We study a dynamic general equilibrium model where innovation takes the form of the introduction new goods, whose … production requires skilled workers. Innovation is followed by a costly process of standardization, whereby these new goods are … substitution between goods and other parameters. Third, we show that the interplay between innovation and standardization may lead …

innovation activities. The selection of high-skill managers is more important for innovation activities. As the economy … investments, but little selection. Closer to the world technology frontier, there is a switch to innovation-based strategy with …

frontier. In vertically integrated firms, owners (managers) have to spend time both on production and innovation activities …, and this creates managerial overload, and discourages innovation. Outsourcing of some production activities mitigates the … frontier, the value of innovation increases, encouraging outsourcing. …