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Price Competition, Innovation and Profitability: Theory and UK Evidence

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  • Symeonidis, George

Abstract

This Paper examines the effect of price competition on innovation, market structure and profitability in R&D-intensive industries. The theoretical predictions are tested using UK data on the evolution of competition, concentration, innovation counts and profitability over 1952-77. The econometric results suggest that the introduction of restrictive practices legislation in the UK had no significant effect on the number of innovations commercialized in previously cartelized R&D-intensive manufacturing industries, while it caused a significant rise in concentration in these industries. In the short run profitability decreased, but in the long run it was restored through the rise in concentration.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2816.

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Date of creation: May 2001
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Handle: RePEc:cpr:ceprdp:2816

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Keywords: Cartels; Innovation; Manufacturing; Market Structure; Price Competition; Profitability; UK;

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References

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Cited by:
  1. Dolfsma, Wilfred & van der Panne, Gerben, 2008. "Currents and sub-currents in innovation flows: Explaining innovativeness using new-product announcements," Research Policy, Elsevier, vol. 37(10), pages 1706-1716, December.
  2. Fu, Xiaolan & Gong, Yundan, 2011. "Indigenous and Foreign Innovation Efforts and Drivers of Technological Upgrading: Evidence from China," World Development, Elsevier, vol. 39(7), pages 1213-1225, July.
  3. Bettina Becker & Stephen Hall, 2013. "Do R&D strategies in high-tech sectors differ from those in low-tech sectors? An alternative approach to testing the pooling assumption," Economic Change and Restructuring, Springer, vol. 46(2), pages 183-202, May.
  4. Khazabi, Massoud, 2004. "Innovation and cooperation with horizontal spillovers," MPRA Paper 39497, University Library of Munich, Germany.
  5. Andy Cosh & Xiaolan Fu & Alan Hughes, 2005. "Management characteristics, collaboration and innovative efficiency: evidence from UK survey data," ESRC Centre for Business Research - Working Papers wp311, ESRC Centre for Business Research.
  6. Mark Rogers, 2004. "Competition, agency and productivity," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 11(3), pages 349-367.

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