This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Innovation and Competitive Pressure

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Vives, Xavier

Additional information is available for the following registered author(s):

Abstract

I analyse the effects of competition on R&D effort (in a non-tournament context) and obtain robust results that hold for a variety of market structures, including markets with and without barriers to entry and markets characterized by either price or quantity competition. The approach encompasses models of direct investment to reduce costs as well as models where cost reduction arises because the agency problem between managers and owners in an asymmetric information context (X-inefficiency) is better resolved. It is found that increasing the number of firms tends to reduce R&D effort, whereas increasing the degree of product substitutability, with or without free entry, increases R&D effort – provided that the total market for varieties does not shrink. Increasing the total market size increases both R&D effort and (weakly) the number of varieties.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cepr.org/pubs/dps/DP4369.asp
File Format: application/pdf
File Function:
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4369.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Apr 2004
Date of revision:
Handle: RePEc:cpr:ceprdp:4369

Contact details of provider:
Postal: Centre for Economic Policy Research, 53--56 Great Sutton Street, London EC1V 0DG
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information:
Email:

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords: corporate governance; cost reduction; entry; globalization; market concentration; market size; product introduction; R&D; substitutability;

Other versions of this item:

Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General

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. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-37, December. [Downloadable!] (restricted)
  2. Patrizio Pagano & Fabiano Schivardi, 2003. "Firm Size Distribution and Growth," Scandinavian Journal of Economics, Blackwell Publishing, vol. 105(2), pages 255-274, 06. [Downloadable!] (restricted)
    Other versions:
  3. Blundell, Richard & Griffith, Rachel & van Reenen, John, 1999. "Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms," Review of Economic Studies, Blackwell Publishing, vol. 66(3), pages 529-54, July. [Downloadable!] (restricted)
  4. Krugman, Paul, 1995. "Increasing returns, imperfect competition and the positive theory of international trade," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 24, pages 1243-1277 Elsevier. [Downloadable!] (restricted)
  5. Benassy, Jean-Pascal, 1989. "Market Size and Substitutability in Imperfect Competition: A Bertrand-Edgeworth-Chamberlin Model," Review of Economic Studies, Blackwell Publishing, vol. 56(2), pages 217-34, April. [Downloadable!] (restricted)
  6. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter. [Downloadable!] (restricted)
  7. Martin Stephen, 1993. "Endogenous Firm Efficiency in a Cournot Principal-Agent Model," Journal of Economic Theory, Elsevier, vol. 59(2), pages 445-450, April. [Downloadable!] (restricted)
  8. Meyer, Margaret A & Vickers, John, 1997. "Performance Comparisons and Dynamic Incentives," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 547-81, June.
    Other versions:
  9. Rabah Amir, 2000. "On the Effects of Entry in Cournot Markets," Econometric Society World Congress 2000 Contributed Papers 1475, Econometric Society. [Downloadable!]
    Other versions:
  10. Volker Nocke, 2003. "A Gap for Me: Entrepreneurs and Entry," PIER Working Paper Archive 05-026, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 29 Sep 2005. [Downloadable!]
    Other versions:
  11. Tor Jakob Klette & Samuel Kortum, 2004. "Innovating Firms and Aggregate Innovation," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 986-1018, October.
    Other versions:
  12. Michael Raith, 2003. "Competition, Risk, and Managerial Incentives," American Economic Review, American Economic Association, vol. 93(4), pages 1425-1436, September. [Downloadable!]
  13. Novshek, William, 1980. "Cournot Equilibrium with Free Entry," Review of Economic Studies, Blackwell Publishing, vol. 47(3), pages 473-86, April. [Downloadable!] (restricted)
  14. George Symeonidis, 2003. "In Which Industries is Collusion More Likely? Evidence from the UK," Journal of Industrial Economics, Blackwell Publishing, vol. 51(1), pages 45-74, 03. [Downloadable!] (restricted)
  15. Monique Ebell & Christian Haefke, 2002. "Product Market Deregulation and Labor Market Outcomes," Economics Working Papers 726, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2003. [Downloadable!]
    Other versions:
  16. Seade, Jesus, 1980. "The stability of cournot revisited," Journal of Economic Theory, Elsevier, vol. 23(1), pages 15-27, August. [Downloadable!] (restricted)
  17. Mark Schankerman, 1991. "How Valuable is Patent Protection? Estimates by Technology Field Using Patent Renewal Data," CEP Discussion Papers dp0046, Centre for Economic Performance, LSE.
  18. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  19. Mark Schankerman, 1991. "How Valuable is Patent Protection? Estimates By Technology Field Using Patent Renewal Data," NBER Working Papers 3780, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  20. Sutton, John, 1996. "Technology and market structure," European Economic Review, Elsevier, vol. 40(3-5), pages 511-530, April. [Downloadable!] (restricted)
  21. Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 1049-1090, August. [Downloadable!] (restricted)
    Other versions:
  22. Bertrand, Marianne & Kramarz, Francis, 2002. "Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry," IZA Discussion Papers 415, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  23. Benjamin E. Hermalin, 1994. "Heterogeneity in Organizational Form: Why Otherwise Identical Firms Choose Different Incentives for Their Managers," RAND Journal of Economics, The RAND Corporation, vol. 25(4), pages 518-537, Winter. [Downloadable!] (restricted)
    Other versions:
  24. Amir, Rabah, 1996. "Cournot Oligopoly and the Theory of Supermodular Games," Games and Economic Behavior, Elsevier, vol. 15(2), pages 132-148, August. [Downloadable!] (restricted)
    Other versions:
  25. Rabah Amir, 1998. "Modelling Imperfectly Appropriable R&D via Spillovers," CIE Discussion Papers 1998-07, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
    Other versions:
  26. Cohen, Wesley M & Klepper, Steven, 1996. "Firm Size and the Nature of Innovation within Industries: The Case of Process and Product R&D," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 232-43, May. [Downloadable!] (restricted)
  27. Jan Boone, 2000. "Competitive Pressure: The Effects on Investments in Product and Process Innovation," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 549-569, Autumn.
  28. Roger W. Koenker & Martin K. Perry, 1981. "Product Differentiation, Monopolistic Competition, and Public Policy," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 217-231, Spring. [Downloadable!] (restricted)
  29. 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!]
  30. 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)
    Other versions:
  31. Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and innovation: an inverted U relationship," IFS Working Papers W02/04, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
  32. 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)
  33. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1181-1222, December.
    Other versions:
  34. Nick Bloom & John Van Reenen, 2006. "Measuring and Explaining Management Practices Across Firms and Countries," CEP Discussion Papers dp0716, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  35. George Symeonidis, 2002. "The Effects of Competition: Cartel Policy and the Evolution of Strategy and Structure in British Industry," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262194686.
  36. Jacob Schmookler, 1959. "Bigness, Fewness, and Research," Journal of Political Economy, University of Chicago Press, vol. 67, pages 628. [Downloadable!] (restricted)
  37. Kamien, Morton I & Schwartz, Nancy L, 1970. "Market Structure, Elasticity of Demand and Incentive to Invent," Journal of Law & Economics, University of Chicago Press, vol. 13(1), pages 241-52, April.
  38. Gual, Jordi & Neven, Damien J, 1992. "Deregulation of the European Banking Industry (1980-1991)," CEPR Discussion Papers 703, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  39. Leahy, Dermot & Neary, J Peter, 1995. "Public Policy Towards R&D in Oligopolistic Industries," CEPR Discussion Papers 1243, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  40. d'Aspremont, Claude & Jacquemin, Alexis, 1990. "Cooperative and Noncooperative R&D in Duopoly with Spillovers: Erratum," American Economic Review, American Economic Association, vol. 80(3), pages 641-42, June. [Downloadable!] (restricted)
  41. Kotaro Suzumura, 1993. "Competition, Commitment and Welfare," Discussion Paper Series a269, Institute of Economic Research, Hitotsubashi University.
  42. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
    Other versions:
  43. Grossman, Gene M & Helpman, Elhanan, 1989. "Product Development and International Trade," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1261-83, December. [Downloadable!] (restricted)
    Other versions:
  44. Hubbard, R. Glenn & Palia, Darius, 1995. "Executive pay and performance Evidence from the U.S. banking industry," Journal of Financial Economics, Elsevier, vol. 39(1), pages 105-130, September. [Downloadable!] (restricted)
    Other versions:
  45. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March. [Downloadable!] (restricted)
    Other versions:
  46. Jayaratne, Jith & Strahan, Philip E, 1998. "Entry Restrictions, Industry Evolution, and Dynamic Efficiency: Evidence from Commercial Banking," Journal of Law & Economics, University of Chicago Press, vol. 41(1), pages 239-73, April.
  47. George Symeonidis, 2000. "Price and Nonprice Competition with Endogenous Market Structure," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 9(1), pages 53-83, 03. [Downloadable!] (restricted)
    Other versions:
  48. Qiu, Larry D., 1997. "On the Dynamic Efficiency of Bertrand and Cournot Equilibria," Journal of Economic Theory, Elsevier, vol. 75(1), pages 213-229, July. [Downloadable!] (restricted)
  49. Benjamin E. Hermalin, 1992. "The Effects of Competition on Executive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 350-365, Autumn. [Downloadable!] (restricted)
    Other versions:
  50. Schmidt, Klaus M, 1997. "Managerial Incentives and Product Market Competition," Review of Economic Studies, Blackwell Publishing, vol. 64(2), pages 191-213, April. [Downloadable!] (restricted)
    Other versions:
  51. Tandon, Pankaj, 1984. "Innovation, Market Structure, and Welfare," American Economic Review, American Economic Association, vol. 74(3), pages 394-403, June. [Downloadable!] (restricted)
  52. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2005. "Regulation And Investment," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 791-825, 06. [Downloadable!] (restricted)
    Other versions:
  53. Grossman, Gene M & Helpman, Elhanan, 1994. "Endogenous Innovation in the Theory of Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 23-44, Winter. [Downloadable!] (restricted)
    Other versions:
  54. Steven Berry & Joel Waldfogel, 2003. "Product Quality and Market Size," NBER Working Papers 9675, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  55. Geroski, P A, 1990. "Innovation, Technological Opportunity, and Market Structure," Oxford Economic Papers, Oxford University Press, vol. 42(3), pages 586-602, July. [Downloadable!] (restricted)
  56. Chad Syverson, 2004. "Product Substitutability and Productivity Dispersion," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 534-550, 08. [Downloadable!] (restricted)
    Other versions:
  57. Vicente Cuñat & Maria Guadalupe, 2005. "How Does Product Market Competition Shape Incentive Contracts?," Journal of the European Economic Association, MIT Press, vol. 3(5), pages 1058-1082, 09. [Downloadable!] (restricted)
    Other versions:
  58. Bester, Helmut & Petrakis, Emmanuel, 1993. "The incentives for cost reduction in a differentiated industry," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 519-534. [Downloadable!] (restricted)
    Other versions:
  59. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October. [Downloadable!] (restricted)
    Other versions:
  60. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May. [Downloadable!] (restricted)
  61. Vives, Xavier, 1990. "Information and competitive advantage," International Journal of Industrial Organization, Elsevier, vol. 8(1), pages 17-35. [Downloadable!] (restricted)
    Other versions:
  62. Rivera-Batiz, Luis A & Romer, Paul M, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 531-55, May. [Downloadable!] (restricted)
    Other versions:
  63. George Symeonidis, 2007. "The Effect of Competition on Wages and Productivity: Evidence from the UK," Economics Discussion Papers 626, University of Essex, Department of Economics. [Downloadable!]
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. Lars Calmfors & Giancarlo Corsetti & Seppo Honkapohja & Gilles Saint-Paul & Hans-Werner Sinn & John Kay & Jan-Egbert Sturm & Xavier Vives, 2006. "Chapter 5: Mergers and Competition Policy in Europe," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 101-116, 03. [Downloadable!]
  2. Lars Calmfors & Giancarlo Corsetti & Seppo Honkapohja & John Kay & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Xavier Vives, 2006. "EEAG European Economic Advisory Group at CESifo: Report on the European Economy 2006," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 1-120, 03. [Downloadable!]
    Other versions:
  3. N. Lacetera & L. Zirulia, 2008. "Knowledge Spillovers, Competition, and R&D Incentive Contracts," Working Papers 624, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
  4. Lehner, Maria & Schnitzer, Monika, 2006. "Entry of Foreign Banks and their Impact on Host Countries," Discussion Papers in Economics 1208, University of Munich, Department of Economics. [Downloadable!]
    Other versions:
  5. Vicente Cuñat & María Guadalupe, 2005. "How Does Product Market Competition Shape Incentive Contracts?," CEP Discussion Papers dp0687, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  6. Donja Darai & Jens Grosser & Nadja Trhal, 2009. "Patents versus Subsidies – A Laboratory Experiment," Working Papers 0905, University of Zurich, Socioeconomic Institute. [Downloadable!]
  7. Cabral, Luís M B & Cozzi, Guido & Denicolo, Vincenzo & Spagnolo, Giancarlo & Zanza, Matteo, 2006. "Procuring Innovation," CEPR Discussion Papers 5774, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  8. Volker Grossmann & Thomas Steger, 2007. "Anti-Competitive Conduct, In-House R&D, and Growth," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  9. Gersbach, Hans & Schmutzler, Armin, 2005. "The Effects of Globalization on Worker Training," CEPR Discussion Papers 4879, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  10. Dalia Marin & Thierry Verdier, 2001. "Power Inside the Firm and the Market: A General Equilibrium Approach," Discussion Papers 109, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich, revised Apr 2006. [Downloadable!]
    Other versions:
  11. Norbäck, Pehr-Johan & Persson, Lars & Vlachos, Jonas, 2006. "Entrepreneurial Innovations, Competition and Competition Policy," Working Paper Series 670, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
  12. Jan Boone & Jan van Ours & Henry van der Wiel, 2007. "How (not) to measure competition," CPB Discussion Papers 91, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
    Other versions:
  13. Domenico Scalera & Alberto Zazzaro, 2005. "Cost reducing investments and spatial competition," Economics Bulletin, Economics Bulletin, vol. 12(20), pages 1-8. [Downloadable!]
  14. Arghya Ghosh & Takao Kato & Hodaka Morita, 2007. "Discrete Innovation, Continuous Improvement, and Competitive Pressure," IZA Discussion Papers 3132, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  15. Juha Kilponen & Torsten Santavirta, 2004. "Competition and Innovation - Microeconometric Evidence using Finnish Data," Research Reports 113, Government Institute for Economic Research Finland (VATT). [Downloadable!]
    Other versions:
  16. Maria Guadalupe & Francisco Perez-Gonzalez, 2006. "The Impact of Product Market Competition on Private Benefits of Control," Hi-Stat Discussion Paper Series d05-159, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
Statistics
Access and download statistics

Did you know? You too can volunteer for RePEc, for example by encouraging others to register as authors.

This page was last updated on 2009-11-25.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.