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Adoption of Product and Process Innovations in Differentiated

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  • Pia Weiss

    (Chemnitz University of Technology)

Abstract

The paper examines the effects of the degree of competition on the firms' decision to innovate in differentiated markets. We find that a low (high) degree of product differentiation (competition) weakly supports the introduction of new products. Firms' weakly favour a process innovation if the degree of product differentiation (competition) is high (low). In addition, assumptions on the strategic complementarity of product and process innovations and on the decreasing returns of a product innovation are found to be the critical assumptions in the sense of Milgrom and Roberts (1994).

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File URL: http://128.118.178.162/eps/io/papers/0212/0212002.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 0212002.

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Date of creation: 12 Dec 2002
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Handle: RePEc:wpa:wuwpio:0212002

Note: Type of Document - Tex; prepared on UNIX; to print on HP;
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Web page: http://128.118.178.162

Related research

Keywords: Product innovation; process innovation; differentiated markets; Bertrand competition; Cournot competition;

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References

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  1. Greenstein, Shane & Ramey, Garey, 1998. "Market structure, innovation and vertical product differentiation," International Journal of Industrial Organization, Elsevier, vol. 16(3), pages 285-311, May.
  2. Rosenkranz, Stephanie, 1996. "Simultaneous Choice of Process and Product Innovation," CEPR Discussion Papers 1321, C.E.P.R. Discussion Papers.
  3. Milgrom, Paul & Roberts, John, 1994. "Comparing Equilibria," American Economic Review, American Economic Association, vol. 84(3), pages 441-59, June.
  4. Boone, Jan, 2001. "Intensity of competition and the incentive to innovate," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 705-726, April.
  5. Bonanno, Giacomo & Haworth, Barry, 1998. "Intensity of competition and the choice between product and process innovation," International Journal of Industrial Organization, Elsevier, vol. 16(4), pages 495-510, July.
  6. Rosenkranz, Stephanie, 1995. "Innovation and cooperation under vertical product differentiation," International Journal of Industrial Organization, Elsevier, vol. 13(1), pages 1-22, March.
  7. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
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Cited by:
  1. Christopher Snyder, 2003. "Introduction to the 2003 International Industrial Organization Conference Special Issue," Review of Industrial Organization, Springer, vol. 23(3), pages 175-177, December.
  2. A. Mantovani, 2005. "Complementarity between Product and Process innovation in a Monopoly Setting," Working Papers 533, Dipartimento Scienze Economiche, Universita' di Bologna.

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