Growth Through Heterogeneous Innovations
June 2012
Working Paper Number:
CES-12-08
Abstract
We study how exploration versus exploitation innovations impact economic growth through a tractable endogenous growth framework that contains multiple innovation sizes, multiproduct firms, and entry/exit. Firms invest in exploration R&D to acquire new product lines and exploitation R&D to improve their existing product lines. We model and show empirically that exploration R&D does not scale as strongly with firm size as exploitation R&D. The resulting framework conforms to many regularities regarding innovation and growth differences across the firm size distribution. We also incorporate patent citations into our theoretical framework. The framework generates a simple test using patent citations that indicates that entrants and small firms have relatively higher growth spillover effects.
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investment,
econometric,
company,
growth,
invention,
entrepreneurial,
entrepreneur,
strategic,
innovation,
innovator,
inventory,
patent,
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IBM,
Longitudinal Business Database,
Survey of Industrial Research and Development,
Chicago Census Research Data Center,
Patent and Trademark Office,
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Kauffman Foundation,
Harvard Business School
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