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Degree of innovativeness and market structure: A model

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Author Info
Daniela Grieco (CESPRI, Bocconi University, Milano,Italy.)
Abstract

A limited number of business firms engage in disruptive innovative activity. When firms decide among alternative innovative patterns, inertial forces may bias their choices in favour of incremental innovations. This paper proposes a model that compares firms’ value when firms can invest in strategies implying different degrees of innovativeness. The model shows that incremental strategies emerge as a dominant strategy for oligopolists when imitation of incremental innovation is sufficiently slow and firms are not too asymmetric in their access to knowledge. If these conditions are not respected, the model exhibits an additional symmetric Nash equilibrium where firms select radical innovations.

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Publisher Info
Paper provided by CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy in its series CESPRI Working Papers with number 178.

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Length: 28 pages
Date of creation: Apr 2006
Date of revision: May 2006
Handle: RePEc:cri:cespri:wp178

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Related research
Keywords: Radical innovation Incremental Innovation Imperfect competition Patent race.

Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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References listed on IDEAS
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