R&D activities and incentives, together with the pace of the resulting technical progress, have been core issues ever since the pioneering work of Schumpeter (1942) and the consequent debate about the so-called Schumpeterian hypothesis, according to which the higher is the degree of market power enjoyed by a firm, the higher is her incentive to invest in innovation. This debate has received a crucial impulse by Arrow (1962), putting forward convincing argument against the Schumpeterian claim, by pointing out that a firm operating initially under perfect competition should indeed be endowed with the highest possible incentive to strive for an innovation whereby, if successful, she could throw her rivals out of the market and acquire monopoly power over the latter.
Cellini, R. and Lambertini, L. (2008), "The Editors' Preface", Cellini, R. and Lambertini, L. (Ed.) The Economics of Innovation (Contributions to Economic Analysis, Vol. 286), Emerald Group Publishing Limited, Bingley, pp. ix-xiii. https://doi.org/10.1016/S0573-8555(08)00212-5
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