A multi-tier model of innovation with international spillovers
Abstract
This work models innovation as a multi-tier process within an endogenous growth framework. The model is used to study how trade, knowledge spillovers, and government influences affect innovation. Different trade and innovation sharing strategies are then explored between a domestic and foreign country. Current growth models use a simple one step learning-by-doing process where labor uses the knowledge base to create new ideas. However, a one-step learning-by-doing specification neglects three important facts that might explain the differences in international growth rates: (i) not all research is motivated through the profit motive, (ii) the government is a large influence in the innovative processes, and (iii) there are many stages to the innovative process. Instead of a one-step learning-by-doing process, the model is designed around three innovation levels defined by the National Science Foundation as basic science, applied science, and development. The government is sole investor in basic research. The ideas created in basic science can then be used by an entrepreneur to develop a particular idea into a product. Within this framework a model is developed that can explore the effects of international knowledge exchange and government subsidies in greater detail than can be accomplished using a one-step learning-by-doing process. Consumers' intertemporal preferences and the profitability of entrepreneurs are found to greatly affect the ability of the government to control the extent of innovation. As a result, different countries use different innovation strategies and government spending approaches in order to maintain a growth-rate parity. The model also provides a mathematical approach to explore the differences between international cooperation and more nationalistic policies. How knowledge is transferred between countries, therefore, becomes important to determine a national research and development policy.
Degree
Ph.D.
Advisors
Pomery, Purdue University.
Subject Area
Economics
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