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Radical Innovation and R&D Competition

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  • Maria Rosa Battaggion
  • Daniela Grieco

Abstract

Empirical evidence about innovation is doubtful in showing incumbent firms' and new entrants' attitude toward radical innovations. Moreover, theoretical works exhibit divergent conclusions when investigating the incentives to innovate. Our paper emphasizes the importance of distinguishing between degrees of innovativeness when comparing an incumbent's and an entrant's incentives to invest in innovation. The model captures the peculiarity of a radical innovation along three dimension: risk, impact on the existing market and capability of opening up a new market. The results emphasize the role of substitution and complementarity between markets in determining the incentives to innovate in the radical case. Implications on innovation policy are finally discussed.

Suggested Citation

  • Maria Rosa Battaggion & Daniela Grieco, 2009. "Radical Innovation and R&D Competition," Rivista italiana degli economisti, Società editrice il Mulino, issue 2, pages 345-360.
    • Handle: RePEc:mul:jqat1f:doi:10.1427/30394:y:2009:i:2:p:345-360
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    Cited by:

    1. Carfì, David & Gambarelli, Gianfranco & Uristani, Angelo, 2011. "Balancing pairs of interfering elements," MPRA Paper 35335, University Library of Munich, Germany.
    2. Daniela Grieco, 2018. "Innovation and stock market performance: A model with ambiguity-averse agents," Journal of Evolutionary Economics, Springer, vol. 28(2), pages 287-303, April.

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