Innovate to Lead or Innovate to Prevail: When do Monopolistic Rents Induce Growth?

Author/Editor:

Roberto Piazza ; Yu Zheng

Publication Date:

December 27, 2019

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

This paper extends the Schumpeterian model of creative destruction by allowing followers’ cost of innovation to increase in their technological distance from the leader. This assumption is motivated by the observation the more technologically ad- vanced the leader is, the harder it is for a follower to leapfrog without incurring extra cost for using leader’s patented knowledge. Under this R&D cost structure, leaders innovate to increase their technological advantage so that followers will eventually stop innovating, allowing leadership to prevail. A new steady state then emerges featuring both leaders and followers innovating in few industries with low aggregate growth.

Series:

Working Paper No. 19/294

Subject:

English

Publication Date:

December 27, 2019

ISBN/ISSN:

9781513512518/1018-5941

Stock No:

WPIEA2019294

Format:

Paper

Pages:

56

Please address any questions about this title to publications@imf.org