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Incumbent innovation and domestic entry

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Author Info

  • Oliver Falck

    ()

  • Stephan Heblich

    ()

  • Stefan Kipar

    ()

Abstract

This paper analyzes the escape-entry incentive for innovation by incumbent firms. The threat posed by the possibility of leading-edge firms entering the market influences incumbent innovation. To overcome problems of endogeneity, we apply an instrumental variable approach to analyze a rich firm-level dataset (1987-2000) for Germany. We find evidence that domestic entry has a negative effect on incumbent product innovation, which is a strong indication of new entrants’ comparative advantage in commercializing new ideas. In contrast, domestic entry has a positive effect on incumbent process innovations, an effect also known as the escape-entry effect.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s11187-009-9219-1
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Bibliographic Info

Article provided by Springer in its journal Small Business Economics.

Volume (Year): 36 (2011)
Issue (Month): 3 (April)
Pages: 271-279

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Handle: RePEc:kap:sbusec:v:36:y:2011:i:3:p:271-279

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Web page: http://www.springerlink.com/link.asp?id=100338

Related research

Keywords: Entry; Process innovation; Product innovation; O3; L16; L26; M13;

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References

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  1. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2006. "The Effects of Entry on Incumbent Innovation and Productivity," NBER Working Papers 12027, National Bureau of Economic Research, Inc.
  2. Joshua D. Angrist, 2000. "Estimation of Limited-Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice," NBER Technical Working Papers 0248, National Bureau of Economic Research, Inc.
  3. Duranton, Gilles & Puga, Diego, 2005. "From sectoral to functional urban specialisation," Journal of Urban Economics, Elsevier, vol. 57(2), pages 343-370, March.
  4. Edward L. Glaeser & Glenn Ellison, 1999. "The Geographic Concentration of Industry: Does Natural Advantage Explain Agglomeration?," American Economic Review, American Economic Association, vol. 89(2), pages 311-316, May.
  5. Stefan Lachenmaier, 2007. "Effects of innovation on firm performance," ifo Beiträge zur Wirtschaftsforschung, Ifo Institute for Economic Research at the University of Munich, number 28.
  6. Yukako Ono, 2002. "Outsourcing business services and the role of central administrative offices," Working Paper Series WP-02-01, Federal Reserve Bank of Chicago.
  7. Audretsch, David B. & Falck, Oliver & Heblich, Stephan, 2011. "Who’s got the aces up his sleeve? Functional specialization of cities and entrepreneurship," Munich Reprints in Economics 20179, University of Munich, Department of Economics.
  8. Falck, Oliver, 2009. "Routinization of innovation in German manufacturing: The David - Goliath symbiosis revisited," Munich Reprints in Economics 20494, University of Munich, Department of Economics.
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Citations

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Cited by:
  1. Carlos Carreira & Paulino Teixeira, 2010. "Does Schumpeterian Creative Destruction Lead to Higher Productivity? The effects of firms’ entry," GEMF Working Papers 2010-20, GEMF - Faculdade de Economia, Universidade de Coimbra.
  2. Christian Seiler, 2012. "The Data Sets of the LMU-ifo Economics & Business Data Center - A Guide for Researchers," Ifo Working Paper Series Ifo Working Paper No. 138, Ifo Institute for Economic Research at the University of Munich.
  3. Aradhna Aggarwal & Takahiro Sato, 2011. "Firm Dynamics and Productivity Growth in Indian Manufacturing: Evidence from Plant Level Panel Dataset," Discussion Paper Series DP2011-07, Research Institute for Economics & Business Administration, Kobe University.

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