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How R&D Competition Affects Investment Choices

Author

Listed:
  • Thierry Lafay

    (UP1 UFR06 - Université Paris 1 Panthéon-Sorbonne - UFR Gestion & économie d'entreprise - UP1 - Université Paris 1 Panthéon-Sorbonne)

  • Céline Maximin

Abstract

We analyze firm research and development investment incentives in a framework in which only one innovation can be undertaken. We assume that the probability of discovering the innovation depends on a parameter that represents the technical difficulty of innovating. We show that patent protection is not always necessary for investments to be made. With patent protection, research and development competition leads to a symmetric equilibrium. Moreover, firms over-invest in marginal innovation but under-invest in difficult innovation, which explains why and how public authorities should intervene to promote specific research in certain economic sectors.

Suggested Citation

  • Thierry Lafay & Céline Maximin, 2017. "How R&D Competition Affects Investment Choices," Post-Print hal-01457619, HAL.
    • Handle: RePEc:hal:journl:hal-01457619
    DOI: 10.1002/mde.2745
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    Cited by:

    1. Kai Chang & Ning Lu & Ze Sheng Li & Yi Ran Wang, 2021. "The combined impacts of fiscal and credit policies on green firm's investment opportunity: Evidences from Chinese firm‐level analysis," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(7), pages 1822-1835, October.

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