Uncertainty and the size distribution of rewards from innovation

F. M. Scherer, Dietmar Harhoff () and rg Kukies J

Journal of Evolutionary Economics, 2000, vol. 10, issue 1, 175-200

Abstract: Previous research has shown that the distribution of profit outcomes from technological innovations is highly skew. This paper builds upon those detailed findings to ask: what stochastic processes can plausibly be inferred to have generated the observed distributions? After reviewing the evidence, this paper reports on several stochastic model simulations, including a pure Gibrat random walk with monthly changes approximating those observed for high-technology startup company stocks and a more richly specified model blending internal and external market uncertainties. The most highly specified simulations suggest that the set of profit potentials tapped by innovators is itself skew-distributed and that the number of entrants into innovation races is more likely to be independent of market size than stochastically dependent upon it.

Keywords: Innovation; -; Risk; -; Uncertainty; -; Skew; distributions; -; Gibrat's; Law (search for similar items in EconPapers)
JEL-codes: C15 O31 (search for similar items in EconPapers)
Date: 2000-01-04
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Citations: View citations in EconPapers (73)

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