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Innovation by Heterogeneous Leaders

Tatsuro Iwaisako () and Kazuyoshi Ohki

Scandinavian Journal of Economics, 2019, vol. 121, issue 4, 1673-1704

Abstract: We develop a Schumpeterian growth model in which leaders and followers conduct research and development (R&D) activities and in which leaders have different‐sized quality leads over their followers, and thus have different profit flows. We show that leaders with larger quality leads make smaller R&D investments; this result is consistent with the actual behaviors of some previous leader firms, such as Sony and Eastman–Kodak. Moreover, we show that subsidizing the R&D of followers can promote the aggregate R&D of leaders, because promotion of followers' R&D decreases (increases) the number of leaders with larger (smaller) quality leads and smaller (larger) R&D investments.

Date: 2019
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https://doi.org/10.1111/sjoe.12347

Related works:
Working Paper: Innovation by Heterogeneous Leaders (2018) Downloads
Working Paper: Innovation by Heterogeneous Leaders (2015)
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