Competitive Pressure, Selection and Investments in Development and Fundamental Research
AbstractThis paper analyses the effects of competitive pressure on a firm's incentives to undertake both fundamental research and development. It presents a new framework incorporating the selection effect of product market competition, the Schumpeterian argument for monopoly power, the Nickell/Porter argument for competitive pressure and the infant industry argument for protection. The key insight is that the effects of competitive pressure on a firm's incentives to innovate depend on the firm's efficiency level relative to that of its opponents. Finally the effects of competitive pressure on industry wide fundamental research and development are analyzed. It turns out that there is a trade off between development and fundamental research: a rise in competitive pressure cannot raise both types of innovative activity at the industry level.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1998-42.
Date of creation: 1998
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Web page: http://center.uvt.nl
Competition; R&D; Selection;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
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