Innovation vs imitation and the evolution of productivity distributions

Fabrizio Zilibotti, Jan Lorenz () and Michael Koenig
Authors registered in the RePEc Author Service: Michael David König

No 8843, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We develop a tractable dynamic model of productivity growth and technology spillovers that is consistent with the emergence of real world empirical productivity distributions. Firms can improve productivity by engaging in in-house R&D, or alternatively, by trying to imitate other firms? technologies subject to limits to their absorptive capacities. The outcome of both strategies is stochastic. The choice between in-house R&D and imitation is endogenous, and based on firms? profit maximization motive. Firms closer to the technological frontier have less imitation opportunities, and tend to choose more often in-house R&D, consistent with the empirical evidence. The equilibrium choice leads to balanced growth featuring persistent productivity differences even when starting from ex-ante identical firms. The long run productivity distribution can be described as a traveling wave with tails following Zipf?s law as it can be observed in the empirical data. Idiosyncratic shocks to firms? productivities of R&D reduce inequality, but also lead to lower aggregate productivity and industry performance.

Keywords: Innovation; Growth; Quality ladder; Absorptive capacity; Productivity difference; Spillovers (search for similar items in EconPapers)
JEL-codes: E10 O40 (search for similar items in EconPapers)
Date: 2012-02
New Economics Papers: this item is included in nep-bec, nep-cse, nep-eff, nep-ino, nep-knm and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Working Paper: Innovation vs. Imitation and the Evolution of Productivity Distributions (2012)
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