R&D Investment and Technology Adoption
نویسندگان
چکیده
We study a model of technology adoption. The firm’s profit is depending on the technology that it uses. The firm holds the option to upgrade its current technology with a new one. Technology progress is modeled with a Poisson process. The firm can either rely on the external R&D market or it can setup its own R&D center. The arrival rate of new technologies in the external R&D market is constant and given. Whenever the firm chooses to setup its own R&D center it can optimaly set the arrival rate of the new technologies. However, the setup costs are increasing in the selected arrival rate. We identify the parameter values for which its optimal for the firm to setup its own R&D center and for those parameter values we determine the optimal arrival rate. Moreover, we determine the optimal technology adoption trigger in all situations. We end the paper with comparative static results.
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