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Innovation vs. imitation and the evolution of productivity distributions


König, Michael D; Lorenz, Jan; Zilibotti, Fabrizio (2016). Innovation vs. imitation and the evolution of productivity distributions. Theoretical Economics, 11(3):1053-1102.

Abstract

We develop a tractable dynamicmodel of productivity growth and technology spillovers that is consistent with the emergence of real world empirical productivity distributions. Firms can improve productivity by engaging in in-house R&D, or alternatively, by trying to imitate other firms’ technologies, subject to the limits of their absorptive capacities. The outcome of both strategies is stochastic. The choice between in-house R&Dand imitation is endogenous, and based on firms’ profit maximization motive. Firms closer to the technological frontier face fewer imitation opportunities, and choose in-house R&D, while firms farther from the frontier try to imitate more productive technologies. The equilibriumchoice leads to a balanced-growth equilibriumfeaturing persistent productivity differences even when starting from ex-ante identical firms. The long-run productivity distribution can be described as a traveling wave with tails following a Pareto as can be observed in the empirical data.

Abstract

We develop a tractable dynamicmodel of productivity growth and technology spillovers that is consistent with the emergence of real world empirical productivity distributions. Firms can improve productivity by engaging in in-house R&D, or alternatively, by trying to imitate other firms’ technologies, subject to the limits of their absorptive capacities. The outcome of both strategies is stochastic. The choice between in-house R&Dand imitation is endogenous, and based on firms’ profit maximization motive. Firms closer to the technological frontier face fewer imitation opportunities, and choose in-house R&D, while firms farther from the frontier try to imitate more productive technologies. The equilibriumchoice leads to a balanced-growth equilibriumfeaturing persistent productivity differences even when starting from ex-ante identical firms. The long-run productivity distribution can be described as a traveling wave with tails following a Pareto as can be observed in the empirical data.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Innovation, growth, quality ladder, absorptive capacity, productivity differences, spillovers
Language:English
Date:2016
Deposited On:15 Apr 2016 17:36
Last Modified:30 Jan 2017 08:15
Publisher:Society for Economic Theory
ISSN:1555-7561
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.3982/TE1437
Related URLs:http://www.zora.uzh.ch/122512/

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