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By Jati K. Sengupta (auth.)

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Additional resources for Technology, Innovations and Growth

Sample text

When the effects of R is captured in the form of productivity of K and L, the production frontier may be written as Y = AF(BK,CL) where A is Solow’s productivity residual and B, C are the productivities of capital and labor respectively. 3) where A0, B0 and C0 are positive constants and g1, g2, g3 are positive parameters representing productivities. Solow assumed constant returns to scale α + β = 1 and ignored the parameters B and C. , L(t ) = L0 e nt . K and I = sY where δ is the fixed rate of depreciation, the growth of per capita capital may be expressed as k = sy = (n + δ )k where y is per capita income, the dot denotes time derivative and it is assumed β = 1 − α implying constant returns.

Firm’s expected gain is derived from the probability of success times the market value of a new product or process. The race for R&D activity between a new comer and the incumbent firm yields an expected monopoly profit for the winner and models of successful R&D innovations may be constructed by using a Poisson process. If successful R&D innovations arise as a result of a Poisson process with intensity u, then the probability that a firm innovates successfully during a period dt is udt. If there are n firms and each firm has equal chance of winning the R&D race, then the probability that any particular firm becomes a winner in the race is (u/n) dt.

2. 3. 4. diffusion of the learning process; high fixed costs and very low marginal costs; increased network value with the number of uses and high switching costs. Innovations and Industry Growth 35 Arthur (1994) and Nachum (2002) have stressed three reasons why the IR processes occur more frequently today than the diminishing returns (DR) processes. The multinational enterprises (MNEs) like Microsoft, Intel and IBM have extensively used the IR processes in opening branches and subsidiaries in China, Singapore, Taiwan and other fast growing countries of Southeast Asia.

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