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Degree of innovativeness and market structure: A model

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  • Daniela Grieco

    (CESPRI, Bocconi University, Milano,Italy.)

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    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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    File URL: ftp://ftp.unibocconi.it/pub/RePEc/cri/papers/WP178Grieco.pdf
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    Bibliographic Info

    Paper provided by KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy in its series KITeS 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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    Keywords: Radical innovation; Incremental Innovation; Imperfect competition; Patent race.;

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    17. William J. Baumol, 2004. "Education for Innovation: Entrepreneurial Breakthroughs vs. Corporate Incremental Improvements," NBER Working Papers 10578, National Bureau of Economic Research, Inc.
    18. Boone, Jan, 2001. "Intensity of competition and the incentive to innovate," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 705-726, April.
    19. Denicolo, Vincenzo, 2001. "Growth with non-drastic innovations and the persistence of leadership," European Economic Review, Elsevier, vol. 45(8), pages 1399-1413, August.
    20. Breschi, Stefano & Malerba, Franco & Orsenigo, Luigi, 2000. "Technological Regimes and Schumpeterian Patterns of Innovation," Economic Journal, Royal Economic Society, vol. 110(463), pages 388-410, April.
    21. 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.
    22. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
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