Empirical studies document that resource reallocation across production units plays an important role in accounting for aggregate productivity growth in the US manufacturing. Financial market frictions could distort the reallocation process and hence may hinder aggregate productivity growth....

We present a model of endogenous firm growth with R&D investment and stochastic innovation as the engines of growth. The model for firm growth is a partial equilibrium model drawing on the quality ladder models in the macro growth literature, but also on the literature on patent races and the...