TY  - JOUR
AU  - Levin,Richard C.
AU  - Reiss,Peter C.
TI  - Cost-Reducing and Demand-Creating R&D With Spillovers
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2876
PY  - 1989
Y2  - March 1989
UR  - http://www.nber.org/papers/w2876
L1  - http://www.nber.org/papers/w2876.pdf
N1  - Author contact info:
Peter C. Reiss
Graduate School of Business
Stanford University
Stanford, CA 94305-5015
Tel: 650/725-2759
Fax: 650/725-7979
E-Mail: preiss@leland.stanford.edu
AB  - This paper analyzes R&D policies when the returns to cost-reducing and demand-creating R&D are imperfectly appropriable and market structure is endogenous. Previous characterizations of appropriability are generalized to permit the possibility that own and rival R&D are imperfect substitutes. We also describe how. equilibrium expenditures on process and product R&D, as well as equilibrium market structure, depend on technological opportunities and spillovers. In contrast to previous work, diminished appropriability does not necessarily reduce R&D expenditures. For example, under some conditions, an increase in the extent of process (product) spillovers will lead to an increase in product (process) R&D. We estimate several variants of the model using manufacturing line of business data and data from a survey of R&D executives.
ER  -