Chapter 15 Technology, R&D, and Efficiency
innovation
(n.) something new, a change; the act of introducing a new method, idea, device, etc.
Entrepreneur
A person who starts up and takes on the risk of a business
Optimal amount of R&D
The level of R&D at which the marginal benefit and marginal cost of R&D expenditures are equal.
Very Long Run
The period of time when the state of technology can change and in which firms can develop an offer entirely new products
interest rate cost of funds curve
a curve showing the interest rate in firm must pay to obtain a particular amount of funds to finance R&D
Imitation Problem
a firm's rivals may be able to imitate its new product or process, greatly reducing the originator's profit from its R + D effort
productive efficiency
a situation in which a good or service is produced at the lowest possible cost
inverted U theory of R&D
deals with the relationship between market structure and technological advance
venture capital
financial capital or simple money not real capital
Bonds
financial contracts through which a borrower is obligated to pay the owner of the bond both the principal and interest due on a loan on date specified in the bond contract
trademarks
gives original innovators of products the exclusive rights to use particular words, symbols, names or devices
Technological Advance
new and better goods and services and new and better ways of producing or distributing them
product innovation
new and improved methods of production or distribution
other innovators
other key people involved in the pursuit of innovation who do not bear personal financial risk
copyrights
protections provided to authors of original work
start-up
small new companies that focus on creating and introducing a new product or employing a new production or distribution technique
invention
the conception of a new product or process combined with a first proof that it will work
Fast Second Strategy
the dominant firm cancel in its own product improvement abilities marketing prowess or economics of scale to prevail
expected rate of return curve
the expected rate of return which is the marginal benefit of each dollar of expenditure on R&D
retained earnings
undistributed profit