Abstract:

Research and development of new technology (R&D) is generally more beneficial for society than simply the profits made by an innovator, meaning that it produces a positive externality. Therefore, the key feature of an innovation analysis is consideration of the effects of floating: an enterprise does not receive the whole profit from the R&D completed, since other firms also obtain access to the developed technology (possibly with a time lag). For this reason, many firms tend to underinvest in R&D - particularly when a company experiences a liquidity constraint.