A dynamic analysis of investment in process and product innovation with learning-by-doing

Shoude Li and Jian Ni

Economics Letters, 2016, vol. 145, issue C, 104-108

Abstract: This paper investigates the optimal control problem of a monopolist’s investments in process and product innovation under learning-by-doing in a dynamic setting. We show that: (i) there exists the saddle stable steady state under monopolist optimum and social optimum; (ii) the learning rates of product and process innovation affect not only the monopolist’s process or product innovation investments, but also the complementarity (substitutability) relationship between product and process innovation; (iii) the social incentive towards both product and process innovation is always larger than the private incentive characterizing the profit-seeking monopolist. These results are valuable complement and development to the results drawn from the standard product and process innovation model.

Keywords: Process and product innovation; Learning-by-doing; Dynamic analysis (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:145:y:2016:i:c:p:104-108

DOI: 10.1016/j.econlet.2016.05.031

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