Industry evolution and R&D externalities |
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Authors: | Stefan Fö lster ,Georgi Trofimov |
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Affiliation: | aThe Industrial Institute for Economic and Social Research, Box 5501 114 85 Stockholm, Sweden;bThe Institute for financial Studies, 117859, Profsoyuznaya street 23, Moscow, Russia |
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Abstract: | R&D externalities can imply ranges of aggregate increasing returns to scale in R&D. As a consequence several equilibria can exist involving different numbers of firms and different R&D investment levels. In a theoretical model the equilibrium dynamics are analyzed, showing that cyclical fluctuations of the number of firms and R&D investment may be expected, and that the long-run equilibrium is highly sensitive to investors' initial beliefs. The model is tested empirically using a unique database comprising competing firms in various R&D races. |
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Keywords: | R& D externalities Industry evolution Multiple equilibria |
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