Advertisement

Economic Theory

, Volume 59, Issue 2, pp 401–433 | Cite as

Leapfrogging cycles in international competition

  • Yuichi FurukawaEmail author
Research Article

Abstract

Technological leadership has shifted at various times from one country to another. We propose a mechanism that explains this perpetual cycle of technological leapfrogging in a two-country model including the dynamic optimization of an infinitely lived consumer. In the model, each country accumulates knowledge stock over time because of domestic innovation and spillovers from foreign innovation. We show that if the international knowledge spillovers are reasonably efficient, technological leadership may shift first from one country to another, and then alternate between countries along an equilibrium path.

Keywords

Perpetual leapfrogging Innovation cycles Growth cycles Endogenous innovation Knowledge spillovers 

JEL Classification

E32 F44 O33 

References

  1. Aghion, P., Harris, C., Howitt, P., Vickers, J.: Competition, imitation and growth with step-by-step innovation. Rev. Econ. Stud. 68, 467–492 (2001)CrossRefGoogle Scholar
  2. Athreye, S., Godley, A.: Internationalization and technological leapfrogging in the pharmaceutical industry. Ind. Corp. Change 18, 295–323 (2009)Google Scholar
  3. Barnett, R.C., Bhattacharya, J.: Rejuveniles and growth. Eur. Econ. Rev. 52, 1055–1071 (2008)CrossRefGoogle Scholar
  4. Barnett, R.C., Bhattacharya, J., Bunzel, H.: Deviant generations. Ricardian equivalence, and growth cycles. Econ. Theory 52, 367–396 (2013)Google Scholar
  5. Borensztein, E., De Gregorio, J., Lee, J.-W.: How does foreign direct investment affect economic growth? J. Int. Econ. 45, 115–135 (1998)CrossRefGoogle Scholar
  6. Branstetter, L.: Is foreign direct investment a channel of knowledge spillovers? Evidence from Japan‘s FDI in the United States. J. Int. Econ. 68, 325–344 (2006)Google Scholar
  7. Brezis, E.S.: Foreign capital flows in the century of Britain’s industrial revolution: new estimates, controlled conjectures. Econ. Hist. Rev. 48, 46–67 (1995)CrossRefGoogle Scholar
  8. Brezis, E.S., Tsiddon, D.: Economic growth, leadership and capital flows: The leapfrogging effect. J. Int. Trade Econ. Dev. 7, 261–277 (1998)CrossRefGoogle Scholar
  9. Brezis, E.S., Krugman, P.R., Tsiddon, D.: Leapfrogging in international competition: a theory of cycles in national technological leadership. Am. Econ. Rev. 83, 1211–1219 (1993)Google Scholar
  10. Broda, C., Weinstein, D.E.: Globalization and the gains from variety. Q. J. Econ. 121, 541–585 (2006)CrossRefGoogle Scholar
  11. Carolan, T., Singh, N., Talati, C.: The composition of U.S.-East Asia trade and changing comparative advantage. J. Dev. Econ. 57, 89–361 (1998)CrossRefGoogle Scholar
  12. Chu, A.C.: The welfare cost of one-size-fits-all patent protection. J. Econ. Dyn. Cont. 35, 876–890 (2011)CrossRefGoogle Scholar
  13. Cohen, W.M., Levinthal, D.A.: Innovation and learning: the two faces of R&D. Econ. J. 99, 569–596 (1989)CrossRefGoogle Scholar
  14. Dastidar, K.G., Dei, F.: Introduction. Pac. Econ. Rev., forthcoming (2014)Google Scholar
  15. Davids, K.: The Rise and Decline of Dutch Technological Leadership. Leiden, Brill, Netherlands (2008)Google Scholar
  16. Deneckere, R., Kenneth J.: Cyclical and chaotic behavior in a dynamic equilibrium model. In: Benhabib, J. (eds.) Cycles and Chaos in Economic Equilibrium. Princeton University Press, Princeton (1992).Google Scholar
  17. Desmet, K.: A simple dynamic model of uneven development and overtaking. Econ. J. 112, 894–918 (2002)CrossRefGoogle Scholar
  18. Drugeon, J.-P.: On the emergence of competitive equilibrium growth cycles. Econ. Theory 52, 397–427 (2013)CrossRefGoogle Scholar
  19. Feenstra, R.C.: Trade and uneven growth. J. Dev. Econ. 49, 229–256 (1996)CrossRefGoogle Scholar
  20. Francois, P., Lloyd-Ellis, H.: Animal spirits through creative destruction. Am. Econ. Rev. 93, 530–550 (2003)CrossRefGoogle Scholar
  21. Francois, P., Lloyd-Ellis, H.: Implementation cycles, investment and growth. Int. Econ. Rev. 49, 901–942 (2008)CrossRefGoogle Scholar
  22. Francois, P., Lloyd-Ellis, H.: Schumpeterian business cycles with pro-cyclical R&D. Rev. Econ. Dyn. 12, 567–591 (2009)CrossRefGoogle Scholar
  23. Francois, P., Lloyd-Ellis, H.: Implementation cycles, growth and the labour market. B.E J. Macroecon. 13, 287–329 (2013)CrossRefGoogle Scholar
  24. Francois, P., Shi, S.: Innovation, growth, and welfare-improving cycles. J. Econ. Theory 85, 226–257 (1999)CrossRefGoogle Scholar
  25. Furukawa, Y.: Growth Miracles and Leapfrogging Cycles in a Many-Country model. Chukyo University, mimeo (2012)Google Scholar
  26. Furukawa, Y.: Unpublished appendix, mimeo, Chukyo University (2014)Google Scholar
  27. Furukawa, Y., Yano, M.: Market quality and market infrastructure in the South and technology diffusion. Int. J. Econ. Theory 10, 139–146 (2014)CrossRefGoogle Scholar
  28. Gale, D.: Delay and cycles. Rev. Econ. Stud. 63, 169–198 (1996)CrossRefGoogle Scholar
  29. Gilbert, R., Shapiro, C.: Optimal patent length and breadth. RAND J. Econ. 21, 106–112 (1990)CrossRefGoogle Scholar
  30. Giovannetti, E.: Perpetual leapfrogging in Bertrand duopoly. Int. Econ. Rev. 42, 671–696 (2001)CrossRefGoogle Scholar
  31. Giovannetti, E.: Catching up, leapfrogging, or forging ahead? Exploring the effects of integration and history on spatial technological adoptions. Environ. Plan. A 45, 930–946 (2013)CrossRefGoogle Scholar
  32. Glass, A. Imitation as a stepping stone to innovation, Working Papers 99–11, Ohio State University, Department of Economics (1999)Google Scholar
  33. Goh, A.-T., Olivier, J.: Optimal patent protection in a two-sector economy. Int. Econ. Rev. 43, 1191–1214 (2002)CrossRefGoogle Scholar
  34. Grossman, G.M., Helpman, E.: Innovation and Growth in the Global Economy. MIT Press, Cambridge (1991)Google Scholar
  35. Hall, R.E.: Market structure and macroeconomic fluctuations. Brook. Papers Econ. Act. 2, 285–322 (1986)CrossRefGoogle Scholar
  36. Hall, R.E.: Potential competition, limit pricing, and price elevation from exclusionary conduct. Issue Compet. Law Policy 433, ABA Section of Antitrust Law: 433–448 (2008)Google Scholar
  37. Harrington, J., Jr., Iskhakov, F., Rust, J., Schjerning, B.: A dynamic model of leap-frogging investments and Bertrand price competition, mimeo (2010). http://econweb.umd.edu/~davis/eventpapers/RustDynamicModel. Accessed 27 October 2014
  38. Helpman, E.: Innovation, imitation, and intellectual property rights. Econometrica 61, 1247–1280 (1993)CrossRefGoogle Scholar
  39. Iwaisako, T., Futagami, K.: Patent protection, capital accumulation, and economic growth. Econ. Theory 52, 631–668 (2013)CrossRefGoogle Scholar
  40. Iwaisako, T., Tanaka, H.: Product cycles and growth cycles, mimeo, Osaka University (2014)Google Scholar
  41. Kaas, L., Zink, S.: Human capital and growth cycles. Econ. Theory 31, 19–33 (2007)CrossRefGoogle Scholar
  42. Kitagawa, A., Shibata, A.: Endogenous growth cycles in an overlapping generations model with investment gestation lags. Econ. Theory 25, 751–762 (2005)CrossRefGoogle Scholar
  43. Krugman, P.: A model of innovation, technology transfer, and the world distribution of Income. J. Political Econ. 87, 253–266 (1979)CrossRefGoogle Scholar
  44. Krusell, P., Rios-Rull, JV.: Vested interests in a positive theory of Stagnation and Growth. Rev. Econ. Stud. 63, 301–329 (1996)Google Scholar
  45. Lai, E.L.-C.: International intellectual property rights protection and the rate of product innovation. J. Dev. Econ. 55, 133–153 (1998)Google Scholar
  46. Lee, J., Kim, B.-C., Lim, Y.-M.: Dynamic competition in technological investments: an empirical examination of the LCD panel industry. Int. J. Ind. Organ. 29, 718–728 (2011)CrossRefGoogle Scholar
  47. Li, C.-W.: On the policy implications of endogenous technological progress. Econ. J. 111, C164–C179 (2001)CrossRefGoogle Scholar
  48. Matsuyama, K.: Growing through cycles. Econometrica 67, 335–347 (1999)CrossRefGoogle Scholar
  49. Matsuyama, K.: Growing through cycles in an infinitely lived agent economy. J. Econ. Theory 100, 220–234 (2001)CrossRefGoogle Scholar
  50. Matsuyama, K.: Credit traps and credit cycles. Am. Econ. Rev. 97, 503–516 (2007)CrossRefGoogle Scholar
  51. Mokyr, J.: The Lever of Riches. Technological Creativity and Economic Progress. Oxford University Press, Oxford (1990)Google Scholar
  52. Motta, M., Thisse, J.-F., Cabrales, A.: On the persistence of leadership or leapfrogging in international trade. Int. Econ. Rev. 38, 809–824 (1997)CrossRefGoogle Scholar
  53. Nelson, R.R., Wright, G.: The rise and fall of American technological leadership: the postwar era in historical perspective. J. Econ. Lit. 30, 1931–1964 (1992)Google Scholar
  54. Nishimura, K., Venditti, A., Yano, M.: Destabilization effect of international trade in a perfect foresight dynamic general equilibrium model. Econ. Theory 55, 357–392 (2014)CrossRefGoogle Scholar
  55. Nishimura, K., Yano, M.: Introduction to the special issue on nonlinear macroeconomic dynamics. Int. J. Econ. Theory 4, 1–2 (2008)CrossRefGoogle Scholar
  56. Obstfeld, M., Taylor, A.M.: Global capital markets: Integration, crisis, and growth. Cambridge University Press, Cambridge (2004)Google Scholar
  57. Ohyama, M., Jones, R.W.: Technology choice, overtaking and comparative advantage. Rev. Int. Econ. 3, 224–234 (1995)CrossRefGoogle Scholar
  58. Petrakos, G., Rodríguez-Pose, A., Rovolis, A.: Growth, integration, and regional disparities in the European Union. Environ. Plan. A 37, 1837–1855 (2005)CrossRefGoogle Scholar
  59. Quah, D.: Regional convergence clusters across Europe. Eur. Econ. Rev. 40, 951–958 (1996a)CrossRefGoogle Scholar
  60. Quah, D.: Empirics for economic growth and convergence. Eur. Econ. Rev. 40, 1353–1375 (1996b)CrossRefGoogle Scholar
  61. Rogers, M.: Absorptive capability and economic growth: How do countries catch-up? Camb. J. Econ. 28, 577–596 (2004)CrossRefGoogle Scholar
  62. Romer, P.M.: Endogenous technological change. J. Polit. Econ. 98, S71–S102 (1990)CrossRefGoogle Scholar
  63. Shleifer, A.: Implementation cycles. J. Polit. Econ. 94, 1163–1190 (1986)CrossRefGoogle Scholar
  64. Twomey, M.J.: A century of foreign investment in the third world. Routledge, London (2000)Google Scholar
  65. van de Klundert, T., Smulders, S.: Endogenous growth model. J. Int. Econ. 54, 211–231 (2001)CrossRefGoogle Scholar
  66. Yang, H.: Information aggregation and investment cycles with strategic complementarity. Econ. Theory 43, 281–311 (2010)CrossRefGoogle Scholar
  67. Yano, M.: A price competition game under free entry. Econ. Theory 29, 395–414 (2006)Google Scholar
  68. Yano, M.: The foundation of market quality economics. Jpn. Econ. Rev. 60, 1–32 (2009)CrossRefGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2014

Authors and Affiliations

  1. 1.School of EconomicsChukyo UniversityNagoyaJapan

Personalised recommendations