The Effect of Entry on R&D Investment of Leaders: Theory and Empirical Evidence
AbstractWe develop a simple model of competition for the market that shows that, contrary to the Arrow view, endogenous entry threat in a market induces the average firm to invest less in R&D and the incumbent leader to invest more than the average firm. We test these predictions with a Tobit model based on a unique dataset and survey for the German manufacturing sector (the Mannheim Innovation Panel). In line with our predictions, endogenous entry threats perceived by the firms reduce R&D intensity for the average firm, but not for an incumbent leader. Moreover, the size of the firms and their patent stocks, proxy for the protection of IPRs, are positively related to R&D intensity. These results hold after a number of robustness tests with instrumental variables.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 163.
Length: 67 pages
Date of creation: May 2009
Date of revision: May 2009
R&D; Entry; Endogenous market structures; Leadership;
Other versions of this item:
- Czarnitzki, Dirk & Etro, Federico Gabriele & Kraft, Kornelius, 2008. "The Effect of Entry on R&D Investment of Leaders: Theory and Empirical Evidence," ZEW Discussion Papers 08-078, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-03 (All new papers)
- NEP-COM-2009-07-03 (Industrial Competition)
- NEP-CSE-2009-07-03 (Economics of Strategic Management)
- NEP-ENT-2009-07-03 (Entrepreneurship)
- NEP-IND-2009-07-03 (Industrial Organization)
- NEP-INO-2009-07-03 (Innovation)
- NEP-MIC-2009-07-03 (Microeconomics)
- NEP-TID-2009-07-03 (Technology & Industrial Dynamics)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Slivko, Olga, 2012. "Innovation strategies of German firms: The effect of competition and intellectual property protection," ZEW Discussion Papers 12-089, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Slivko, Olga & Theilen, Bernd, 2011. "Innovation or Imitation? The effect of spillovers and competitive pressure on firms' R&D strategy choice," Working Papers 2072/179618, Universitat Rovira i Virgili, Department of Economics.
- Ilir Maçi & Kresimir Zigic, 2008.
"Competition Policy and Market Leaders,"
CERGE-EI Working Papers
wp375, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roberto Reale).
If references are entirely missing, you can add them using this form.