EconPapers    
Economics at your fingertips  
 

Product Innovation, Diffusion and Endogenous Growth

Michael Klein and Fuat Sener
Additional contact information
Fuat Sener: Union College

Review of Economic Dynamics, 2023, vol. 48, 178-201

Abstract: We develop a model of Schumpeterian growth featuring a stochastic diffusion process where the rate of commercial success of product innovations is endogenously determined by advertising intensity. We consider both informative advertising, which young technological leaders use to increase the probability of diffusion, and defensive advertising, which incumbents use to prevent the diffusion of competing products. Economic growth depends positively on the arrival rate of product innovations and the diffusion rate of innovations into the mainstream market. We show that R&D subsidies shift relative investment incentives towards innovation and away from diffusion. This creates an inverted U-shaped relationship between R&D subsidies and both economic growth and welfare as innovations arrive more frequently, but fewer commercialize successfully. We find that advertising subsidies increase diffusion, growth, and welfare when advertising is purely informative. In the presence of defensive advertising, advertising subsidies lead to socially wasteful increases in resources devoted to advertising without large increases in diffusion, reducing growth and welfare. (Copyright: Elsevier)

Keywords: Innovation; Diffusion; Commercialization; Advertising; Marketing; R&D subsidies (search for similar items in EconPapers)
JEL-codes: M30 O31 O33 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://dx.doi.org/10.1016/j.red.2022.05.001
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See https://www.sciencedirect.com/ for details.

Related works:
Software Item: Code and data files for "Product Innovation, Diffusion and Endogenous Growth" (2022) Downloads
Working Paper: Online Appendix to "Product Innovation, Diffusion and Endogenous Growth" (2022) Downloads
Working Paper: Product innovation, diffusion and endogenous growth (2021) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:issued:21-201

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/j.red.2022.05.001

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().

 
Page updated 2025-03-19
Handle: RePEc:red:issued:21-201