Abstract：We study innovation and endogenous knowledge-network evolution in a general-equilibrium framework with heterogeneous firms and long-run growth.The empirical examination uses patent-citation data to track the formation of new links in the knowledge network across technological categories.We find that these new links are formed infrequently and tend to connect high-quality innovations and large firms on both ends.Formation of such new links boosts innovation and real performance of firms on both ends with positive spillovers to otherfirms.We build a tractable model to rationalize these findings and study the implications of knowledge-network dynamics on innovation incentives and aggregate growth.In the model,firminnovation relies on knowledge inputs.Each firm searches for others as knowledge-input suppliers and attracts others as users of its own knowledge.The search and attraction benefits spill over to other firms in the same industry as they share the common sets of suppliers andusers.Overtime,each firm accumulates and loses suppliers andusers,andthe network thus evolvesendogenously.We characterize the stationary equilibrium path in closed-form.We show that denser networks are associated with faster growth and to what degree the endogenous network dynamics drive aggregategrowth.Wealso show how firm values are tied to their network connections.

Lecture Introduction: TianCan,PhDin economics from the University ofPennsylvania,iscurrently an assistant professor of economics at the University of North Carolina at ChapelHill.Herresearch interests include macroeconomic theory and application,including production and knowledge network in macroeconomy,firmand industry dynamics,business cycle,etc.His main research interests are the formation and dynamics of endogenous networks and their application in macromodels.Academic articles ZengYoubiao in Journalof Monetary Economics,Journalof EconomicTheory,International Economic Review,European Economic Review,Journalof Economic Dynamics and Control.