Schumpeterian Competition

Carl A. Futia

The Quarterly Journal of Economics, 1980, vol. 94, issue 4, 675-695

Abstract: This paper describes a stochastic model of the process of competition via technological innovation as it might occur within a single industry. Individual firms undertake R&D projects in the hope of acquiring a decisive competitive advantage over their rivals. But such advantages and the economic rents arising from this are only temporary; they eventually disappear in the face of imitation, entry, and innovation by other firms. At the industry's long-run equilibrium, concentration and the pace of technological innovation are jointly determined by the conditions of entry and the extent of innovative opportunity. The model implies relationships among these variables that have in fact been detected in the empirical R&D literature.

Date: 1980
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