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Competitive pressure determinants and innovation at the firm level

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Author Info

  • Paz Coscollá-Girona

    ()
    (Dpto. Análisis Económico)

  • Pilar Beneito López

    ()
    (Universitat de València)

  • Amparo Sanchis Llopis

    (Universitat de València)

  • María Engracia Rochina Barrachina

    (Universitat de València)

Abstract

This paper provides empirical evidence on the relationship between indicators of competitive pressure and innovation incentives using panel data of Spanish manufacturing firms for the period 1990-2006. Instead of using standard indicators of competition, such as market concentration measures or firms’ price costs margins, we analyze a number of indicators of competitive pressure directly related to the demand and cost conditions faced by firms. We consider the likely different incentives faced by firms to undertake product innovation versus process innovation efforts, and estimate a multivariate probit model for the probability of firms to introduce product innovations, process innovations or both. Our results are consistent with the theoretical predictions of Vives (2008) for free entry. We obtain that product market substitutability, entry costs and market size significantly affect the probability to introduce product and process innovations but that the effect of these variables differs among the type of innovation. We also find different effects of competitive pressure on innovation when taking into account the efficiency level of the firm relative to the efficiency distribution within its industry.

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File URL: http://www.ivie.es/downloads/docs/wpasec/wpasec-2011-02.pdf
File Function: Fisrt version / Primera version, 2011
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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie EC with number 2011-02.

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Length: 1 pages
Date of creation: Apr 2011
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasec:2011-02

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Related research

Keywords: competitive pressure; cost-reduction; process innovations; demand-enhancing; product innovations; relative efficiency;

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References

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  1. Juan A. Máñez-Castillejo & María E. Rochina-Barrachina & Juan A. Sanchis-Llopis, 2010. "Does Firm Size Affect Self-selection and Learning-by-Exporting?," The World Economy, Wiley Blackwell, vol. 33(3), pages 315-346, 03.
  2. Martin Woerter & Christian Rammer & Spyros Arvanitis, 2010. "Innovation, Competition and Incentives for R&D," KOF Working papers 10-259, KOF Swiss Economic Institute, ETH Zurich.
  3. María Rochina-Barrachina & Juan Mañez & Juan Sanchis-Llopis, 2010. "Process innovations and firm productivity growth," Small Business Economics, Springer, vol. 34(2), pages 147-166, February.
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Cited by:
  1. Pilar Beneito & María E. Rochina-Barrachina & Amparo Sanchis, 2012. "Patents, competition and firms’ innovation incentives," Working Papers 1211, Department of Applied Economics II, Universidad de Valencia.
  2. Crass, Dirk & Schwiebacher, Franz, 2013. "Do trademarks diminish the substitutability of products in innovative knowledge-intensive services?," ZEW Discussion Papers 13-061, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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