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

Anton Bondarev () and Alfred Greiner

Working papers from Faculty of Business and Economics - University of Basel

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, van be overcome by raising R&D spending sufficiently.

Keywords: Multiple steady-states; lock-in; innovations; R&D constraint; optimal control (search for similar items in EconPapers)
JEL-codes: C61 D92 O32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ino and nep-tid
Date: 2017-04-01
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Persistent link: https://EconPapers.repec.org/RePEc:bsl:wpaper:2017/04

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