R&D, Investment and Industry Dynamics
J. OF ECONOMICS AND MANAGEMENT STRATEGY
Posted: 9 Jul 1998
We present a model of industry evolution where the dynamics are driven by a process of endogenous innovations followed by subsequent embodiments in physical capital. Our model stresses the causal relationship between past R&D expenditures and current investments in machinery and equipment. This causality pattern, supported by U.S. manufacturing data, also explains the observed higher volatility of physical investment relative to R&D expenditures.
JEL Classification: O32, L16
Suggested Citation: Suggested Citation