The conjecture that R&D expenditures as a percentage of firms' sales first rise, reach a peak, and then fall as industry concentration rises is known as the
A)inverted-U theory of R&D.
B)average product of R&D theory.
C)bell-shaped-curve theory of product innovation.
D)theory of increasing and diminishing returns.

Question

Quizplus · Accepted Answer

The inverted-U theory of R&D posits that research and development (R&D) spending as a percentage of sales increases with industry concentration up to a point, after which it decreases, forming an inverted U-shape relationship. This theory suggests that moderate levels of industry concentration are most conducive to R&D investment.

The Conjecture That R&D Expenditures as a Percentage of Firms