Big Data Approach to Firm Level Innovation in Manufacturing by Seyed Mehrshad Parvin Hosseini & Aydin Azizi

Author:Seyed Mehrshad Parvin Hosseini & Aydin Azizi
Language: eng
Format: epub
ISBN: 9789811563003
Publisher: Springer Singapore

3.7 Costs of Innovation

Once the decision to invest in innovation is made, the firm has to determine the level of innovation to invest in. For this, the firm balances the costs involved against the benefit (revenue) gained from the additional level of investment being contemplated. If the positive externalities associated with innovation are ignored (as firms most likely will), they will choose the level of investment where the PMB = PMC (point E1 in Fig. 3.3). This will not reflect the socially optimal level of innovation and in fact will be below it (or at a suboptimal level).

Fig. 3.3The privately optimal levels of investment in innovation [19]

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