Investment, R&D, and Long-Run Growth

  • Dietmar Hornung

Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 509)

Table of contents

  1. Front Matter
    Pages I-XVI
  2. Introduction

    1. Dietmar Hornung
      Pages 1-3
  3. An Outline of Related Research

    1. Front Matter
      Pages 5-5
    2. Dietmar Hornung
      Pages 7-11
    3. Dietmar Hornung
      Pages 13-22
  4. Product Differentiation due to R&D

    1. Front Matter
      Pages 23-23
    2. Dietmar Hornung
      Pages 25-41
    3. Dietmar Hornung
      Pages 43-57
  5. Product Differentiation due to Investment

    1. Front Matter
      Pages 59-59
    2. Dietmar Hornung
      Pages 61-72
    3. Dietmar Hornung
      Pages 73-81
  6. R&D Revisited

    1. Front Matter
      Pages 95-95
    2. Dietmar Hornung
      Pages 97-109
    3. Dietmar Hornung
      Pages 111-121
    4. Dietmar Hornung
      Pages 123-132
  7. Two-Stage Input Differentiation

    1. Front Matter
      Pages 133-133
    2. Dietmar Hornung
      Pages 135-159
    3. Dietmar Hornung
      Pages 161-174
    4. Dietmar Hornung
      Pages 175-176
  8. Back Matter
    Pages 177-196

About this book


In the 1990s, growth theory has incorporated imperfect competition in its investigations. This innovation has proven to be seminal: Cleviating from growth models with perfect competition, the new framework featured forward­ looking entrepreneurs. Firms maximize profits intertemporarily, i. e. their in­ vestment leads to instantaneous sunk costs and offers flows of future profits. Firms finance this investment by launching shares. The capital market is per­ fectly competitive, implying that the return on a share is equal to the return on a bond. As opposed to the capital market, the goods market is imperfectly competitive. As a result of investment, firms enjoy market power. That is, firms may acquire the capability to provide a product that is differentiated in, e. g. , styling, technology, accessibility, or reputation. The launch of a dif­ ferentiated product allows to capture a market niche, and successful firms may price above marginal cost. The resulting profit flows are channelled to the firms' shareholders. The introduction of monopolistic competition into growth theory is valuable: real world economies may be portrayed rather by such an imperfect competition framework than by a perfect competition approach. Starting with Romer (1990), in growth theory, modeling of imperfect competition has been notoriously bound to a focus on the impact of research and development (R&D) on economic growth. In the existing literature, growth-affecting investment is restricted to R&D investment.


Investment economic growth growth growth model growth theory research & development (R&D)

Authors and affiliations

  • Dietmar Hornung
    • 1
  1. 1.Emerging Markets ResearchDGZ Deka Bank Deutsche KommunalbankFrankfurt/MainGermany

Bibliographic information

  • DOI
  • Copyright Information Springer-Verlag Berlin Heidelberg 2002
  • Publisher Name Springer, Berlin, Heidelberg
  • eBook Packages Springer Book Archive
  • Print ISBN 978-3-540-42528-1
  • Online ISBN 978-3-642-51718-1
  • Series Print ISSN 0075-8442
  • Buy this book on publisher's site
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