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Growth through Heterogeneous Innovations

  • Ufuk Akcigit

    ()

    (Department of Economics, University of Pennsylvania)

  • William R. Kerr

    ()

    (Department of Economics, Harvard University)

We study how exploration versus exploitation innovations impact economic growth through a tractable endogenous growth framework that contains multiple innovation sizes, multi-product firms, and entry/exit. Firms invest in exploration R&D to acquire new product lines and exploitation R&D to improve their existing product lines. We model and show empirically that exploration R&D does not scale as strongly with firm size as exploitation R&D. The resulting framework conforms to many regularities regarding innovation and growth differences across the firm size distribution. We also incorporate patent citations into our theoretical framework. The framework generates a simple test using patent citations that indicates that entrants and small firms have relatively higher growth spillover effects.

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File URL: http://economics.sas.upenn.edu/system/files/working-papers/10-035.pdf
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Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 10-035.

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Length: 80 pages
Date of creation: 27 Oct 2010
Handle: RePEc:pen:papers:10-035
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