Competitive pressure: The effects on investments in product and process innovation
AbstractI analyze the effects of competitive pressure on a firm's incentives to invest in product and process innovations. I present a framework incorporating the selection and adaptation effects of product market competition on efficiency and the Schumpeterian argument for monopoly power. The effects of competition on a firm's innovations depend on whether a firm is complacent, eager, struggling, or faint, which is determined by the firm's efficiency level relative to that of its opponents. Finally, the following tradeoff is pointed out: a rise in competitive pressure cannot raise both product and process innovations at the industry level.
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Bibliographic InfoPaper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-84400.
Date of creation: 2000
Date of revision:
Publication status: Published in RAND Journal of Economics (2000) v.31, p.549-569
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Other versions of this item:
- 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.
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- Van Reenen, John, 1994.
"The Creation and Capture of Rents: Wages and Innovation in a Panel of UK Companies,"
CEPR Discussion Papers, C.E.P.R. Discussion Papers
1071, C.E.P.R. Discussion Papers.
- Van Reenen, John, 1996. "The Creation and Capture of Rents: Wages and Innovation in a Panel of U.K. Companies," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(1), pages 195-226, February.
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