Leapfrogging Cycles in International Competition

Furukawa, Yuichi (2012): Leapfrogging Cycles in International Competition.

Abstract

Technological leadership has shifted at various times from one country to another. We propose a mechanism that explains this perpetual cycle of technological leapfrogging in a two-country model including the dynamic optimization of an infinitely-lived consumer. In the model, each country accumulates knowledge stock over time because of domestic innovation and spillovers from foreign innovation. We show that if the international knowledge spillovers are reasonably efficient, technological leadership may shift first from one country to another, and then alternate between countries along an equilibrium path.

• Item Type: MPRA Paper
• Language: English
• Keywords: Perpetual leapfrogging; innovation and growth cycles; endogenous innovation; knowledge spillovers
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F44 - International Business Cycles; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes

References

Aghion, Philippe, Christopher Harris, Peter Howitt, and John Vickers. "Competition, imitation and growth with step-by-step innovation," Review of Economic Studies, 68: 467-92 (2001).

Athreye, Suma and Andrew Godley. "Internationalization and technological leapfrogging in the pharmaceutical industry," Industrial and Corporate Change, 18: 295-323 (2009).

Branstetter, Lee. "Is foreign direct investment a channel of knowledge spillovers: evidence from Japan's FDI in the United States," Journal of International Economics, 68: 325-44 (2006).

Brezis, Elise S. "Foreign capital flows in the century of Britain's industrial revolution: new estimates, controlled conjectures," Economic History Review, 48: 46-67 (1995).

Brezis, Elise S. and Daniel Tsiddon. "Economic growth, leadership and capital flows: the leapfrogging effect," Journal of International Trade and Economic Development, 7: 261-77 (1998).

Brezis, Elise S., Paul R. Krugman, and Daniel Tsiddon. "Leapfrogging in international competition: a theory of cycles in national technological leadership," American Economic Review, 83: 1211-19 (1993).

Broda, Christian and David E. Weinstein. "Globalization and the gains from variety," Quarterly Journal of Economics, 121: 541-85 (2006).

Carolan, Terrie, Nirvikar Singh, and Cyrus Talati. "The composition of U.S.-East Asia trade and changing comparative advantage," Journal of Development Economics 57, 361-89 (1998).

Chu, Angus C. "The welfare cost of one-size-fits-all patent protection," Journal of Economic Dynamics and Control, 35: 876-890 (2011).

Cohen, Wesley M., and Daniel A. Levinthal. "Innovation and learning: The two faces of R&D," Economic Journal, 99: 569-596 (1989).

Davids, Karel. The Rise and Decline of Dutch Technological Leadership, Leiden, Netherlands: Brill (2008).

Deneckere, Raymond and Kenneth Judd. "Cyclical and chaotic behavior in a dynamic equilibrium model," in Cycles and Chaos in Economic Equilibrium, ed. by Jess Benhabib. Princeton: Princeton University Press (1992).

Desmet, Klaus. "A simple dynamic model of uneven development and overtaking," Economic Journal, 112: 894-918 (2002).

Feenstra, Robert C. "Trade and uneven growth," Journal of Development Economics, 49: 229-56 (1996).

Francois, Patrick, and Huw Lloyd-Ellis. "Animal spirits through creative destruction," American Economic Review, 93: 530-550 (2003).

Francois, Patrick, and Huw Lloyd-Ellis. "Implementation cycles, investment and growth," International Economic Review, 49: 901-942 (2008).

Francois, Patrick, and Huw Lloyd-Ellis. "Schumpeterian business cycles with pro-cyclical R&D," Review of Economic Dynamics, 12: 567-591 (2009).

Francois, Patrick, and Huw Lloyd-Ellis. "Implementation cycles, growth and the labour market," mimeo, http://faculty.arts.ubc.ca/fpatrick/documents/bejm14-2-13.pdf (2013).

Francois, Patrick, and Shouyong Shi. "Innovation, growth, and welfare-improving cycles," Journal of Economic Theory, 85: 226-57 (1999).

Furukawa, Yuichi. "Growth miracles and leapfrogging cycles in a many-country model," mimeo, Chukyo University (2012).

Gale, Douglas. "Delay and cycles," Review of Economic Studies, 63: 169-98 (1996).

Gilbert, Richard, and Carl Shapiro. "Optimal patent length and breadth," RAND Journal of Economics, 21: 106-112 (1990).

Giovannetti, Emanuele. "Perpetual leapfrogging in Bertrand duopoly," International Economic Review, 42: 671-96 (2001).

Giovannetti, Emanuele. "Catching up, leapfrogging, or forging ahead? Exploring the effects of integration and history on spatial technological adoptions," Environment and Planning A, 45: 930-946 (2013).

Glass, Amy. "Imitation as a stepping stone to innovation," Working Papers 99-11, Ohio State University, Department of Economics (1999).

Goh, Ai-Ting, and Jacques Olivier. "Optimal patent protection in a two-sector economy," International Economic Review, 43: 1191-1214 (2002).

Grossman, Gene M., and Elhanan Helpman. Innovation and Growth in the Global Economy, Cambridge, MA: MIT Press (1991).

Hall, Robert E. "Market structure and macroeconomic fluctuations," Brookings Papers on Economic Activity, 2: 285-322 (1986).

Hall, Robert E. "Potential competition, limit pricing, and price elevation from exclusionary conduct," Issue in Competition Law and Policy 433, ABA Section of Antitrust Law: 433-448 (2008).

Harrington, Joseph, Jr. Fyodor Iskhakov, John Rust, and Bertel Schjerning. "A dynamic model of leap frogging investments and Bertrand price competition," mimeo (2010). Available at: http://econweb.umd.edu/~davis/eventpapers/RustDynamicModel.pdf (accessed on 10 March, 2014).

Helpman, Elhanan. "Innovation, imitation, and intellectual property rights." Econometrica, 61: 1247-80 (1993).

Iwaisako, Tatsuro, and Koichi Futagami. "Patent protection, capital accumulation, and economic growth," Economic Theory, 52: 631-668 (2013).

Iwaisako, Tatsuro, and Hitoshi Tanaka. "Product cycles and growth cycles," mimeo, Osaka University (2012).

Krugman, P. "A model of innovation, technology transfer, and the world distribution of Income." Journal of Political Economy, 87: 253-66 (1979).

Lai, Edwin L.-C. "International intellectual property rights protection and the rate of product innovation," Journal of Development Economics, 55: 133-53 (1998).

Lee, Jeongsik, Byung-Cheol Kim, and Young-Mo Lim. "Dynamic competition in technological investments: an empirical examination of the LCD panel industry," International Journal of Industrial Organization, 29: 718-28 (2011).

Li, Chol-Won. "On the policy implications of endogenous technological progress," Economic Journal, 111: C164-79 (2001).

Matsuyama, Kiminori. "Growing through cycles," Econometrica, 67: 335-47 (1999).

Matsuyama, Kiminori. "Growing through cycles in an infinitely lived agent economy," Journal of Economic Theory, 100: 220-34 (2001).

Matsuyama, Kiminori. "Credit traps and credit cycles," American Economic Review, 97: 503-16 (2007).

Mokyr, Joel. The Lever of Riches. Technological Creativity and Economic Progress, Oxford: Oxford University Press (1990).

Motta, Massimo, Jacques-Francois Thisse, and Antonio Cabrales. "On the persistence of leadership or leapfrogging in international trade," International Economic Review, 38: 809-24 (1997).

Nelson, Richard R. and Gavin Wright. "The rise and fall of American technological leadership: the postwar era in historical perspective," Journal of Economic Literature, 30: 1931-64 (1992).

Nishimura, Kazuo and Makoto Yano. "Introduction to the special issue on nonlinear macroeconomic dynamics," International Journal of Economic Theory, 4: 1-2 (2008).

Ohyama, Michihiro and Ronald W. Jones. "Technology choice, overtaking and comparative advantage," Review of International Economics, 3: 224-34 (1995).

Petrakos George, Andrés Rodríguez-Pose, and Antonis Rovolis. "Growth, integration, and regional disparities in the European Union," Environment and Planning A, 37: 1837-1855 (2005).

Quah, Danny. Regional convergence clusters across Europe, European Economic Review, 40: 951-958 (1996a).

Quah, Danny. Empirics for economic growth and convergence, European Economic Review, 40: 1353-1375 (1996b).

Rogers, Mark. "Absorptive capability and economic growth: How do countries catch-up?," Cambridge Journal of Economics, 28: 577-596 (2004).

Romer, Paul. M. "Endogenous technological change," Journal of Political Economy 98: S71-S102 (1990).

Shleifer, Andrei. "Implementation cycles," Journal of Political Economy 94, 1163-1190 (1986).

van de Klundert, Theo and Sjak Smulders. "Loss of technological leadership of rentier economies: a two-country endogenous growth model," Journal of International Economics, 54: 211-31 (2001).