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A mathematical model of applied research is formulated. It views applied research as a search in a given distribution; basic research shifts the distribution searched. The productivity of applied research effort is a function of the gap between technology in practice and basic knowledge. With constant basic and applied research a (stochastic) steady state emerges in which technological change is determined by the rate of progress of basic knowledge, and the technological gap by the level of applied research.
Evenson et al. (Thu,) studied this question.