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Time Based Competition and Innovation

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  • Thesmar, David
  • Thoenig, Mathias

Abstract

By choosing their organizations, firms trade-off productive efficiency and time spent in implementing innovation. We embed such a productivity/reactivity trade-off in a growth model with creative destruction. We first highlight the specific impact of time in firm competition: in addition to weighing costs and benefits of late adoption, firms use time as a strategic variable through the possibility of overtaking their competitors. Due to this very specificity of time competition, multiple equilibria may emerge: when firms adopt quickly, their stock market valuation is larger, and they innovate more and produce less. Moreover, the IT revolution is shown to favour quick implementation via a general equilibrium feedback on organizational choice.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3293.

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Date of creation: Apr 2002
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Handle: RePEc:cpr:ceprdp:3293

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Related research

Keywords: competition; firm organisation; innovation; reactivity;

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  1. Bolton, Patrick & Dewatripont, Mathias, 1994. "The Firm as a Communication Network," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(4), pages 809-39, November.
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Cited by:
  1. David Fairris & Philippe Askenazy, 2010. "Works Councils and Firm Productivity in France," Journal of Labor Research, Springer, Springer, vol. 31(3), pages 209-229, September.
  2. Elisa Rancati, 2005. "Global Markets and Time-Based Competition," Symphonya. Emerging Issues in Management, University of Milano-Bicocca, University of Milano-Bicocca, issue 2 Over-Su.

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