From Mind to Market: A Global, Dynamic Analysis of R&D

Tinbergen Institute Discussion Paper No. 11-139/1

57 Pages Posted: 4 Oct 2011 Last revised: 15 Mar 2014

See all articles by Jeroen Hinloopen

Jeroen Hinloopen

CPB Netherlands Bureau of Economic Policy Analysis; University of Amsterdam - Amsterdam School of Economics (ASE); Tinbergen Institute

Grega Smrkolj

Newcastle University Business School

Florian Wagener

University of Amsterdam - Center for Nonlinear Dynamics in Economics and Finance (CeNDEF) - Department of Quantitative Economics; Tinbergen Institute

Date Written: February 28, 2013

Abstract

Existing models of R&D are not easily reconciled with four observable aspects of R&D: initial technologies (“ideas”) need to be developed further, only a minority of initial ideas is successfully brought to the market, production and process innovations take place simultaneously (whereby, initially, there is no production at all), and process innovations are implemented for technologies that are destined to leave the market. We present a detailed bifurcation analysis for a dynamic model of R&D that captures these observations in one, unifying framework. As we provide a global analysis, we do not limit initial technologies to carry marginal costs that are below the choke price. We show that there always exists a critical value of initial marginal cost above which the firm does not initiate any (R&D) activity; the path to the saddle-point steady state is never globally optimal. We also sketch some tentative policy implications of our analysis.

Keywords: bifurcations, innovation, monopoly, optimal control, R&D

JEL Classification: D42, L12, O31

Suggested Citation

Hinloopen, Jeroen and Smrkolj, Grega and Wagener, Florian O.O., From Mind to Market: A Global, Dynamic Analysis of R&D (February 28, 2013). Tinbergen Institute Discussion Paper No. 11-139/1, Available at SSRN: https://ssrn.com/abstract=1935916 or http://dx.doi.org/10.2139/ssrn.1935916

Jeroen Hinloopen (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

University of Amsterdam - Amsterdam School of Economics (ASE) ( email )

Roetersstraat 11
Amsterdam, North Holland 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Grega Smrkolj

Newcastle University Business School ( email )

5 Barrack Road
Newcastle upon Tyne, NE1 4SE
United Kingdom

HOME PAGE: http://www.ncl.ac.uk/business-school/staff/profile/gregasmrkolj.html

Florian O.O. Wagener

University of Amsterdam - Center for Nonlinear Dynamics in Economics and Finance (CeNDEF) - Department of Quantitative Economics ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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