On innovation cycles in a finite discrete R&D game

This paper shows that innovation (or Schumpeter's) cycles can be demonstrated in a discrete and finite dynamic game of innovation and imitation. We find that the cycles depend crucially on whether imitation is a credible threat and hence, we conclude that strategic interactions are sufficient to generate cycles in an innovation game.

► A finite discrete dynamic game of innovation is constructed. ► The cyclical behavior of innovation is explained. ► We find that strategic interactions lead to cycles.