Innovation by Heterogeneous Leaders*

Abstract

We develop a Schumpeterian growth model in which leaders and followers conduct research and development (R&D) activities and in which leaders have different‐sized quality leads over their followers, and thus have different profit flows. We show that leaders with larger quality leads make smaller R&D investments; this result is consistent with the actual behaviors of some previous leader firms, such as Sony and Eastman–Kodak. Moreover, we show that subsidizing the R&D of followers can promote the aggregate R&D of leaders, because promotion of followers' R&D decreases (increases) the number of leaders with larger (smaller) quality leads and smaller (larger) R&D investments.

Effects of patent policy on growth and inequality: exogenous versus endogenous quality improvements

“…8 The present paper complements this strand of the literature by investigating the growth effect of patent protection in a quality-ladder 6 For other seminal studies on R&D-based endogenous economic growth, see also Romer (1990), Segerstrom et al (1990), Jones (1995), and Peretto (1998). 7 Chu et al (2019) and Iwaisako and Ohki (2019) extend the quality-ladder model in Grossman and Helpman (1991) to allow for a random innovation step size. 8 Some studies examine the effects of blocking patents; see, for instance, Chu and Pan (2013), Cozzi andGalli (2014), andYang (2018).…”

Inflation and Innovation in a Schumpeterian Economy with North–South Technology Transfer

“…In contrast, we explore the effects of inflation in a Schumpeterian quality‐ladder model as in Chu and Lai (), Chu and Cozzi (), He and Zou (), Chu et al. (), Huang, Yang, and Cheng (), Iwaisako and Ohki (), and Neto, Furukawa, and Ribeiro () . However, the present study differs from all these closed‐economy studies by considering an open‐economy two‐country model, which enables us to explore the cross‐country effects of the CIA constraints on innovation and international technology transfer.…”