The Simple Microeconomics of Induced Innovation
A general model analyzes the innovator's decision to perform research and development directed towards process innovation. The innovator chooses expenditures in several research activities. The vector of research expenditures determines the input-output coefficients that describe the innovative technology. The innovator maximizes rents, which with non-drastic innovation equals total savings of variable costs, less research expenditures. If expenditures in different activities exhibit diminishing returns in the savings of all factors, then the optimization problem has a unique solution. Comparative static results are found for changes in factor prices and demand conditions. The paper generalizes Binswanger (1974) and Binswanger (1978) to derive results with $J$ factors of production and $M$ interdependent research activities.
|Date of creation:||28 Dec 1993|
|Note:||Keywords technology, induced innovation, theory, research and development.|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
References listed on IDEAS
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- Binswanger, Hans P, 1974.
"A Microeconomic Approach to Induced Innovation,"
Royal Economic Society, vol. 84(336), pages 940-958, December.
- Kennedy, Charles, 1973. "A Generalisation of the Theory of Induced Bias in Technical Progress," Economic Journal, Royal Economic Society, vol. 83(329), pages 48-57, March.
- Gene M. Grossman & Elhanan Helpman, 1988.
"Product Development and International Trade,"
NBER Working Papers
2540, National Bureau of Economic Research, Inc.
- Helpman, Elhanan & Grossman, Gene M., 1989. "Product Development and International Trade," Scholarly Articles 3445094, Harvard University Department of Economics.
- Grossman, G.M. & Helpman, E., 1988. "Product Development And International Trade," Papers 132, Princeton, Woodrow Wilson School - Public and International Affairs.
- Krugman, Paul, 1979. "A Model of Innovation, Technology Transfer, and the World Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 253-266, April.
- Michael L. Katz & Carl Shapiro, 1986. "How to License Intangible Property," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 567-589.
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