Growth Through Heterogeneous Innovations
University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)
William R. Kerr
Harvard University - Entrepreneurial Management Unit
NBER Working Paper No. w16443
We study how exploration versus exploitation innovations impact economic growth through a tractable endogenous growth framework that contains multiple innovation sizes, multi-product firms, and entry/exit. Firms invest in exploration R&D to acquire new product lines and exploitation R&D to improve their existing product lines. We model and show empirically that exploration R&D does not scale as strongly with firm size as exploitation R&D. The resulting framework conforms to many regularities regarding innovation and growth differences across the firm size distribution. We also incorporate patent citations into our theoretical framework. The framework generates a simple test using patent citations that indicates that entrants and small firms have relatively higher growth spillover effects.
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Date posted: November 8, 2010
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