Media type: Text; E-Article Title: Too much R&D? - vertical differentiation and monopolistic competition Contributor: Kranich, Jan [Author] imprint: Bingley : Emerald Group Publishing Ltd., 2009 Published in: Journal of Economic Studies 36 (2009), Nr. 6 Issue: published Version Language: English DOI: https://doi.org/10.15488/2754; https://doi.org/10.1108/01443580911001779 ISSN: 0144-3585 Keywords: Research and development ; Monopolies ; Competitive strategy ; Product design Origination: Footnote: Diese Datenquelle enthält auch Bestandsnachweise, die nicht zu einem Volltext führen. Description: Purpose: This paper aims to discuss whether product research and development (R&D) in developed economies tends to be too high compared with the socially desired level. Design/methodology/approach: In this context, a model of vertical and horizontal product differentiation within the Dixit-Stiglitz framework of monopolistic competition is set up. Firms compete in horizontal attributes of their products, and also in quality that can be controlled by R&D investments. Findings: The paper reveals that in monopolistic-competitive industries, R&D intensity is positively correlated with market concentration. Furthermore, welfare and policy analysis demonstrate an overinvestment in R&D with the result that vertical differentiation is too high and horizontal differentiation is too low. The only effective policy instrument in order to contain welfare losses is a price control of R&D services. Originality/value: Considering the extent of product R&D as well as the political efforts to promote public and private research, this paper scrutinizes its benefit incorporating income and employment effects. Thus, it goes beyond partial-analytical models of the existing industrial organization literature and provides a larger base of political analysis. © Emerald Group Publishing Limited. Access State: Open Access