The Arrow Effect under Competitive R&D
Journal
The B.E. Journal of Macroeconomics
ISSN
1555-0486
ISSN-Digital
1935-1690
Type
journal article
Date Issued
2007-01-16
Author(s)
Abstract
This paper shows that standard Schumpeterian theory does not imply that the incumbent monopolist has too little incentive to carry out R&D aimed at displacing its own product. If the patent holder is rational as is any other R&D investor, she will know that in equilibrium her patent’s obsolescence shall not be affected by her own R&D investment, because all the R&D firms operate under perfect competition and constant returns to scale at the private level. This reconciles Schumpeterian theory with the empirical evidence on innovation by incumbents. It is proved that the usual macroeconomic implications maintain their validity.
Language
English
Keywords
Arrow effect
basic Schumpeterian model
R&D and growth
innovation by incumbents
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Refereed
Yes
Publisher
De Gruyter
Publisher place
Berlin
Volume
7
Number
1
Start page
2
End page
2
Pages
1
Subject(s)
Eprints ID
222065