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Strategic R&D investment, competitive toughness and growth

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Author Info
D'ASPREMONT, Claude
DOS SANTOS FERREIRA, Rodolphe
GERARD-VARET, Louis-AndrŽ

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Abstract

We develop an overlapping generations model, where firms (as consumers) have a two-period life, investing in R&D during the first period and competing in the product market in the second period. The number of firms is endogenously determined and the set of successful firms by a Bernoullian random process. We show the possibility of an inverted-U relationship between innovation and product market competition for an individual industry, based on the possibility for non-successful firms to remain productive. When the relative cost advantage of successful firms is large (large innovation step or small spillovers) this possibility results from the probabilistic nature of the model.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004014.

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Date of creation: 01 Apr 2004
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Handle: RePEc:cor:louvco:2004014

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Related research
Keywords: competitive toughness; R&D incentives; strategic investment; endogenous growth;

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Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Kamien, Morton I & Schwartz, Nancy L, 1975. "Market Structure and Innovation: A Survey," Journal of Economic Literature, American Economic Association, vol. 13(1), pages 1-37, March. [Downloadable!] (restricted)
  2. David Encaoua & David Ulph, 2005. "Catching-up or Leapfrogging: The effects of competition on innovation and growth," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00177643_v1, HAL. [Downloadable!]
    Other versions:
  3. Peretto, Pietro F., 1999. "Cost reduction, entry, and the interdependence of market structure and economic growth," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 173-195, February. [Downloadable!] (restricted)
  4. Boone, Jan, 2001. "Intensity of competition and the incentive to innovate," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 705-726, April. [Downloadable!] (restricted)
  5. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc. [Downloadable!]
  6. Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107 Elsevier. [Downloadable!] (restricted)
  7. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-46, August. [Downloadable!] (restricted)
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  8. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-91, December. [Downloadable!] (restricted)
  9. Dasgupta, Partha & Stiglitz, Joseph, 1980. "Industrial Structure and the Nature of Innovative Activity," Economic Journal, Royal Economic Society, vol. 90(358), pages 266-93, June. [Downloadable!] (restricted)
  10. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March. [Downloadable!] (restricted)
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  11. Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908 Elsevier. [Downloadable!] (restricted)
  12. van de Klundert, Theo & Smulders, Sjak, 1997. " Growth, Competition and Welfare," Scandinavian Journal of Economics, Blackwell Publishing, vol. 99(1), pages 99-118, March. [Downloadable!] (restricted)
  13. Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April. [Downloadable!] (restricted)
  14. d'ASPREMONT, Claude & DOS SANTOS-FERREIRA, Rodolphe & GƒRARD-VARET, Louis-AndrŽ, 2003. "Competition for market share or for market size: oligopolistic equilibria with varying competitive toughness," CORE Discussion Papers 2003010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Piercarlo Zanchettin & Vincenzo Denicolò, 2004. "Competition and Growth in Neo-Schumpeterian Models," Discussion Papers in Economics 04/28, Department of Economics, University of Leicester. [Downloadable!]
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