Stefano Comino & Fabio M. Manenti, 2022. "Patent portfolios and firms’ technological choices," Journal of Economics, Springer, vol. 137(2), pages 97-120, October.
    2. Yevgeniy Popov & Maksim Vlasov & Anna Shishkina & Anastasia Yakimova, 2016. "Institutional Analysis of Knowledge Generation Resource Potential at the Enterprises of Regional Military-Industrial Complex," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(3), pages 839-851.
    3. Konstantin Fursov & Thomas Thurner, 2016. "God Helps Those Who Help Themselves! A Study of User-Innovation in Russia," HSE Working papers WP BRP 59/STI/2016, National Research University Higher School of Economics.
    4. Svetlana Panikarova & Maxim Vlasov, 2016. "Knowledge Generation Strategies: Empirical Analysis of Industrial Enterprises," Journal of Information & Knowledge Management (JIKM), World Scientific Publishing Co. Pte. Ltd., vol. 15(02), pages 1-11, June.
    5. Etro, Federico, 2019. "Mergers of complements and entry in innovative industries," International Journal of Industrial Organization, Elsevier, vol. 65(C), pages 302-326.
    6. Igor Letina, 2016. "The road not taken: competition and the R&D portfolio," RAND Journal of Economics, RAND Corporation, vol. 47(2), pages 433-460, May.
    7. Levin, Mark (Левин, Марк) & Matrosova, Kseniya (Матросова, Ксения), 2017. "Development and Analysis of Economic Models of Innovation Incentives [Разработка И Исследование Экономических Моделей Стимулирования Инновационных Процессов]," Working Papers 061713, Russian Presidential Academy of National Economy and Public Administration.
    8. Wittwer, Milena, 2017. "Centralizing Disconnected Markets? An Irrelevance Result," MPRA Paper 76534, University Library of Munich, Germany.
    9. Tara Viswanath, 1991. "Parallel Search: An Application to R & D," Discussion Papers 957, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    10. Bhattacharya, Sudipto & Glazer, Jacob & Sappington, David E. M., 1992. "Licensing and the sharing of knowledge in research joint ventures," Journal of Economic Theory, Elsevier, vol. 56(1), pages 43-69, February.
    11. Fölster, Stefan, 1992. "A Note: On Innovation and Capital Markets," Working Paper Series 340, Research Institute of Industrial Economics.
    12. Kevin J. Boudreau, 2012. "Let a Thousand Flowers Bloom? An Early Look at Large Numbers of Software App Developers and Patterns of Innovation," Organization Science, INFORMS, vol. 23(5), pages 1409-1427, October.
    13. Miguel Gonzalez-Maestre & Diego Penarrubia, 2005. "Cooperation versus competition in product innovation," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 14(4), pages 305-318.
    14. GianCarlo Moschini & Oleg Yerokhin, 2008. "Patents, Research Exemption, and the Incentive for Sequential Innovation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(2), pages 379-412, June.
    15. Yang, Gaoju & Wang, Fang & Huang, Xianhai & Chen, Hangyu, 2022. "Human capital inflow, firm innovation and patent mix," Journal of Asian Economics, Elsevier, vol. 79(C).
    16. repec:ebl:ecbull:v:12:y:2002:i:6:p:1-9 is not listed on IDEAS
    17. Richard J. Gilbert, 2019. "Competition, Mergers, and R&D Diversity," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(3), pages 465-484, May.
    18. Richard Gilbert, 2006. "Looking for Mr. Schumpeter: Where Are We in the Competition-Innovation Debate?," NBER Chapters, in: Innovation Policy and the Economy, Volume 6, pages 159-215, National Bureau of Economic Research, Inc.
    19. Gambardella, Alfonso, 2013. "The economic value of patented inventions: Thoughts and some open questions," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 626-633.
    20. Tse, Chung Yi, 2001. "Risky quality choice," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 185-212, January.
    21. Popov, E. V. & Vlasov, M. V. & Shishkina, A. Yu. & Yakimova, A. V., 2016. "Institutional Analysis of Resource Potential for Knowledge Generation in the Enterprises of the Regional Defense-Industrial Sector," R-Economy, Ural Federal University, Graduate School of Economics and Management, vol. 2(3), pages 314-323.

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