Competitive Innovation and Information Flows in a Growing Industry

49 Pages Posted: 2 Nov 2005

See all articles by Serguey Braguinsky

Serguey Braguinsky

Carnegie Mellon University - Department of Social and Decision Sciences

Salavat Gabdrakhmanov

University of Chicago - Department of Economics

Atsushi Oyama

University of Chicago - Department of Economics

Date Written: September 2005

Abstract

Case studies reveal a pattern of rapid industrial growth propelled by innovation and quick diffusion of new technologies, especially among emerging industries exposed to global competition. At the firm level, the distribution of innovative activity is highly skewed, while productivity growth is not strongly related to a firm's innovative activity. In this paper, we develop a dynamic model of a competitive industry that is consistent with these stylized facts. We derive an equilibrium growth path, along which a leading firm invests in increasing the stock of technological knowledge and chooses not to prevent spillovers to other firms as long as the industry remains relatively small. As the industry expands including new entry, the leader's optimal amount of investment gradually declines. The leading firm may also choose to start keeping its innovations secret somewhere along the equilibrium growth path, bringing technology diffusion and further expansion of the industry to a halt. Policy implications include beneficial effects of the absence of tariff protection, and possible beneficial effects of moderate costs of intellectual property rights protection.

Keywords: Competition, Innovation, Industry growth, Intellectual property

JEL Classification: L20, O31

Suggested Citation

Braguinsky, Serguey and Gabdrakhmanov, Salavat and Oyama, Atsushi, Competitive Innovation and Information Flows in a Growing Industry (September 2005). Available at SSRN: https://ssrn.com/abstract=829905 or http://dx.doi.org/10.2139/ssrn.829905

Serguey Braguinsky (Contact Author)

Carnegie Mellon University - Department of Social and Decision Sciences ( email )

Pittsburgh, PA 15213-3890
United States

Salavat Gabdrakhmanov

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

Atsushi Oyama

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

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