An Explanation of the Inverted-U Relationship between
Profitability and Innovation

B 2014

An Explanation of the Inverted-U Relationship between Profitability and Innovation

KRČÁL, Ondřej

Basic information

Original name

An Explanation of the Inverted-U Relationship between Profitability and Innovation

Authors

KRČÁL, Ondřej (203 Czech Republic, guarantor, belonging to the institution)

Edition

1. vyd. Brno, 160 pp. 2014

Publisher

Masaryk University

Other information

Language

English

Type of outcome

Odborná kniha

Field of Study

50200 5.2 Economics and Business

Country of publisher

Czech Republic

Confidentiality degree

není předmětem státního či obchodního tajemství

Publication form

printed version "print"

RIV identification code

RIV/00216224:14560/14:00077997

Organization unit

Faculty of Economics and Administration

ISBN

978-80-210-7423-1

DOI

http://dx.doi.org/10.5817/CZ.MUNI.M210-7423-2014

Keywords (in Czech)

inovace; konkurence; ekonomická efektivnost; modelování; simulace; predikční modely; monografie

Keywords in English

innovations; competition; economic efficiency; modeling; simulation; predictive models; monograph

Abstract

V originále

In this book I introduce two models of innovation that explain the inverted-U relationship between profitability and innovation, and the findings of Aghion et al. (2005) and Hashmi (2005) related to the relationship between profitability and the dispersion of productivity in the industry. The basic model provides a simple and general explanation of the empirical findings. In the basic model firms choose R&D expenditures that maximize their expected profits under the assumption that R and D expenditures of firms might be constrained by the size of their profits. The prospect-theory model provides a more specific explanation of the empirical findings, which includes a behavioral model of managerial decision-making. Managers in the model choose R and D expenditures according to the preferences represented by the prospect-theory value function. For specific sets of parameter values, both models generate predictions that correspond to the empirical findings of Aghion et al. (2005) and Hashmi (2005). Finally, I show that both models generate realistic predictions for a wider range of parameter combinations around the specific parameter values.

Links

MUNI/A/0781/2013, interní kód MU

Name: Regulace trhu dopravních služeb – modely, metody a aplikace (Acronym: ReDoS)

Investor: Masaryk University, Category A

Citovat

KRČÁL, Ondřej. An Explanation of the Inverted-U Relationship between Profitability and Innovation. 1. vyd. Brno: Masaryk University, 2014, 160 pp. ISBN 978-80-210-7423-1. Available from: https://dx.doi.org/10.5817/CZ.MUNI.M210-7423-2014.

@book{1214957,
   author = {Krčál, Ondřej},
   address = {Brno},
   doi = {http://dx.doi.org/10.5817/CZ.MUNI.M210-7423-2014},
   edition = {1. vyd.},
   keywords = {innovations; competition; economic efficiency; modeling; simulation; predictive models; monograph},
   howpublished = {tištěná verze "print"},
   language = {eng},
   location = {Brno},
   isbn = {978-80-210-7423-1},
   publisher = {Masaryk University},
   title = {An Explanation of the Inverted-U Relationship between Profitability and Innovation},
   year = {2014}
}

TY  - BOOK
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AU  - Krčál, Ondřej
PY  - 2014
TI  - An Explanation of the Inverted-U Relationship between Profitability and Innovation
VL  - Neuveden
PB  - Masaryk University
CY  - Brno
SN  - 9788021074231
KW  - innovations
KW  - competition
KW  - economic efficiency
KW  - modeling
KW  - simulation
KW  - predictive models
KW  - monograph
N2  - In this book I introduce two models of innovation that explain the inverted-U relationship between profitability and innovation, and the findings of Aghion et al. (2005) and Hashmi (2005) related to the relationship between profitability and the dispersion of productivity in the industry. The basic model provides a simple and general explanation of the empirical findings. In the basic model firms choose R&D expenditures that maximize their expected profits under the assumption that R and D expenditures of firms might be constrained by the size of their profits. The prospect-theory model provides a more specific explanation of the empirical findings, which includes a behavioral model of managerial decision-making. Managers in the model choose R and D expenditures according to the preferences represented by the prospect-theory value function. For specific sets of parameter values, both models generate predictions that correspond to the empirical findings of Aghion et al. (2005) and Hashmi (2005). Finally, I show that both models generate realistic predictions for a wider range of parameter combinations around the specific parameter values.
ER  -

KRČÁL, Ondřej. \textit{An Explanation of the Inverted-U Relationship between Profitability and Innovation}. 1. vyd. Brno: Masaryk University, 2014, 160 pp. ISBN~978-80-210-7423-1. Available from: https://dx.doi.org/10.5817/CZ.MUNI.M210-7423-2014.

Detailed Information on Publication Record