IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Impact of Cost Reducing R\&D Spillovers on the Ergodic Distribution of Market Structures

  • Christopher A. Laincz

    (Drexel University)

  • Ana Rodrigues

    (University of York)

We study a dynamic duopoly model of R\&D to analyze the impact of imperfect appropriability on market structure and welfare. We pursue this analysis by extending the Markov-Perfect dynamic industry model proposed by Ericson and Pakes (EP) (1995), through the introduction of a non-proprietary productivity component to R\&D as part of a dynamic, stochastic process. We find that when spillovers are costless, or that when firms can absorb spillovers by investing in imitative R\&D, the impact of the extent of spillovers on concentration levels is negligible. However, when.spillovers require absorptive capacity investment in own R\&D, concentration levels decline with increases in the extent of spillovers and welfare improves. The difference lies in the degree of substitutability between own and external R\&D sources. When own and external R\&D are perfect or nearly perfect substitutes, the rates of innovation and hence the market structures are unaffected. When spillovers can only be obtained through absorptive R\&D, the degree of substitutability falls, leading to higher rates of innovation, particularly by smaller firms,and a less concentrated market structure.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 307.

as
in new window

Length:
Date of creation: 04 Jul 2006
Date of revision:
Handle: RePEc:sce:scecfa:307
Contact details of provider: Web page: http://comp-econ.org/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Tor Jakob Klette & Samuel Kortum, 2004. "Innovating Firms and Aggregate Innovation," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 986-1018, October.
  2. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-37, December.
  3. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
  4. Richard C. Levin & Peter C. Reiss, 1988. "Cost-Reducing and Demand-Creating R&D with Spillovers," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 538-556, Winter.
  5. Loury, Glenn C, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 395-410, August.
  6. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  7. Grunfeld, Leo A., 2003. "Meet me halfway but don't rush: absorptive capacity and strategic R&D investment revisited," International Journal of Industrial Organization, Elsevier, vol. 21(8), pages 1091-1109, October.
  8. Simpson, R David & Vonortas, Nicholas S, 1994. "Cournot Equilibrium with Imperfectly Appropriable R&D," Journal of Industrial Economics, Wiley Blackwell, vol. 42(1), pages 79-92, March.
  9. Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and Innovation: An Inverted U Relationship," NBER Working Papers 9269, National Bureau of Economic Research, Inc.
  10. Ericson, Richard & Pakes, Ariel, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 53-82, January.
  11. Minjae Song, 2006. "A Dynamic Analysis of Cooperative Research in the Semiconductor Industry," 2006 Meeting Papers 468, Society for Economic Dynamics.
  12. Dasgupta, Partha & Stiglitz, Joseph, 1980. "Industrial Structure and the Nature of Innovative Activity," Economic Journal, Royal Economic Society, vol. 90(358), pages 266-93, June.
  13. Kamien, Morton I. & Zang, Israel, 2000. "Meet me halfway: research joint ventures and absorptive capacity," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 995-1012, October.
  14. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  15. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-96, September.
  16. Ulrich Doraszelski & Mark Satterthwaite, 2010. "Computable Markov-perfect industry dynamics," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 215-243.
  17. Henriques, Irene, 1990. "Cooperative and Noncooperative R&D in Duopoly with Spillovers: Comment," American Economic Review, American Economic Association, vol. 80(3), pages 638-40, June.
  18. Kamien, Morton I & Schwartz, Nancy L, 1972. "Timing of Innovations Under Rivalry," Econometrica, Econometric Society, vol. 40(1), pages 43-60, January.
  19. Laincz, Christopher A., 2005. "Market structure and endogenous productivity growth: how do R&D subsidies affect market structure?," Journal of Economic Dynamics and Control, Elsevier, vol. 29(1-2), pages 187-223, January.
  20. Suzumura, Kotaro, 1992. "Cooperative and Noncooperative R&D in an Oligopoly with Spillovers," American Economic Review, American Economic Association, vol. 82(5), pages 1307-20, December.
  21. Jim Jin & Juan Perote-Peña & Michael Troege, 2004. "Learning by doing, spillovers and shakeouts," Journal of Evolutionary Economics, Springer, vol. 14(1), pages 85-98, January.
  22. Ziss, Steffen, 1994. "Strategic R&D with Spillovers, Collusion and Welfare," Journal of Industrial Economics, Wiley Blackwell, vol. 42(4), pages 375-93, December.
  23. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  24. Rosenberg, Nathan, 1974. "Science, Invention and Economic Growth," Economic Journal, Royal Economic Society, vol. 84(333), pages 90-108, March.
  25. Ghemawat, Pankaj & Spence, A Michael, 1985. "Learning Curve Spillovers and Market Performance," The Quarterly Journal of Economics, MIT Press, vol. 100(5), pages 839-52, Supp..
  26. Flaherty, M Therese, 1980. "Industry Structure and Cost-Reducing Investment," Econometrica, Econometric Society, vol. 48(5), pages 1187-1209, July.
  27. Budd, Christopher & Harris, Christopher & Vickers, John, 1993. "A Model of the Evolution of Duopoly: Does the Asymmetry between Firms Tend to Increase or Decrease?," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 543-73, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:sce:scecfa:307. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.