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Increasing Returns and Economic Analysis

Variety, Spillovers and Market Structure in a Model of Endogenous Technological Change

Publication ,  Chapter
Peretto, PF
1998

Growth theorists have produced a number of interesting models investigating the idea that technological progress, the engine of growth in income per capita, is endogenous to the economic system and driven by market forces. These models are radically different from the traditional theory of economic growth based on capital accumulation and emphasize the incentives for profit-seeking agents to undertake R&D aimed at developing new products and processes, or incrementally improving old ones. In particular, infinitely lived and perfectly enforceable patents generate local monopolies by assigning to the innovator the exclusive right to manufacture and sell the new good.1 The emphasis on the non-rivalry of knowledge and the patent law makes clear that imperfect markets and monopoly power are necessary for profit-seeking agents to undertake R&D and innovation. However, these models focus exclusively on monopolistic competition to describe market structure and firms’ behaviour. In addition, the emphasis on the patent market and free entry in R&D neglects the fact that most innovations are carried out by established producers. As a consequence, these models neglect the central role of the oligopolistic corporation and its in-house integration of manufacturing and R&D. Thus, the theory does not address those components of the market structure, like concentration, firm size and market rivalry, emphasized by Schumpeter (1942) as key determinants of the R&D activity of profit-seeking firms.

Duke Scholars

DOI

ISBN

978-1-349-26257-1

Publication Date

1998

Start / End Page

338 / 366

Publisher

Macmillan Press Ltd
 

Citation

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Peretto, P. F. (1998). Variety, Spillovers and Market Structure in a Model of Endogenous Technological Change. In K. J. Arrow, Y. K. Ng, & X. Yang (Eds.), Increasing Returns and Economic Analysis (pp. 338–366). Great Britain: Macmillan Press Ltd. https://doi.org/10.1007/978-1-349-26255-7_21
Peretto, P. F. “Variety, Spillovers and Market Structure in a Model of Endogenous Technological Change.” In Increasing Returns and Economic Analysis, edited by K. J. Arrow, Y. K. Ng, and X. Yang, 338–66. Great Britain: Macmillan Press Ltd, 1998. https://doi.org/10.1007/978-1-349-26255-7_21.
Peretto PF. Variety, Spillovers and Market Structure in a Model of Endogenous Technological Change. In: Arrow KJ, Ng YK, Yang X, editors. Increasing Returns and Economic Analysis. Great Britain: Macmillan Press Ltd; 1998. p. 338–66.
Peretto, P. F. “Variety, Spillovers and Market Structure in a Model of Endogenous Technological Change.” Increasing Returns and Economic Analysis, edited by K. J. Arrow et al., Macmillan Press Ltd, 1998, pp. 338–66. Manual, doi:10.1007/978-1-349-26255-7_21.
Peretto PF. Variety, Spillovers and Market Structure in a Model of Endogenous Technological Change. In: Arrow KJ, Ng YK, Yang X, editors. Increasing Returns and Economic Analysis. Great Britain: Macmillan Press Ltd; 1998. p. 338–366.

DOI

ISBN

978-1-349-26257-1

Publication Date

1998

Start / End Page

338 / 366

Publisher

Macmillan Press Ltd