Firm behavior and the externalities of technological leadership

Benjamin Bental, Dennis Fixler

Research output: Contribution to journalArticlepeer-review


A simple two firm model in which technological knowledge lies in an existing product's attribute is analyzed. Accordingly, the technologically leading firm, the firm whose current product is more advanced, produces a knowledge externality. The technologically less advanced firm may take advantage of the externality, by learning the technology and embarking on its own development plan. If the follower instead just imitates the leader's product, the externality is likely to have an adverse effect on the imitator, reflecting the notion that a larger technological gap makes imitation more difficult. Comparative statistics experiments reveal among other things that greater initial technological gaps encourage technological progress if the follower imitates. As a result, the introduction of a patent system in this case would inhibit technological progress.

Original languageEnglish
Pages (from-to)1731-1746
Number of pages16
JournalEuropean Economic Review
Issue number9
StatePublished - Nov 1988
Externally publishedYes

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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