IDEAS home Printed from https://ideas.repec.org/p/tin/wpaper/20110139.html
   My bibliography  Save this paper

From Mind to Market: A Global, Dynamic Analysis of R&D

Author

Listed:
  • Jeroen Hinloopen

    (University of Amsterdam)

  • Grega Smrkolj

    (University of Amsterdam)

  • Florian Wagener

    (University of Amsterdam)

Abstract

This discussion paper resulted in a publication in the Journal of Economic Dynamics and Control 2013, 37(12), 2729-2754. Existing models of R&D are not easily reconciled with four observable aspects of R&D: initial technologies ('ideas') need to be developed further, only a minority of initial ideas is successfully brought to the market, production and process innovations take place simultaneously (whereby, initially, there is no production at all), and process innovations are implemented for technologies that are destined to leave the market. We present a detailed bifurcation analysis for a dynamic model of R&D that captures these observations in one, unifying framework. As we provide a global analysis, we do not limit initial technologies to carry marginal costs that are below the choke price. We show that there always exists a critical value of initial marginal cost above which the firm does not initiate any (R&D) activity; the path to the saddle-point steady state is never globally optimal. We also sketch some tentative policy implications of our analysis.

Suggested Citation

  • Jeroen Hinloopen & Grega Smrkolj & Florian Wagener, 2011. "From Mind to Market: A Global, Dynamic Analysis of R&D," Tinbergen Institute Discussion Papers 11-139/1, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20110139
    as

    Download full text from publisher

    File URL: https://papers.tinbergen.nl/11139.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-1137, December.
    2. Kovác, Eugen & Vinogradov, Viatcheslav & Zigic, Kresimir, 2010. "Technological leadership and persistence of monopoly under endogenous entry: Static versus dynamic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 34(8), pages 1421-1441, August.
    3. Benkard, C. Lanier, 2000. "A Dynamic Analysis of the Market for Wide-Bodied Commercial Aircraft," Research Papers 1636, Stanford University, Graduate School of Business.
    4. Dieter Grass & Jonathan P. Caulkins & Gustav Feichtinger & Gernot Tragler & Doris A. Behrens, 2008. "Optimal Control of Nonlinear Processes," Springer Books, Springer, number 978-3-540-77647-5, January.
    5. Cellini, Roberto & Lambertini, Luca, 2009. "Dynamic R&D with spillovers: Competition vs cooperation," Journal of Economic Dynamics and Control, Elsevier, vol. 33(3), pages 568-582, March.
    6. Wagener, F. O. O., 2003. "Skiba points and heteroclinic bifurcations, with applications to the shallow lake system," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages 1533-1561, July.
    7. Polasky, Stephen & de Zeeuw, Aart & Wagener, Florian, 2011. "Optimal management with potential regime shifts," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 229-240, September.
    8. Utterback, James M & Abernathy, William J, 1975. "A dynamic model of process and product innovation," Omega, Elsevier, vol. 3(6), pages 639-656, December.
    9. Qiu, Larry D., 1997. "On the Dynamic Efficiency of Bertrand and Cournot Equilibria," Journal of Economic Theory, Elsevier, vol. 75(1), pages 213-229, July.
    10. James Adams & Zvi Griliches, 1996. "Measuring Science: An Exploration," NBER Working Papers 5478, National Bureau of Economic Research, Inc.
    11. 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.
    12. David Besanko & Ulrich Doraszelski & Yaroslav Kryukov & Mark Satterthwaite, 2010. "Learning-by-Doing, Organizational Forgetting, and Industry Dynamics," Econometrica, Econometric Society, vol. 78(2), pages 453-508, March.
    13. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
    14. Michel, Philippe, 1982. "On the Transversality Condition in Infinite Horizon Optimal Problems," Econometrica, Econometric Society, vol. 50(4), pages 975-985, July.
    15. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-1306, December.
    16. Madsen, Jakob B., 2007. "Are there diminishing returns to R&D?," Economics Letters, Elsevier, vol. 95(2), pages 161-166, May.
    17. Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908, Elsevier.
    18. Lambertini, Luca & Mantovani, Andrea, 2009. "Process and product innovation by a multiproduct monopolist: A dynamic approach," International Journal of Industrial Organization, Elsevier, vol. 27(4), pages 508-518, July.
    19. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, April.
    20. C. Lanier Benkard, 2000. "A Dynamic Analysis of the Market for Wide-Bodied Commercial Aircraft," NBER Working Papers 7710, National Bureau of Economic Research, Inc.
    21. 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.
    22. Doraszelski, Ulrich, 2004. "Innovations, improvements, and the optimal adoption of new technologies," Journal of Economic Dynamics and Control, Elsevier, vol. 28(7), pages 1461-1480, April.
    23. Kamihigashi, Takashi, 2001. "Necessity of Transversality Conditions for Infinite Horizon Problems," Econometrica, Econometric Society, vol. 69(4), pages 995-1012, July.
    24. Kiseleva, T. & Wagener, F.O.O., 2011. "Bifurcations of Optimal Vector Fields," CeNDEF Working Papers 11-05, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    25. De Bondt, Raymond, 1997. "Spillovers and innovative activities," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 1-28, February.
    26. Kiseleva, Tatiana & Wagener, F.O.O., 2010. "Bifurcations of optimal vector fields in the shallow lake model," Journal of Economic Dynamics and Control, Elsevier, vol. 34(5), pages 825-843, May.
    27. Vernon, John M & Gusen, Peter, 1974. "Technical Change and Firm Size: The Pharmaceutical Industry," The Review of Economics and Statistics, MIT Press, vol. 56(3), pages 294-302, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhang, Wei-Bin, 2017. "Endogenous wealth and knowledge in Heckscher-Ohlin theory," International Journal of Development and Conflict, Gokhale Institute of Politics and Economics, vol. 7(2), pages 119-137.
    2. Smrkolj, Grega & Wagener, Florian, 2019. "Research among copycats: R&D, spillovers, and feedback strategies," International Journal of Industrial Organization, Elsevier, vol. 65(C), pages 82-120.
    3. Anton Bondarev, 2019. "Robust Policy Schemes for Differential R&D Games with Asymmetric Information," Dynamic Games and Applications, Springer, vol. 9(2), pages 391-415, June.
    4. Anton Bondarev, 2021. "Games Without Winners: Catching-up with Asymmetric Spillovers," Dynamic Games and Applications, Springer, vol. 11(4), pages 670-703, December.
    5. Hinloopen, Jeroen & Smrkolj, Grega & Wagener, Florian, 2013. "In Defense of Trusts: R&D Cooperation in Global Perspective," MPRA Paper 63551, University Library of Munich, Germany, revised 09 Apr 2015.
    6. Bondarev, Anton & Krysiak, Frank C., 2017. "Temporary and permanent technology lock-ins in the quality-differentiated Bertrand competition," Working papers 2017/09, Faculty of Business and Economics - University of Basel.
    7. Jeroen Hinloopen & Grega Smrkolj & Florian Wagener, 2016. "R&D Cooperatives and Market Collusion: A Global Dynamic Approach," Tinbergen Institute Discussion Papers 16-048/II, Tinbergen Institute.
    8. Gezer, Serhat, 2019. "Delaying product introduction: A dynamic analysis with endogenous time horizon," Journal of Economic Dynamics and Control, Elsevier, vol. 102(C), pages 96-114.
    9. Herbert Dawid & Gerd Muehlheusser, 2019. "Smart products: liability, timing of market introduction, and investments in product safety," CESifo Working Paper Series 7673, CESifo.
    10. Herbert Dawid & Michel Y. Keoula & Peter M. Kort, 2017. "Numerical Analysis of Markov-Perfect Equilibria with Multiple Stable Steady States: A Duopoly Application with Innovative Firms," Dynamic Games and Applications, Springer, vol. 7(4), pages 555-577, December.
    11. Bondarev, Anton, 2018. "Robust policy schemes for R&D games with asymmetric information," Working papers 2018/01, Faculty of Business and Economics - University of Basel.
    12. Jeroen Hinloopen & Grega Smrkolj & Florian Wagener, 2017. "Research and Development Cooperatives and Market Collusion: A Global Dynamic Approach," Journal of Optimization Theory and Applications, Springer, vol. 174(2), pages 567-612, August.
    13. Kováč, Eugen & Žigić, Krešimir, 2016. "Persistence of monopoly, innovation, and R&D spillovers," Research in Economics, Elsevier, vol. 70(4), pages 714-734.
    14. Dawid, Herbert & Keoula, Michel Y. & Kopel, Michael & Kort, Peter M., 2015. "Product innovation incentives by an incumbent firm: A dynamic analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 411-438.
    15. Dawid, Herbert & Muehlheusser, Gerd, 2022. "Smart products: Liability, investments in product safety, and the timing of market introduction," Journal of Economic Dynamics and Control, Elsevier, vol. 134(C).
    16. Zhang Wei-Bin, 2017. "A Multi-Country Trade and Tourism with Endogenous Capital and Knowledge," Business Systems Research, Sciendo, vol. 8(1), pages 71-91, March.
    17. Wei-Bin Zhang, 2018. "Growth, Research, and Free Trade with Knowledge as Global Public Capital," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 37-66.
    18. Maria Caterina Bramati & Arsen Palestini & Mauro Rota, 2016. "Effects of Law-Enforcement Efficiency and Duration of Trials in an Oligopolistic Competition Among Fair and Unfair Firms," Journal of Optimization Theory and Applications, Springer, vol. 170(2), pages 650-669, August.
    19. Kiseleva, T. & Wagener, F.O.O., 2011. "Bifurcations of Optimal Vector Fields," CeNDEF Working Papers 11-05, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    20. Anton Bondarev & Frank C. Krysiak, 2017. "Robust policy schemes for R&D games with asymmetric information," Working papers 2017/14, Faculty of Business and Economics - University of Basel.
    21. Tatiana Kiseleva & Florian Wagener, 2015. "Bifurcations of Optimal Vector Fields," Mathematics of Operations Research, INFORMS, vol. 40(1), pages 24-55, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hinloopen, Jeroen & Smrkolj, Grega & Wagener, Florian, 2013. "In Defense of Trusts: R&D Cooperation in Global Perspective," MPRA Paper 63551, University Library of Munich, Germany, revised 09 Apr 2015.
    2. Jeroen Hinloopen & Grega Smrkolj & Florian Wagener, 2016. "R&D Cooperatives and Market Collusion: A Global Dynamic Approach," Tinbergen Institute Discussion Papers 16-048/II, Tinbergen Institute.
    3. Jeroen Hinloopen & Grega Smrkolj & Florian Wagener, 2017. "Research and Development Cooperatives and Market Collusion: A Global Dynamic Approach," Journal of Optimization Theory and Applications, Springer, vol. 174(2), pages 567-612, August.
    4. Smrkolj, Grega & Wagener, Florian, 2019. "Research among copycats: R&D, spillovers, and feedback strategies," International Journal of Industrial Organization, Elsevier, vol. 65(C), pages 82-120.
    5. Fouad Ouardighi & Matan Shnaiderman & Federico Pasin, 2014. "Research and Development with Stock-Dependent Spillovers and Price Competition in a Duopoly," Journal of Optimization Theory and Applications, Springer, vol. 161(2), pages 626-647, May.
    6. Iritié, B. G. Jean-Jacques, 2014. "Enjeux des politiques industrielles basées sur les clusters d'innovation: cas des pôles de compétitivité [Issues of Innovative Clusters-based Industrial Policy: Case of Pole of Competitiveness]," MPRA Paper 54429, University Library of Munich, Germany.
    7. B.G. Jean Jacques Iritié, 2018. "Economic issues of innovation clusters-based industrial policy: a critical overview," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 20(3), pages 286-307.
    8. Raymond De Bondt & Jan Vandekerckhove, 2012. "Reflections on the Relation Between Competition and Innovation," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 7-19, March.
    9. De Bondt, Raymond, 1997. "Spillovers and innovative activities," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 1-28, February.
    10. Leibowicz, Benjamin D., 2018. "Welfare improvement windows for innovation policy," Research Policy, Elsevier, vol. 47(2), pages 390-398.
    11. Miyagiwa, Kaz & Ohno, Yuka, 2002. "Uncertainty, spillovers, and cooperative R&D," International Journal of Industrial Organization, Elsevier, vol. 20(6), pages 855-876, June.
    12. Levin, Mark (Левин, Марк) & Matrosova, K. (Матросова, К.), 2016. "Research, Modeling and Process Management Dissemination of Innovations in Socio-Economic Systems [Исследование, Моделирование И Управление Процессами Распространения Инноваций В Социально-Экономиче," Working Papers 1443, Russian Presidential Academy of National Economy and Public Administration.
    13. Hélène Halmenschlager, 2004. "Les externalités de diffusion du savoir-faire permettent-elles de rattraper le retard dans les courses à l'innovation ?," Recherches économiques de Louvain, De Boeck Université, vol. 70(3), pages 341-361.
    14. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, September.
    15. Vincenzo Denicolò & Michele Polo, 2018. "The innovation theory of harm: an appraisal," IEFE Working Papers 103, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
    16. Marie‐Laure Cabon‐Dhersin & Romain Gibert, 2020. "R&D cooperation, proximity and distribution of public funding between public and private research sectors," Manchester School, University of Manchester, vol. 88(6), pages 773-800, December.
    17. Maria Caterina Bramati & Arsen Palestini & Mauro Rota, 2016. "Effects of Law-Enforcement Efficiency and Duration of Trials in an Oligopolistic Competition Among Fair and Unfair Firms," Journal of Optimization Theory and Applications, Springer, vol. 170(2), pages 650-669, August.
    18. Erkal, Nisvan & Piccinin, Daniel, 2010. "Cooperative R&D under uncertainty with free entry," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 74-85, January.
    19. Hauenschild, Nils, 2003. "On the role of input and output spillovers when R&D projects are risky," International Journal of Industrial Organization, Elsevier, vol. 21(8), pages 1065-1089, October.
    20. Grass, D., 2012. "Numerical computation of the optimal vector field: Exemplified by a fishery model," Journal of Economic Dynamics and Control, Elsevier, vol. 36(10), pages 1626-1658.

    More about this item

    Keywords

    Bifurcations; Innovation; Monopoly; Optimal control; R&D;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tin:wpaper:20110139. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tinbergen Office +31 (0)10-4088900 (email available below). General contact details of provider: https://edirc.repec.org/data/tinbenl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.