Innovating Firms and Aggregate Innovation

Tor Klette and Samuel Kortum

No 3248, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop a parsimonious model of innovating firms rich enough to confront firm-level evidence. It captures the dynamic behaviour of individual heterogeneous firms, describes the evolution of an industry with simultaneous entry and exit, and delivers a general equilibrium model of technological change. While unifying the theoretical analysis of firms, industries and the aggregate economy, the model yields insights into empirical work on innovating firms. It accounts for the persistence over time of firms' R&D investment, the concentration of R&D among incumbent firms, and the link between R&D and patenting. Furthermore, it explains why R&D as a fraction of revenues is strongly related to firm productivity yet largely unrelated to firm size or growth.

Keywords: R&d; Firm growth; Productivity; Market structure; Endogenous growth theory; Birth and death processes (search for similar items in EconPapers)
JEL-codes: L11 O31 (search for similar items in EconPapers)
Date: 2002-03
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Citations: View citations in EconPapers (27)

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Related works:
Journal Article: Innovating Firms and Aggregate Innovation (2004)
Working Paper: Innovating firms and aggregate innovation (2002)
Working Paper: Innovating Firms and Aggregate Innovation (2002)
Working Paper: Innovating Firms and Aggregate Innovation (2002)
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