Bài giảng MicroEconomics - Chapter 11W: Technology, R&D, and Efficiency

Technology, R&D, and EfficiencyChapter 11WMcGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.Chapter ObjectivesInvention, innovation, and technological diffusionFurthering technological advanceOptimal amount of R&DBenefits from innovationMarket structure and technological advanceTechnological advance and efficiency 11W-2Technological AdvanceOccurs in the very long runOccurs in response to incentivesArises from firm rivalryFirms seek new profit opportunities11W-3Invention-Innovation-DiffusionThree step processInventionPatentInnovationProduct innovationProcess innovationDiffusionRequires R&D expenditure11W-4U.S. R&D ExpendituresSource: National Science FoundationBasicResearchAppliedResearch(invention)4%22%74%Development(innovation and imitation)Composition of business outlays 200611W-5Source: National Science Foundation012345R&D ExpendituresTotal R&D expenditures as a percentageof GDP, 2006SwedenJapanUnited StatesGermanyFranceCanadaUnited KingdomItalyRussia11W-6Role of EntrepreneursEntrepreneursBear financial riskOther innovatorsForming start-upsInnovating within existing firmsAnticipating the futureExploiting university and government scientific research11W-7Firm’s Optimal R&D AmountMarginal benefit and marginal costSources of fundsBank loansBondsRetained earningsVenture capitalPersonal savingsInterest-rate cost of funds Expected-rate-of-return11W-81816141210864$10203040506070808888888820161284020406080100Expectedrate ofreturn, %R&DmillionsInterestRatecost offunds, %Expected Rate of Return, rAnd Interest Rate, i (Percent)Research and DevelopmentExpenditures (Millions of Dollars)r = iirFirm’s Optimal R&D Amount11W-9Three important pointsOptimal vs. affordable R&DExpected, not guaranteed, returnsAdjustmentsFirm’s Optimal R&D Amount11W-10Increased ProfitsIncreased revenue via product innovationImportance of priceUnsuccessful new productsProduct improvementsReduced cost via process innovation11W-11Increased ProfitsTotal ProductAverage Total CostUnits of LaborUnits of Output250020001000TP1TP2ATC1ATC220002500$5040Innovation increases TP and decreases ATCMaking greater production possible at lower costs11W-12Imitation and R&D IncentivesImitation problemFast-second strategyBenefits of being firstPatentsCopyrights and trademarksBrand-name recognitionTrade secrets and learning by doingTime lagsProfitable buyouts11W-13Distribution of U.S. PatentsSource: U.S. Patent and Trademark Office Top 10 foreign countriesNumber of U.S. patents, 1963-2006Japan (658,827)Germany (295,110)U.K. (123,371)France (110,839)Canada (77,594)Taiwan (58,162)Switzerland (52,201)South Korea (44,125)Italy (43,668)Sweden (38,456)11W-142005U.S. R&D Expenditures1980 - 2006Source: National Science FoundationBusiness R&D Expenditures(Billions of 2000 Dollars)YearBusiness R&DExpenditures11W-15Role of Market StructureWhich type of market structure is best suited to technological advancePure competitionMonopolistic competitionOligopolyPure monopoly11W-16Inverted-U TheoryMore CompetitionLess Competition0257510050Concentration Ratio (Percent)R&D Expenditures as aPercentage of SalesA “loose” oligopoly supports the optimum R&D spending11W-17Technological Advance and EfficiencyProductive efficiencyIncreasing productivity of inputsAllocative efficiencyA more-preferred mix of goods and servicesCreative destruction11W-18Key Termstechnological advancevery long runinventionpatentinnovationproduct innovationprocess innovationdiffusionstart-upsventure capitalinterest-rate cost-of-funds curveexpected-rate-of-return curveoptimal amount of R&Dimitation problemfast-second strategyinverted-U theory of R&Dcreative destruction11W-19Next Chapter PreviewThe Demand For Resources11W-20