R&D Capability and Market Structure

Shuji Takahashi

Economics of Innovation and New Technology, 1999, vol. 8, issue 4, 355-365

Abstract: In this theoretical article, we examine the effect of competition on a firm's investment in 'R&D capability'. We extend the horizons of the discussion on 'R&D capability' to market structure by using a simple two-firm patent race model in which the firms can invest in both final technology used in the market and R&D capability for increasing R&D efficiency during a R&D race. Duopolists have a smaller incentive to make capability investment than monopolists and tend to invest in final technology. This myopic behavior may reduce both welfare and the speed of innovation.

Keywords: Patent; Market structure; Learning; Innovation process JEL Classification: O31; O34 (search for similar items in EconPapers)
Date: 1999
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DOI: 10.1080/10438599900000015

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