Munich Personal RePEc Archive

Disruptive Innovation by Heterogeneous Incumbents and Economic Growth: When do incumbents switch to new technology?

Ohki, Kazuyoshi (2019): Disruptive Innovation by Heterogeneous Incumbents and Economic Growth: When do incumbents switch to new technology?

[img]
Preview
PDF
MPRA_paper_96771.pdf

Download (3MB) | Preview

Abstract

In this paper, we construct a tractable endogenous growth model to examine heterogeneous incumbents' current technology-switching behavior. Then, we examine the effects of policies such as a subsidy for innovation by incumbents, a subsidy for innovation by entrants, and the extension of patent length. Our setting suggests interesting and counterintuitive results. High quality incumbents tend to be less likely to conduct innovation, which is inconsistent with Schumpeter's hypothesis. A subsidy for innovation by entrants decreases the average quality of differentiated goods. Moreover, it may decrease the growth rate of the economy if the positive spillover of innovation from average quality production is adequately large. Aggregate innovation can be small even when the population size is large if the barriers to entry are extremely high.

Logo of the University Library LMU Munich
MPRA is a RePEc service hosted by
the University Library LMU Munich in Germany.