Social Versus Private Returns to the Innovations by Small Firms Compared to Large Firms

摘要

The study focuses on the size of firms as a factor in determining the gap between private and social rates of return to innovation. The authors test the hypothesis that innovations carried out by small firms tend to have a larger gap between private and social rates of return than the innovations carried out by larger firms. If indeed small firms are unable to appropriate fully (or to as great an extent as larger firms) the economic benefits of their innovations, then these firms face inadequate incentives to undertake the amount of investment in innovative activity that would be socially optimal.