TY  - JOUR
AU  - Klette,Tor Jakob
AU  - Kortum,Samuel
TI  - Innovating Firms and Aggregate Innovation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8819
PY  - 2002
Y2  - February 2002
UR  - http://www.nber.org/papers/w8819
L1  - http://www.nber.org/papers/w8819.pdf
N1  - Author contact info:
Tor Jakob Klette
E-Mail: t.j.klette@econ.uio.no

Samuel S. Kortum
Department of Economics
University of Chicago
1126 East 59th Street
Chicago, IL 60637
Tel: 773/702-8251
Fax: 773/702-8490
E-Mail: kortum@uchicago.edu
AB  - We develop a parsimonious model of innovating firms rich enough to confront firm-level evidence. It captures the dynamic behavior of individual heterogenous firms, describes the evolution of an industry with simultaneous entry and exit, and delivers a general equilibrium model of technological change. While unifying the theoretical analysis of firms, industries, and the aggregate economy, the model yields insights into empirical work on innovating firms. It accounts for the persistence over time of firms' R&D investment, the concentration of R&D among incumbent firms, and the link between R&D and patenting. Furthermore, it explains why R&D as a fraction of revenues is strongly related to firm productivity yet largely unrelated to firm size or growth.
ER  -