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Competition and Innovation - Microeconometric Evidence Using Finnish Data

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Author Info

  • Juha Kilponen

    (Bank of Finland)

  • Torsten Santavirta

    (University of Helsinki)

Abstract

In this study we provide a theoretical prediction of a complementary relationship between the incentive effects of product market competition and R&D subsidies using the theory of Aghion et. al (1997, 2001). The complementarity relationship and that of an inverted U-relationship is then tested using a large Finnish firm level data set combined with patent and patent citations of the firms. Econometric analysis shows that the inverted U-relationship is fairly robust to different innovation measures derived from patent data. We also find that the inverted-U relationship tends to be steeper when also R&D subsidies are considered. This result suggests that there exists a complementarity between competition and R&D subsidies.

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File URL: http://128.118.178.162/eps/io/papers/0509/0509009.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 0509009.

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Length: 100 pages
Date of creation: 16 Sep 2005
Date of revision:
Handle: RePEc:wpa:wuwpio:0509009

Note: Type of Document - pdf; pages: 100
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Web page: http://128.118.178.162

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Keywords: Product market competition; Innovations; R&D subsidies;

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  1. Borenstein, Severin & Farrell, Joseph, 2006. "Do Investors Forecast Fat Firms? Evidence from the Gold Mining Industry," Competition Policy Center, Working Paper Series, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley qt4h02v1jp, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
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Citations

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Cited by:
  1. Juha Kilponen & Helvi Kinnunen & Antti Ripatti, 2006. "Demographic Uncertainty and Labour Market Imperfections in Small Open Economy," Computing in Economics and Finance 2006 227, Society for Computational Economics.
  2. Kilponen , Juha & Kinnunen , Helvi & Ripatti , Antti, 2006. "Population ageing in a small open economy – some policy experiments with a tractable general equilibrium model," Research Discussion Papers 28/2006, Bank of Finland.
  3. Valkonen, Laura, 2006. "Deregulation as a Means to Increase Competition and Productivity," Discussion Papers 1014, The Research Institute of the Finnish Economy.
  4. Ad van Riet & Moreno Roma, 2006. "Competition, productivity and prices in the euro area services sector," Occasional Paper Series 44, European Central Bank.

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