Product and Process Innovations in a Horizontally Differentiated Product Market
AbstractFor horizontal product differentiation, the paper examines the effects of the level of competition on the firm's decision between a product and process innovation. When firms have to choose between the two types of innovation, it is demonstrated that both firms undertake the product innovation when the competition is intense, they choose different investment projects in intermediate competition, and they pursue cost--reducing innovations when competition is less intense. If firms may pursue both innovations, they mix the types depending on the innovation cost structure. Again, firms incur higher costs into product innovations, when the competition is initially intense.
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Bibliographic InfoPaper provided by Institute for Economic Policy, Cologne, Germany in its series IWP Discussion Paper Series with number 07/2001.
Date of creation: Nov 2001
Date of revision:
Product innovation; Process innovation; Horizontal product differentiation;
Other versions of this item:
- Pia Weiss, 2002. "Product and Process Innovations in a Horizontally Differentiated Product Market," Industrial Organization 0201005, EconWPA.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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