Technology lock-in with horizontal and vertical innovations through limited R&D spending

Anton Bondarev () and Alfred Greiner ()
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Alfred Greiner: Bielefeld University

4OR, 2018, vol. 16, issue 1, No 4, 65 pages

Abstract: Abstract In this paper we analyze an inter-temporal optimization problem of a representative firm that invests in horizontal and vertical innovations and that faces a constraint with respect to total R&D spending. We find that there can exist two different steady-states of the economy when the amount of research spending falls short of an endogenously determined threshold: one with higher productivities and less new technologies being developed, and the other with more technologies being created and lower productivities. But, for a higher amount of R&D spending the steady-state becomes unique and the firm produces the whole spectrum of available technologies. Thus, a lock-in effect may arise that, however, can be overcome by raising R&D spending sufficiently.

Keywords: Multiple steady-states; Lock-in; Innovations; R&D constraint; Optimal control; C61; D92; O32 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s10288-017-0348-0

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