Working Paper: NBER ID: w16443
Authors: Ufuk Akcigit; William R. Kerr
Abstract: We study how exploration versus exploitation innovations impact economic growth through a tractable endogenous growth framework that contains multiple innovation sizes, multi-product firms, and entry/exit. Firms invest in exploration R&D to acquire new product lines and exploitation R&D to improve their existing product lines. We model and show empirically that exploration R&D does not scale as strongly with firm size as exploitation R&D. The resulting framework conforms to many regularities regarding innovation and growth differences across the firm size distribution. We also incorporate patent citations into our theoretical framework. The framework generates a simple test using patent citations that indicates that entrants and small firms have relatively higher growth spillover effects.
Keywords: Innovation; Economic Growth; Firm Size; R&D
JEL Codes: L16; O31; O33; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| smaller firms (L25) | grow faster than larger firms (L25) |
| exploration R&D (O32) | greater growth spillover effects (F62) |
| larger firms (L25) | focus on exploitation R&D (O32) |
| larger firms (L25) | lower growth rates compared to smaller firms (L25) |
| R&D expenditures increase with firm size (L25) | effectiveness diminishes (L15) |
| exploration R&D (O32) | higher overall growth rates (O40) |
| growth spillover effects from exploration R&D (O36) | larger than those from exploitation R&D (O39) |