Microeconomic Foundations of Research and Development

Author: Lee, Tom Kwan-Yau

Year: 1979

Degree: Dissertation (Ph.D.)

Advisor: Noll, Roger G.

Committee Members: Noll, Roger G.; Ferejohn, John A.; Quirk, James P.; Wilde, Louis L.; Klein, Burton H.

Option: Social Science

DOI: 10.7907/48p1-8c06

Abstract

Numerous studies of the economics of technological change have appeared since the seminal work of Abramovitz and Solow. Most are empirical studies that are without a formal theoretical basis. Scherer was the pioneer of theoretical work on the problem of R&D rivalry.

This thesis revisits the issues in the literature on R&D. In Chapter I, sources of R&D allocative failures are identified and suggestions to remedy the situation are covered. In Chapter II, a selective critique of theoretical R&D models is provided. This completes Part I of the thesis. Part II constitutes the thesis proper. In Chapter III, I develop a nonsequential R&D search model and examine the economic determinants of R&D decisions. Predictions based on comparative statics results are given. The Reservation Technology concept is introduced. In Chapter IV, welfare implications of market structure on industrial R&D are investigated. It is shown that a monopolist may be less persistent in R&D search than a social decision maker. Sufficient conditions for noncooperative duopolists to be more persistent in R&D search than a monopolist are provided. A discussion on R&D economies of scale and a treatment of product and process innovation are also provided. Chapter V presents a new approach to the theory of R&D. A sequential R&D model with a two dimensional search space is developed and a Reswitching Property of R&D is established.

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