Growth Through Heterogeneous Innovations
56 Pages Posted: 29 Apr 2015 Last revised: 11 Jun 2015
Date Written: March 25, 2015
We study how external versus internal innovations promote economic growth through a tractable endogenous growth framework with multiple innovation sizes, multi-product firms, and entry/exit. Firms invest in external R&D to acquire new product lines and in internal R&D to improve their existing product lines. A baseline model derives the theoretical implications of weaker scaling for external R&D versus internal R&D, and the resulting predictions align with observed empirical regularities for innovative firms. Quantifying a generalized model for the recent U.S. economy using matched Census Bureau and patent data, we observe a modest departure for external R&D from perfect scaling frameworks.
Keywords: Endogenous Growth, Innovation, External, Internal, Research and Development, Patents, Citations, Scientists, Entrepreneurs
JEL Classification: O31, O33, O41, L16
Suggested Citation: Suggested Citation