We study a two-stage R&D project with an abandonment option. Two types of uncertaintyinfluence the decision to start R&D. Demand uncertainty is modelled as a lottery between aproportional increase and decrease in demand. Technical uncertainty is modelled as a lotterybetween a decrease and...

We study a two-stage R&D project with an abandonment option. Two types of uncertainty influence the decision to start R&D. Demand uncertainty is modelled as a lottery between a proportional increase and decrease in demand. Technical uncertainty is modelled as a lottery between a decrease and...

The basis of competition in today’s marketplace is changing from one based on human labor, to one where the principle source of value creation is an organization’s knowledge, and the organization’s ability to rapidly acquire new knowledge through learning. The rise of the knowledge economy...

How does firm entry affect innovation incentives in incumbent firms? Micro data suggest that there is heterogeneity across industries. Specifically, incumbent productivity growth and patenting is positively correlated with lagged greenfield foreign firm entry in technologically advanced...

How does firm entry affect innovation incentives in incumbent firms? Micro data suggest that there is heterogeneity across industries. Specifically, incumbent productivity growth and patenting is positively correlated with lagged greenfield foreign firm entry in technologically advanced...

This paper proposes a theoretical framework for studying the invention of new products when demand is uncertain. In this framework, under general conditions, the threat of ex post entry by a competitor can deter invention ex ante. Asymmetric market power in the ex post market exacerbates the...

In standard market theory demand and cost functions have to be known to compute optimal price or quantity responses. In case of risk or uncertainty the decisions depend on expectations, i.e. estimated parameters. Even in case of rational inference these expectations itself are uncertain, at...

Existing models of R&D are not easily reconciled with four observable aspects of R&D: initial technologies ('ideas') need to be developed further, only a minority of initial ideas is successfully brought to the market, production and process innovations take place simultaneously (whereby,...

The theoretical discussion concerning the question whether the incumbent or the (potential) entrant invests more into R&D has attracted considerable interest. This paper reports the results of an empirical study on this question using data of about 3500 German firms over the years 1992 to 1995....

We study an endogenous growth model where a profit-motivated R and D sector coexists with the introduction of free blueprints invented by philanthropists. These goods are priced at marginal cost, contrary to proprietary ones which are produced by a monopoly owned by the inventor. We show that...