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The effects of entry on incumbent innovation and productivity

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  • Aghion, Philippe
  • Blundell, Richard
  • Griffith, Rachel
  • Howitt, Peter
  • Prantl, Susanne

Abstract

How does firm entry affect innovation incentives in incumbent firms? Micro data suggest that there is heterogeneity across industries. Specifically, incumbent productivity growth and patenting is positively correlated with lagged greenfield foreign firm entry in technologically advanced industries, but not in laggard industries. To explain this pattern, we use a Schumpeterian growth model with entry and multiple sectors which differ by their distance to the world technology frontier. We show that technologically advanced entry threat spurs innovation incentives in sectors close to the technology frontier - successful innovation allows incumbents to survive the threat. In laggard sectors it discourages innovation - increased entry threat reduces incumbents' expected rents from innovating. We find that the empirical patterns hold using rich micro panel data for the UK, and controlling for the endogeneity of entry by exploiting major European and UK policy reforms. -- Wie wirkt Markteintritt auf Innovationsanreize? Deskriptive Auswertungen von Mikrodaten zeigen industriespezifische Heterogenität in den Reaktionen etablierter Unternehmen. Konkret zeigt sich, dass das Produktivitätswachstum und die Patentzahlen etablierter Unternehmen in technologisch hochentwickelten Industrien positiv korrelieren mit vorhergehendem Markteintritt ausländischer Unternehmen, die neue Produktionseinheiten aufbauen. Dies steht im Gegensatz zur Situation in Industrien, die hinter dem technisch Machbaren zurückbleiben. Um dieses Muster zu erklären, verwenden wir ein endogenes Wachstumsmodell mit Markteintritt und multiplen Sektoren in unterschiedlicher Distanz von der weltweit geltenden, technologischen Entwicklungsgrenze. Markteintrittsdruck seitens technologisch fortschrittlicher Unternehmen erhöht die Innovationsanreize etablierter Unternehmen in Sektoren nahe der technologischen Entwicklungsgrenze, da etablierte Unternehmen dort durch erfolgreiche Innovationstätigkeit drohenden Markteintritt überleben können. In technologisch rückständigen Industrien reduziert Markteintrittsdruck die im Erfolgsfalle zu erwartende Innovationsrente etablierter Unternehmen und dämpft somit deren Innovationsanreize. Wir zeigen empirische Evidenz, die im Einklang mit diesen Kausalzusammenhängen steht. Für die empirische Analyse verwenden wir umfassende Paneldaten auf Mikroebene in Großbritannien und wir nutzen wichtige Politikänderungen auf EU-Ebene und in Großbritannien, um für die Endogenität von Markteintritt zu kontrollieren.

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Bibliographic Info

Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Competition and Innovation with number SP II 2006-18.

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Date of creation: 2006
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Handle: RePEc:zbw:wzbcin:spii200618

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Keywords: entry threat; innovation incentives; distance to the technology frontier; firm entry; productivity growth; patenting;

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References

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