Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/162182 
Year of Publication: 
2017
Series/Report no.: 
WWZ Working Paper No. 2017/04
Publisher: 
University of Basel, Center of Business and Economics (WWZ), Basel
Abstract: 
In this paper we analyze an inter-temporal optimization problem of a representative firm that invests in horizontal and vertical innovations and that faces a constraint with respect to total R&D spending. We find that there can exist two different steady-states of the economy when the amount of research spending falls short of an endogenously determined threshold: one with higher productivities and less new technologies being developed, and the other with more technoligies being created and lower productivities. But, for a higher amount of R&D spending the steady-state becomes unique and the firm produces the whole spectrum of available technologies. Thus, a lock-in effect may arise that, however, can be overcome by raising R&D spending sufficiently.
Subjects: 
multiple steady-states
lock-in
innovations
R&D constraint
optimal control
JEL: 
C61
D92
O32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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