Growth Through Heterogeneous Innovations

Ufuk  Akcigit; William R. Kerr

Article | Journal of Political Economy | August 2018

Growth Through Heterogeneous Innovations

Abstract

We build a tractable growth model where multi-product incumbents invest in internal innovations to improve their existing products, while new entrants and incumbents invest in external innovations to acquire new product lines. External and internal innovations generate heterogeneous innovation qualities, and firm size affects innovation incentives. This framework allows us to analyze how different types of innovation contribute to economic growth and how the firm size distribution can have important consequences for the types of innovations realized. Our model aligns with many observed empirical regularities, and we quantify our framework by matching Census Bureau operating data with patent data for U.S. firms. We observe that internal innovation scales moderately faster with firm size than external innovation.

Keywords: Endogenous Growth; innovation; Citations; Scientists; entrepreneurs; External; Internal; Patents; Innovation Strategy; Entrepreneurship; Economic Growth; Research and Development; Science;

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Akcigit, Ufuk, and William R. Kerr. "Growth Through Heterogeneous Innovations." Journal of Political Economy 126, no. 4 (August 2018): 1374–1443.

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Growth Through Heterogeneous Innovations

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