Publication details for Prof Guido CozziCozzi, G. & Spinesi, L. (2006). How much horizontal innovation is consistent with vertical innovation? Research in Economics 60(1): 47-53.
- Publication type: Journal papers: academic
- ISSN/ISBN: 1090-9443
- DOI: 10.1016/j.rie.2005.12.001
- Keywords: Schumpeterian growth theory, Horizontal and vertical innovation, Scale effects
- View online: Online version
- Durham research online: DRO record
Author(s) from Durham
R&D-driven growth theory emphasizes vertical and horizontal innovation activities for long run growth. In this paper, we show that the real world co-existence of both innovative activities restricts the admissible laws of motion for horizontal innovation, thereby allowing to test the admissible range of intertemporal horizontal R&D spillovers. Private arbitrage between manufacturing and vertically innovating makes quality improving R&D profitable if and only if the horizontal innovation rate does not exceed the population growth rate. Hence, the mere observation of positive vertical innovation suggests that the number of new sectors has not been increasing faster than population.