Endogenous growth models may exhibit either under or over-investment in R&D. The possibility of over-investment is generally attributed to a business stealing effect that arises as the latest innovator destroys and/or appropriates previous incumbent's rents. We argue that this conventional wisdom is misleading. In standard models, business stealing by itself cannot result in excessive R&D. We explain the other effects that must be at work here, thus contributing towards a better understanding of when and why the market may be biased towards excessive R&D.
Denicolò, V., Zanchettin, P. (2014). What Causes Over-investment in R&D in Endogenous Growth Models?. ECONOMIC JOURNAL, 124(581), 1192-1212 [10.1111/ecoj.12132].
What Causes Over-investment in R&D in Endogenous Growth Models?
DENICOLO', VINCENZO;
2014
Abstract
Endogenous growth models may exhibit either under or over-investment in R&D. The possibility of over-investment is generally attributed to a business stealing effect that arises as the latest innovator destroys and/or appropriates previous incumbent's rents. We argue that this conventional wisdom is misleading. In standard models, business stealing by itself cannot result in excessive R&D. We explain the other effects that must be at work here, thus contributing towards a better understanding of when and why the market may be biased towards excessive R&D.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
