Advanced Search
MyIDEAS: Login to save this paper or follow this series

Innovation and competitive pressure

Contents:

Author Info

  • Vives, Xavier

    ()
    (IESE Business School)

Abstract

The effects of competition on process and product innovation are analyzed, obtaining robust results that hold for a range of market structures. 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 product varieties does not shrink. Increasing the total market size increases R&D effort and has ambiguous effects on the number of varieties offered, while decreasing the cost of entry increases the number of entrants and varieties but reduces R&D effort per variety. The framework and results shed light on empirical strategies to assess the impact of competition on innovation.

Download Info

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Bibliographic Info

Paper provided by IESE Business School in its series IESE Research Papers with number D/634.

as in new window
Length: 53 pages
Date of creation: 10 Jun 2006
Date of revision:
Handle: RePEc:ebg:iesewp:d-0634

Contact details of provider:
Postal: IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN
Web page: http://www.iese.edu/
More information through EDIRC

Related research

Keywords: cost reduction; X-inefficiency; market concentration; market size; substitutability; product introduction; corporate governance; globalization;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Chad Syverson, 2004. "Product Substitutability and Productivity Dispersion," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 534-550, May.
  2. 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.
  3. 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.
  4. G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
  5. David Scharfstein, 1988. "Product-Market Competition and Managerial Slack," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 147-155, Spring.
  6. Seade, Jesus, 1980. "The stability of cournot revisited," Journal of Economic Theory, Elsevier, vol. 23(1), pages 15-27, August.
  7. Marianne Bertrand & Francis Kramarz, 2001. "Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry," NBER Working Papers 8211, National Bureau of Economic Research, Inc.
  8. George Symeonidis, 2003. "In Which Industries is Collusion More Likely? Evidence from the UK," Journal of Industrial Economics, Wiley Blackwell, vol. 51(1), pages 45-74, 03.
  9. Howitt, Peter & Griffith, Rachel & Aghion, Philippe & Blundell, Richard & Bloom, Nick, 2005. "Competition and Innovation: An Inverted-U Relationship," Scholarly Articles 4481507, Harvard University Department of Economics.
  10. d'ASPREMONT, Claude & JACQUEMIN, Alexis, . "Cooperative and noncooperative R&D in duopoly with spillovers," CORE Discussion Papers RP -823, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. AMIR, Rabah, 1994. "Cournot Oligopoly and the Theory of Supermodular Games," CORE Discussion Papers 1994013, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Nickell, S.J., 1993. "Competition and Crporate Performance," Economics Series Working Papers 99155, University of Oxford, Department of Economics.
  13. Kamien, Morton I & Schwartz, Nancy L, 1970. "Market Structure, Elasticity of Demand and Incentive to Invent," Journal of Law and Economics, University of Chicago Press, vol. 13(1), pages 241-52, April.
  14. Grossman, G.M. & Helpman, E., 1993. "Endogenous, Innovation in the Theory of Growth," Papers 165, Princeton, Woodrow Wilson School - Public and International Affairs.
  15. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  16. Leahy, Dermot & Neary, J Peter, 1995. "Public Policy Towards R&D in Oligopolistic Industries," CEPR Discussion Papers 1243, C.E.P.R. Discussion Papers.
  17. Jakob Klette & Samuel Kortum, 2002. "Innovating firms and aggregate innovation," Staff Report 300, Federal Reserve Bank of Minneapolis.
  18. 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.
  19. Geroski, P A, 1990. "Innovation, Technological Opportunity, and Market Structure," Oxford Economic Papers, Oxford University Press, vol. 42(3), pages 586-602, July.
  20. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2002. "Regulation and Investment," Boston College Working Papers in Economics 549, Boston College Department of Economics.
  21. Vives, Xavier, 1990. "Information and competitive advantage," International Journal of Industrial Organization, Elsevier, vol. 8(1), pages 17-35.
  22. George Symeonidis, 1999. "Price and non-price competition with endogenous market structure," Economics Discussion Papers 501, University of Essex, Department of Economics.
  23. Jayaratne, Jith & Strahan, Philip E, 1998. "Entry Restrictions, Industry Evolution, and Dynamic Efficiency: Evidence from Commercial Banking," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 239-73, April.
  24. Schmidt, Klaus M, 1997. "Managerial Incentives and Product Market Competition," Review of Economic Studies, Wiley Blackwell, vol. 64(2), pages 191-213, April.
  25. 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.
  26. Patrizio Pagano & Fabiano Schivardi, 2003. "Firm Size Distribution and Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(2), pages 255-274, 06.
  27. 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.
  28. Daron Acemoglu & Joshua Linn, 2003. "Market Size in Innovation: Theory and Evidence From the Pharmaceutical Industry," NBER Working Papers 10038, National Bureau of Economic Research, Inc.
  29. Novshek, William, 1980. "Cournot Equilibrium with Free Entry," Review of Economic Studies, Wiley Blackwell, vol. 47(3), pages 473-86, April.
  30. Helpman, Elhanan & Grossman, Gene M., 1989. "Product Development and International Trade," Scholarly Articles 3445094, Harvard University Department of Economics.
  31. José E. Galdón-Sánchez & James A. Schmitz Jr., 2002. "Competitive Pressure and Labor Productivity: World Iron-Ore Markets in the 1980's," American Economic Review, American Economic Association, vol. 92(4), pages 1222-1235, September.
  32. Tandon, Pankaj, 1984. "Innovation, Market Structure, and Welfare," American Economic Review, American Economic Association, vol. 74(3), pages 394-403, June.
  33. Nick Bloom & John Van Reenen, 2006. "Measuring and Explaining Management Practices Across Firms and Countries," CEP Discussion Papers dp0716, Centre for Economic Performance, LSE.
  34. 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.
  35. 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.
  36. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
  37. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  38. Martin Stephen, 1993. "Endogenous Firm Efficiency in a Cournot Principal-Agent Model," Journal of Economic Theory, Elsevier, vol. 59(2), pages 445-450, April.
  39. 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, December.
  40. Vives, Xavier, 1985. "On the efficiency of Bertrand and Cournot equilibria with product differentation," Journal of Economic Theory, Elsevier, vol. 36(1), pages 166-175, June.
  41. Rabah Amir, 2000. "On the Effects of Entry in Cournot Markets," Econometric Society World Congress 2000 Contributed Papers 1475, Econometric Society.
  42. Jacob Schmookler, 1959. "Bigness, Fewness, and Research," Journal of Political Economy, University of Chicago Press, vol. 67, pages 628.
  43. 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.
  44. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  45. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  46. Ng, Charles K & Seabright, Paul, 2001. "Competition, Privatisation and Productive Efficiency: Evidence from the Airline Industry," Economic Journal, Royal Economic Society, vol. 111(473), pages 591-619, July.
  47. Wesley M Cohen & Richard R Nelson & John P Walsh, 2003. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (Or Not)," Levine's Working Paper Archive 618897000000000624, David K. Levine.
  48. 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.
  49. Michael Raith, 2003. "Competition, Risk, and Managerial Incentives," American Economic Review, American Economic Association, vol. 93(4), pages 1425-1436, September.
  50. 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.
  51. 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.
  52. Sutton, John, 1996. "Technology and market structure," European Economic Review, Elsevier, vol. 40(3-5), pages 511-530, April.
  53. Schmidt, Klaus M., 1997. "Managerial Incentives and Product Market Competition," Munich Reprints in Economics 19772, University of Munich, Department of Economics.
  54. Kotaro Suzumura, 1993. "Competition, Commitment and Welfare," Discussion Paper Series a269, Institute of Economic Research, Hitotsubashi University.
  55. 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.
  56. Gual, Jordi & Neven, Damien J, 1992. "Deregulation of the European Banking Industry (1980-1991)," CEPR Discussion Papers 703, C.E.P.R. Discussion Papers.
  57. 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.
  58. 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.
  59. R. Glenn Hubbard & Darius Palia, 1994. "Executive Pay and Performance: Evidence from the U.S. Banking Industry," NBER Working Papers 4704, National Bureau of Economic Research, Inc.
  60. Benassy, Jean-Pascal, 1989. "Market Size and Substitutability in Imperfect Competition: A Bertrand-Edgeworth-Chamberlin Model," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 217-34, April.
  61. 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.
  62. Schmookler, Jacob, 1962. "Economic Sources of Inventive Activity," The Journal of Economic History, Cambridge University Press, vol. 22(01), pages 1-20, March.
  63. Meyer, Margaret A & Vickers, John, 1995. "Performance Comparisons and Dynamic Incentives," CEPR Discussion Papers 1107, C.E.P.R. Discussion Papers.
  64. 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.
  65. Berry, Steven & Waldfogel, Joel, 2005. "Product Quality and Market Size," Working Papers 1, Yale University, Department of Economics.
  66. 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.
  67. 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.
  68. 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, Wiley Blackwell, vol. 66(3), pages 529-54, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ebg:iesewp:d-0634. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Silvia Jimenez).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.