Discussion Paper No.1203
Title: The Struggle to Survive in the R&D Sector:
Implications for Innovation and Growth
Authors: Yuichi Furukawa
Abstract:
We develop a growth model capturing an important aspect of the real
world: the struggle to survive in the research and development (R&D) sector
in the form of endogenous intertemporal investments by R&D
rms to prevent
product obsolescence. The core
nding is that if legal patent protection is
too strong, a higher R&D subsidy rate delivers insu¢ cient investments to
survive in the R&D sector, depressing innovation and growth in the long run.
Quantitative analysis indicates that, in countries with a high R&D subsidy
rate, the current real-world patent protection may be high enough to have a
negative e¤ect on R&D subsidies because of the reduced number of R&D
rms.
JEL classi
cation: O31, O34, O41
Keywords: Survival, subsidy, patent breadth, R&D-based endogenous growth