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Adoption of Product and Process Innovations in Differentiated Markets: The Impact of Competition

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  • Pia Weiss

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Abstract

The paper examines the effects of the degree of competition on firms' decisions to innovate in differentiated markets. Firms favor product innovations if they produce close substitutes (so competition is severe) and favor process innovations if products are differentiated (so competition is less severe). Assumptions on the strategic complementarity of product and process innovations and on the decreasing returns of a product innovation are found to be the critical assumptions in the sense of Milgrom and Roberts (1994).

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Bibliographic Info

Article provided by Springer in its journal Review of Industrial Organization.

Volume (Year): 23 (2003)
Issue (Month): 3_4 (December)
Pages: 301-314

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Handle: RePEc:kap:revind:v:23:y:2003:i:3_4:p:301-314

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Web page: http://www.springerlink.com/link.asp?id=100336

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  1. Bonanno, Giacomo & Haworth, Barry, 1998. "Intensity of competition and the choice between product and process innovation," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 16(4), pages 495-510, July.
  2. Rosenkranz, Stephanie, 2003. "Simultaneous choice of process and product innovation when consumers have a preference for product variety," Journal of Economic Behavior & Organization, Elsevier, vol. 50(2), pages 183-201, February.
  3. Bester, H. & Petrakis, E., 1991. "The Incentives for Cost Reduction in a Differentiated Industry," Papers, Tilburg - Center for Economic Research 9136, Tilburg - Center for Economic Research.
  4. Milgrom, Paul & Roberts, John, 1994. "Comparing Equilibria," American Economic Review, American Economic Association, vol. 84(3), pages 441-59, June.
  5. Greenstein, Shane & Ramey, Garey, 1998. "Market structure, innovation and vertical product differentiation," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 16(3), pages 285-311, May.
  6. Rosenkranz, Stephanie, 1995. "Innovation and cooperation under vertical product differentiation," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 13(1), pages 1-22, March.
  7. Boone, Jan, 2001. "Intensity of competition and the incentive to innovate," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 19(5), pages 705-726, April.
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Cited by:
  1. Lu�sa Carvalho & Teresa Costa & Jorge Caiado, 2013. "Determinants of innovation in a small open economy: a multidimensional perspective," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 14(3), pages 583-600, June.
  2. Sebastian Braun, 2007. "Trade Liberalisation, Process and Product Innovation, and Relative Skill Demand," SFB 649 Discussion Papers SFB649DP2007-001, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  3. Cellini, Roberto & Lambertini, Luca & Sterlacchini, Alessandro, 2009. "Managerial incentive and the firms’ propensity to invest in product and process innovation," MPRA Paper 12935, University Library of Munich, Germany.
  4. Bocquet, Rachel & Le Bas, Christian & Mothe, Caroline & Poussing, Nicolas, 2013. "Are firms with different CSR profiles equally innovative? Empirical analysis with survey data," European Management Journal, Elsevier, Elsevier, vol. 31(6), pages 642-654.
  5. Murat Yildizoglu (GREThA) & Mohamed AYADI (UAQUAP, Université de Tunis) & Mohieddine RAHMOUNI (UAQUAP et GREThA), 2007. "Sectoral patterns of innovation in a developing country: The Tunisian case," Cahiers du GREThA, Groupe de Recherche en Economie Théorique et Appliquée 2007-19, Groupe de Recherche en Economie Théorique et Appliquée.
  6. Maria JOSE SILVA & Gastão SOUSA & Jacinta MOREIRA & Jorge SIMÕES, 2011. "Innovation Activities in the Service Sector: Empirical Evidence from Portuguese Firms," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, ScientificPapers.org, vol. 1(6), pages 17, October.
  7. Yu-Shan Su & Eric Tsang & Mike Peng, 2009. "How do internal capabilities and external partnerships affect innovativeness?," Asia Pacific Journal of Management, Springer, vol. 26(2), pages 309-331, June.
  8. James G. Mulligan & Nilotpal Das, 2005. "Persistent Adoption of Time-Saving Process Innovations," Working Papers, University of Delaware, Department of Economics 05-03, University of Delaware, Department of Economics.

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