ABSTRACT
The importance of technological change is stressed throughout this text. In Chapter 1 we wrote, “Most economists recognize that even if an industry achieves static effi -ciency its performance may be poor if it fails to invest in research and development (R&D) at an optimal rate.” Moreover, the current business literature stresses the importance of R&D: Firms become successful by developing either new ways of producing or new products. 1 In this chapter we analyze the theoretical and empirical work in the area of technological change and R&D, with an emphasis on trying to ascertain whether a relationship exists between market structure and the rate of technological advance. The objective is to determine whether there is an ideal market structure that results in an optimal rate of technological advance. We also examine the United States patent system to determine its impact on the rate of technological advance.
