Innovation vs Imitation and the Evolution of Productivity Distributions

52 Pages Posted: 1 Mar 2012

See all articles by Michael König

Michael König

University of Zurich - Department of Economics

Jan Lorenz

Jacobs University Bremen

Fabrizio Zilibotti

Centre for Economic Policy Research (CEPR); Yale University

Date Written: February 2012

Abstract

We develop a tractable dynamic model of productivity growth and technology spillovers that is consistent with the emergence of real world empirical productivity distributions. Firms can improve productivity by engaging in in-house R&D, or alternatively, by trying to imitate other firms’ technologies subject to limits to their absorptive capacities. The outcome of both strategies is stochastic. The choice between in-house R&D and imitation is endogenous, and based on firms’ profit maximization motive. Firms closer to the technological frontier have less imitation opportunities, and tend to choose more often in-house R&D, consistent with the empirical evidence. The equilibrium choice leads to balanced growth featuring persistent productivity differences even when starting from ex-ante identical firms. The long run productivity distribution can be described as a traveling wave with tails following Zipf’s law as it can be observed in the empirical data. Idiosyncratic shocks to firms’ productivities of R&D reduce inequality, but also lead to lower aggregate productivity and industry performance.

Keywords: absorptive capacity, growth, innovation, productivity difference, quality ladder, spillovers

JEL Classification: E10, O40

Suggested Citation

König, Michael and Lorenz, Jan and Zilibotti, Fabrizio and Zilibotti, Fabrizio, Innovation vs Imitation and the Evolution of Productivity Distributions (February 2012). CEPR Discussion Paper No. DP8843, Available at SSRN: https://ssrn.com/abstract=2013836

Michael König (Contact Author)

University of Zurich - Department of Economics ( email )

Zürich
Switzerland

Jan Lorenz

Jacobs University Bremen ( email )

Campus Ring 1
Bremen, 28759
Germany

Fabrizio Zilibotti

Yale University ( email )

493 College St
New Haven, CT CT 06520
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
2
Abstract Views
1,162
PlumX Metrics