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Is there really an inverted U-shaped relation between competition and R&D?

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  • Patrik Gustavsson Tingvall
  • Andreas Poldahl

Abstract

We test whether predictions of the Aghion et al. (Aghion, P., Bloom, N., Blundell, R., Griffith, R. and Howitt, P. (2004) Competition and Innovation: An Inverted U Relationship. NBER Working Paper series, No. 9269.) model are supported by firm-level data. In particular, we analyze if there is an inverted U-shaped relation between competition and R&D. Results show that the inverted U-shaped relation is supported by the Herfindahl index but not by the price cost margin. Using the Herfindahl index, results suggest that breaking up monopolies increases R&D, whereas further increases in competition most likely lead to reduced R&D. Comparing different estimators, we find that time series-based estimators typically result in less clear-cut results, probably driven by a lack of time series variation in measures of competition.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Economics of Innovation and New Technology.

Volume (Year): 15 (2006)
Issue (Month): 2 ()
Pages: 101-118

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Handle: RePEc:taf:ecinnt:v:15:y:2006:i:2:p:101-118

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Keywords: R&D; Competition; Firm size; Spillovers;

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Citations

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Cited by:
  1. Yanrui Wu, 2012. "R&D Behaviour in Chinese Firms," Economics Discussion / Working Papers, The University of Western Australia, Department of Economics 12-26, The University of Western Australia, Department of Economics.
  2. Ivan Ledezma, 2010. "Defensive Strategies in the Quality Ladders," Working Papers, DIAL (Développement, Institutions et Mondialisation) DT/2010/11, DIAL (Développement, Institutions et Mondialisation).
  3. YAGI Michiyuki & MANAGI Shunsuke, 2013. "Competition and Innovation: An inverted-U relationship using Japanese industry data," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 13062, Research Institute of Economy, Trade and Industry (RIETI).
  4. Patrik Gustavsson Tingvall & Patrik Karpaty, 2011. "Service-sector competition, innovation and R&D," Economics of Innovation and New Technology, Taylor & Francis Journals, Taylor & Francis Journals, vol. 20(1), pages 63-88.
  5. Tom Holden, 2012. "Medium-frequency cycles and the remarkable near trend-stationarity of output," School of Economics Discussion Papers, School of Economics, University of Surrey 1412, School of Economics, University of Surrey.
  6. Márquez-Ramos, Laura & Martínez-Zarzoso, Inmaculada, 2010. "The effect of technological innovation on international trade," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, Kiel Institute for the World Economy, vol. 4(11), pages 1-37.
  7. Márquez-Ramos, Laura & Martínez-Zarzoso, Inmaculada, 2009. "The effect of technological innovation on international trade: a nonlinear approach," Economics Discussion Papers, Kiel Institute for the World Economy 2009-24, Kiel Institute for the World Economy.
  8. Lundborg, Per, 2005. "Wage Fairness, Growth and the Utilization of R&D Workers," Working Paper Series, Trade Union Institute for Economic Research 206, Trade Union Institute for Economic Research.
  9. Richard Harris & John Moffat, 2011. "R&D, innovation and exporting," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 33593, London School of Economics and Political Science, LSE Library.
  10. Chiara Peroni & Ivete Ferreira, 2012. "Competition and Innovation in Luxembourg," Journal of Industry, Competition and Trade, Springer, Springer, vol. 12(1), pages 93-117, March.
  11. Lundborg, Per, 2005. "Wage Theories for the Swedish Labour Market," Working Paper Series, Trade Union Institute for Economic Research 207, Trade Union Institute for Economic Research.
  12. repec:hal:wpaper:halshs-00586709 is not listed on IDEAS

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