Innovation vs. imitation and the evolution of productivity distributions

, (), Jan Lorenz () and , ()
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,: Department of Economics, University of Zurich
,: Department of Economics, University of Zurich
Authors registered in the RePEc Author Service: Fabrizio Zilibotti

Theoretical Economics, 2016, vol. 11, issue 3

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 the limits of 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 face fewer imitation opportunities, and choose in-house R\&D, while firms farther from the frontier try to imitate more productive technologies. The equilibrium choice leads to a balanced-growth equilibrium 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 a Pareto as can be observed in the empirical data.

Keywords: Imitation; innovation; growth; quality ladder; absorptive capacity; productivity differences; spillovers (search for similar items in EconPapers)
JEL-codes: E10 O40 (search for similar items in EconPapers)
Date: 2016-09-13
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Citations: View citations in EconPapers (68)

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Related works:
Working Paper: Innovation vs imitation and the evolution of productivity distributions (2012)
Working Paper: Innovation vs. Imitation and the Evolution of Productivity Distributions (2012)
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