Working Paper: NBER ID: w2876
Authors: Richard C. Levin; Peter C. Reiss
Abstract: This paper analyzes R&D policies when the returns to cost-reducing and demand-creating R&D are imperfectly appropriable and market structure is endogenous. Previous characterizations of appropriability are generalized to permit the possibility that own and rival R&D are imperfect substitutes. We also describe how. equilibrium expenditures on process and product R&D, as well as equilibrium market structure, depend on technological opportunities and spillovers. In contrast to previous work, diminished appropriability does not necessarily reduce R&D expenditures. For example, under some conditions, an increase in the extent of process (product) spillovers will lead to an increase in product (process) R&D. We estimate several variants of the model using manufacturing line of business data and data from a survey of R&D executives.
Keywords: R&D; spillovers; market structure; appropriability
JEL Codes: O32; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| spillovers (O36) | R&D expenditures (O32) |
| diminished appropriability (H82) | R&D expenditures (O32) |
| process-product spillovers (O36) | R&D expenditures (O32) |
| variations in degree of substitution between own and rival R&D (O39) | private incentives to undertake R&D (O31) |
| expectations of rival firms' R&D activities (D84) | firms' decisions regarding R&D (O32) |
| increased competition in R&D (O39) | marginal productivity of own R&D (O39) |