ABSTRACT
In this chapter, the authors analyze the theoretical and empirical work in the area of technological change and research and development (R&D), with an emphasis on trying to ascertain whether a relationship exists between market structure and the rate of technological advance. They examine the United States patent system to determine its impact on the rate of technological advance. The authors deal with Schumpeter’s argument. They discuss a few studies, summarize the stylized facts, and consider some methodological problems. The authors also examine the evidence into two parts: the relationship between firm size and inventive effort, or inputs, and the relationship between firm size and inventive output. Several early studies examined the relationship between firm size and R&D intensity, typically measured as the ratio of either R&D expenditures or R&D employment to firm size. Simple tests that regress R&D intensity against the concentration ratio and the square of the concentration ratio support the inverted-U hypothesis.
