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On the other hand, in order to create a flow Poisson rate of Xn, an incumbent firm with n = 1 product lines must incur an expenditure of Rx(Xn, n) units of the final good.
equilibrium both the optimal Poisson rate of entry and the realized mass of entrants.
Denote by xn the external R&D intensity of a firm of size n, i.e. xn = Xn/n, where Xn is the Poisson rate of external innovation.
The first term in the second line is the change in the firm's value when losing a good j to another incumbent or an outside entrant through creative destruction, an event that occurs at the equilibrium Poisson rate t .
external innovation and transitions to n + 1, which occurs at the Poisson rate nxn (recall that here xn denotes the intensity rate).
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