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Innovation and firm-level persistent profitability: a Schumpeterian framework

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  • Peter W Roberts

    (Columbia Business School, Columbia University, New York, NY, USA)

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    Abstract

    Studies of firm-level profit dynamics tend to attribute the variance in profit persistence to variability in the extent to which imitative pressures are resisted. This monopoly-based explanation of persistent profitability implicitly assumes a one-to-one correspondence between firm-level and product-level profit dynamics. Following Schumpeter, this paper begins to develop a framework for firm-level profit persistence that embraces product innovation, competitor imitation, and, more importantly, the prospect that several product innovations may be embodied within a single firm. Such an approach opens the door for an innovation-based explanation of profit persistence to accompany the monopoly-based arguments that are typically offered. Copyright © 2001 John Wiley & Sons, Ltd.

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    Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

    Volume (Year): 22 (2001)
    Issue (Month): 4-5 ()
    Pages: 239-250

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    Handle: RePEc:wly:mgtdec:v:22:y:2001:i:4-5:p:239-250

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    Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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    1. Scherer, F M, 1992. "Schumpeter and Plausible Capitalism," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 30(3), pages 1416-33, September.
    2. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1987. "Appropriating the Returns from Industrial Research and Development," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 783-832.
    3. Mansfield, Edwin & Schwartz, Mark & Wagner, Samuel, 1981. "Imitation Costs and Patents: An Empirical Study," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 91(364), pages 907-18, December.
    4. Mueller, Dennis C, 1977. "The Persistence of Profits above the Norm," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 44(176), pages 369-80, November.
    5. Schohl, Frank, 1990. "Persistence of profits in the long run: A critical extension of some recent findings," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 8(3), pages 385-404, September.
    6. Cubbin, John & Geroski, Paul A, 1987. "The Convergence of Profits in the Long Run: Inter-firm and Inter-industry Comparisons," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 35(4), pages 427-42, June.
    7. Comanor, William S, 1986. "The Political Economy of the Pharmaceutical Industry," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 24(3), pages 1178-1217, September.
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    Cited by:
    1. Qin Yang & Crystal Jiang, 2007. "Location advantages and subsidiaries’ R&D activities in emerging economies: Exploring the effect of employee mobility," Asia Pacific Journal of Management, Springer, Springer, vol. 24(3), pages 341-358, September.
    2. Vaaler, Paul M. & McNamara, Gerry, 2006. "Are Technology-Intensive Industries More Dynamically Competitive? No and Yes," Working Papers, University of Illinois at Urbana-Champaign, College of Business 06-0124, University of Illinois at Urbana-Champaign, College of Business.
    3. Tarziján, Jorge & Brahm, Francisco & Daiber, Luis Felipe, 2008. "Entrepreneurial profitability and persistence: Chile versus the U.S.A," Journal of Business Research, Elsevier, Elsevier, vol. 61(6), pages 599-608, June.
    4. Stefano Brusoni & Elena Cefis & Luigi Orsenigo, 2006. "Innovate or Die? A critical review of the literature on innovation and performance," KITeS Working Papers, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy 179, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Sep 2006.
    5. Ljiljana Božić & Valerija Botrić, 2011. "Innovation Propensity in the EU Candidate Countries," Transition Studies Review, Springer, Springer, vol. 18(2), pages 405-417, December.
    6. Juan Carlos Bou & Albert Satorra, 2003. "The persistence of abnormal returns at industry and firm levels," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 729, Department of Economics and Business, Universitat Pompeu Fabra.

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