CREAT: Census Research Exploration and Analysis Tool

Growth Through Heterogeneous Innovations

June 2012

Written by: William Kerr, Ufuk Akcigit

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, innovate, patenting, innovative, innovating, patented

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:
National Science Foundation, Harvard University, Federal Reserve Bank, IBM, Longitudinal Business Database, Survey of Industrial Research and Development, Chicago Census Research Data Center, Patent and Trademark Office, Special Sworn Status, Kauffman Foundation, Harvard Business School

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