DP3179 Low Returns in R&D Due to Lack of Entrepreneurial Skills

Author(s): Claudio Michelacci
Publication Date: January 2002
Keyword(s): R&D Entrepreneurship, search with endogenous growth
JEL(s): J24, O32, O40
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3179

This Paper proposes a model of endogenous growth where innovating requires both researchers, who produce inventions, and entrepreneurs who implement them. As research and entrepreneurship compete in the allocation of aggregate resources, the relation between growth and research effort is hump-shaped. When entrepreneurs appropriate too little rents from innovation, too few resources are allocated to entrepreneurship and returns to R&D are low because of this lack of entrepreneurial skills. When so, innovation should be promoted by encouraging entrepreneurship rather than research.