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The Cleansing Effect of R&D Subsidies

Author

Listed:
  • Tetsugen Haruyama

    (Graduate School of Economics, Kobe University)

Abstract

The paper develops a patent race model of firms which differ in R&D productivity. It is demon-strated that R&D subsidies generate the cleansing effect where relatively lower productivity firms drop out of the race and innovation accelerates due to expanded R&D investment by the remaining firms and new entrants with higher productivity than those that exit.

Suggested Citation

  • Tetsugen Haruyama, 2014. "The Cleansing Effect of R&D Subsidies," Discussion Papers 1425, Graduate School of Economics, Kobe University.
    • Handle: RePEc:koe:wpaper:1425
    as

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    File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2014/1425.pdf
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    References listed on IDEAS

    as
    1. David A. Malueg & Shunichi O. Tsutsui, 1997. "Dynamic R&D Competition with Learning," RAND Journal of Economics, The RAND Corporation, vol. 28(4), pages 751-772, Winter.
    2. Reinganum, Jennifer F., 1981. "Dynamic games of innovation," Journal of Economic Theory, Elsevier, vol. 25(1), pages 21-41, August.
    3. Tom Lee & Louis L. Wilde, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(2), pages 429-436.
    4. Cohen, Wesley M & Klepper, Steven, 1992. "The Anatomy of Industry R&D Intensity Distributions," American Economic Review, American Economic Association, vol. 82(4), pages 773-799, September.
    5. Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(3), pages 395-410.
    6. Ljungqvist, Lars & Sargent, Thomas J., 2012. "Recursive Macroeconomic Theory, Third Edition," MIT Press Books, The MIT Press, edition 3, volume 1, number 0262018748, April.
    7. Pankaj Tandon, 1983. "Rivalry and the Excessive Allocation of Resources to Research," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 152-165, Spring.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Patent race; R&D; industrial policy; cleansing effect;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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