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A Minimum of Rivalry: Evidence from Transition Economies on the Importance of Competition for Innovation and Growth Author info | Abstract | Publisher info | Download info | Related research | Statistics Carlin, Wendy
Schaffer, Mark E
Seabright, Paul
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This Paper examines the importance of competition in the growth and development of firms. We make use of the large-scale natural experiment of the shift from an economic system without competition to a market economy to shed light on the factors that influence innovation by firms and their subsequent growth. Our data come from a survey of nearly 4,000 firms in 24 transition countries. These data have three main advantages. First, while in a market economy firms face widely divergent needs and opportunities for innovation, virtually every firm that emerged from central planning was maladapted to the new environment, and needed to innovate at least modestly in order to survive. Second, we measure directly the degree of competition perceived by each firm in its principal market rather than attempting to infer this from market data collected by statistical agencies; and we collect data directly on various measures of innovative activity. Third, the fact that transition countries inherited market structures from a regime in which selection and incentive effects of competition were not operational and were then subjected to a dramatic shock to competition mitigates some of the endogeneity problems associated with measures of competition in market economies. We find evidence of the importance of a minimum of rivalry in both innovation and growth: the presence of at least a few competitors is effective both directly and through improving the efficiency with which the rents from market power in product markets are utilised to undertake innovation. There is also some less clear-cut evidence that the presence of a few rivals is more conducive to performance than the presence of many competitors.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
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Date of creation: Apr 2004Date of revision:
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Keywords: competition ; innovation ; productivity growth ; rivalry ; transition ; Other versions of this item:
Article Paper Wendy Carlin & Mark Schaffer & Paul Seabright, 2004.
"A Minimum of Rivalry: Evidence from Transition Economies on the Importance of Competition for Innovation and Growth ,"
CERT Discussion Papers
0402, Centre for Economic Reform and Transformation, Heriot Watt University.
[Downloadable!] Carlin, Wendy & Schaffer, Mark & Seabright, Paul, 2004.
"A Minimum of Rivalry : Evidence from Transition Economies on the Importance of Competition for Innovation and Growth ,"
IDEI Working Papers
272, Institut d'Économie Industrielle (IDEI), Toulouse.
[Downloadable!] Wendy Carlin & Mark Schaffer & Paul Seabright, 2004.
"A Minimum of Rivalry: Evidence from Transition Economies on the Importance of Competition for Innovation and Growth ,"
William Davidson Institute Working Papers Series
2004-670, William Davidson Institute at the University of Michigan Stephen M. Ross Business School.
[Downloadable!] Find related papers by JEL classification: L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development P00 - Economic Systems - - General - - - General
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Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2002.
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North American Stata Users' Group Meetings 2003
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Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1999.
"Competition, Financial Discipline and Growth ,"
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376, William Davidson Institute at the University of Michigan Stephen M. Ross Business School.
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"Competition, Imitation and Growth with Step-by-Step Innovation ,"
Review of Economic Studies ,
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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.)
Gorodnichenko, Yuriy & Svejnar, Jan & Terrell, Katherine, 2008.
"Globalization and Innovation in Emerging Markets ,"
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Other versions: Pradeep Mitra & Alexander Muravyev & Mark E. Schaffer, 2008.
"Convergence in institutions and market outcomes: Cross-country and time-series evidence from the BEEPS surveys in transition economies ,"
CERT Discussion Papers
0809, Centre for Economic Reform and Transformation, Heriot Watt University.
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Mitra, Pradeep & Muravyev, Alexander & Schaffer, Mark, 2008.
"Convergence in Institutions and Market Outcomes: Cross-Country and Time-Series Evidence from the BEEPS Surveys in Transition Economies ,"
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Sabirianova, Klara & Svejnar, Jan & Terrell, Katherine, 2005.
"Foreign Investment, Corporate Ownership, and Development: Are Firms in Emerging Markets Catching Up to the World Standard? ,"
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4868, C.E.P.R. Discussion Papers.
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"Foreign Investment, Corporate Ownership, and Development:Are Firms in Emerging Markets Catching Up to the World Standard? ,"
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