Growth Through Heterogeneous Innovations
80 Pages Posted: 3 Jul 2012
Date Written: June 1, 2012
We study how exploration versus exploitation innovations impact economic growth through a tractable endogenous growth framework that contains multiple innovation sizes, multiproduct 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.
Keywords: Endogenous Growth, Innovation, Exploration, Exploitation, Research and Development, Patents, Citations, Scientists, Entrepreneurs
JEL Classification: O31, O33, O41, L16
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