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Are the public firms more innovative than the private ones?

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  • Juan Carlos Bárcena-Ruiz

Abstract

This paper shows that the public firms can be more innovative and, thus, more efficient than the private firms. To verify this conclusion, a mixed duopoly is considered that allows both the public firm and the private firm to adopt a new technology with a positive fixed cost that reduces the marginal cost of production. The private firm maximizes profits while the public firm maximizes the weighed sum of the consumer and producer surpluses. In this framework, it is shown that if the cost of setting up a new technology takes an intermediate value when the weight of the consumer surplus in social welfare is high enough, the public firm is more innovative than the private one. Moreover, there is at least as much innovation in a mixed duopoly as in a private duopoly if the cost of setting up a new technology is high enough.

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Bibliographic Info

Article provided by University of Economics, Prague in its journal Prague Economic Papers.

Volume (Year): 2008 (2008)
Issue (Month): 2 ()
Pages: 157-167

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Handle: RePEc:prg:jnlpep:v:2008:y:2008:i:2:id:327:p:157-167

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Related research

Keywords: mixed duopoly; innovation;

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References

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  1. Nett, Lorenz, 1994. "Why private firms are more innovative than public firms," European Journal of Political Economy, Elsevier, vol. 10(4), pages 639-653, December.
  2. Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December.
  3. Vining, Aidan R & Boardman, Anthony E, 1992. " Ownership versus Competition: Efficiency in Public Enterprise," Public Choice, Springer, vol. 73(2), pages 205-39, March.
  4. Bester, H. & Petrakis, E., 1991. "The Incentives for Cost Reduction in a Differentiated Industry," Discussion Paper, Tilburg University, Center for Economic Research 1991-36, Tilburg University, Center for Economic Research.
  5. De Fraja, Giovanni, 1993. "Unions and Wages in Public and Private Firms: A Game-Theoretic Analysis," Oxford Economic Papers, Oxford University Press, vol. 45(3), pages 457-69, July.
  6. Willner, Johan, 1999. "Policy objectives and performance in a mixed market with bargaining," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 17(1), pages 137-145, January.
  7. Bos, Dieter & Peters, Wolfgang, 1995. "Double inefficiency in optimally organized firms," Journal of Public Economics, Elsevier, vol. 56(3), pages 355-375, March.
  8. Poyago-Theotoky, Joanna, 1998. "R&D Competition in a Mixed Duopoly under Uncertainty and Easy Imitation," Journal of Comparative Economics, Elsevier, vol. 26(3), pages 415-428, September.
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Cited by:
  1. Chen, Yi-Wen & Yang, Ya-Po & Wang, Leonard F.S. & Wu, Shih-Jye, 2014. "Technology licensing in mixed oligopoly," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 193-204.

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