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.
Journal of Economic Dynamics and Control
Industry Evolution and R&D Externalities
Journal Article
Reference
Fölster, Stefan and Georgi Trofimov (1997). “Industry Evolution and R&D Externalities”. Journal of Economic Dynamics and Control 21(10), 1727–1746. doi.org/10.1016/S0165-1889(97)00045-6
Fölster, Stefan and Georgi Trofimov (1997). “Industry Evolution and R&D Externalities”. Journal of Economic Dynamics and Control 21(10), 1727–1746. doi.org/10.1016/S0165-1889(97)00045-6
Authors
Stefan Fölster, Georgi Trofimov