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Disruptive Innovation by Heterogeneous Incumbents and Economic Growth: When do incumbents switch to new technology?

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  • Ohki, Kazuyoshi

Abstract

In this paper, we construct a tractable endogenous growth model to examine heterogeneous incumbents' current technology-switching behavior. Then, we examine the effects of policies such as a subsidy for innovation by incumbents, a subsidy for innovation by entrants, and the extension of patent length. Our setting suggests interesting and counterintuitive results. High quality incumbents tend to be less likely to conduct innovation, which is inconsistent with Schumpeter's hypothesis. A subsidy for innovation by entrants decreases the average quality of differentiated goods. Moreover, it may decrease the growth rate of the economy if the positive spillover of innovation from average quality production is adequately large. Aggregate innovation can be small even when the population size is large if the barriers to entry are extremely high.

Suggested Citation

  • Ohki, Kazuyoshi, 2019. "Disruptive Innovation by Heterogeneous Incumbents and Economic Growth: When do incumbents switch to new technology?," MPRA Paper 96771, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:96771
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    Cited by:

    1. Chu, Angus C. & Liao, Chih-Hsing, 2025. "Optimal patent policy and wealth inequality in a Schumpeterian economy," Journal of Macroeconomics, Elsevier, vol. 83(C).

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    More about this item

    Keywords

    Economic Growth; R&D; Firm-Heterogeneity; Innovation by Incumbents; IPR Policy;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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