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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. Reinganum, Jennifer F., 1981. "Dynamic games of innovation," Journal of Economic Theory, Elsevier, vol. 25(1), pages 21-41, August.
    2. 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.
    3. Ljungqvist, Lars & Sargent, Thomas J., 2012. "Recursive Macroeconomic Theory, Third Edition," MIT Press Books, The MIT Press, edition 3, volume 1, number 0262018748, April.
    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. 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.
    7. 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.
    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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