Firm Growth by Product Innovation in the Presence of the Product Life Cycle

Hiroki Murakami ()

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: In this paper, we present a model which enables us to look into the process of research and development (R&D) for product innovation in the presence of the product life cycle and the resultant firm or economic growth. Specifically, we describe R&D for product innovation as an activity to control the birth rate of a new product, which measures the probability of product innovation; derive the optimal birth rate of a new product, which determines the size of R&D expenditure; and examine the growth rate of the (representative) firm('s expected total revenue) along the optimal R&D plan. We then find that the growth rate of the firm converges to the optimal birth rate of a new product in the long run.

Pages: 25 pages
Date: 2016-03
New Economics Papers: this item is included in nep-com, nep-cse, nep-ino, nep-sbm and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:16032

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