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Strategic R&D investment, competitive toughness and growth
Author(s) -
D'Aspremont Claude,
Dos Santos Ferreira Rodolphe,
GérardVaret LouisAndré
Publication year - 2010
Publication title -
international journal of economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 11
eISSN - 1742-7363
pISSN - 1742-7355
DOI - 10.1111/j.1742-7363.2010.00135.x
Subject(s) - competition (biology) , economics , investment (military) , endogenous growth theory , microeconomics , monetary economics , capital (architecture) , industrial organization , market economy , human capital , biology , history , ecology , archaeology , politics , political science , law
We show, within a single industry, the possibility that R&D‐investment is non‐monotonically related to competitive toughness: increasing when competition is soft and decreasing when competition is tough. This possibility results from the combination of a Schumpeterian markup squeezing effect discouraging innovation, and a concentration effect spurring innovators. It is obtained in a sectoral model where the number of innovators is random and where non‐successful investors may remain productive. The result is extended to a multisectoral stochastic endogenous growth model with overlapping generations of consumers and firms, the number of which is endogenously determined in the capital market.