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Industry Size and the Distribution of R&D InvestmentJohn AskerNew York University - Leonard N. School of Business - Department of Economics Mariagiovanna BaccaraWashington University in Saint Louis February 2008 NYU Working Paper No. 2451/26013 Abstract: We analyze the link between industry size and R&D spending distribution. We consider amonopolistically competitive market in which firms can invest in cost-cutting R&D by paying a fixed cost first. For an intermediate level of fixed cost, there is a unique equilibrium in which the market segments into investing and non-investing firms. Using this equilibrium, we study howthe distribution and level of R&D expenditure changes as industry size increases. In particular, we show that, as the market size increases, R&D spending can become more concentrated. Data motivating these results are drawn from the Taiwanese and Korean semiconductor industries.
Number of Pages in PDF File: 21 Keywords: Entry, Research and Development, Product Differentiation working papers seriesDate posted: October 13, 2008Suggested CitationContact Information
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