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Product market competition and the value of innovation: Evidence from US patent data

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  • Im, Hyun Joong
  • Park, Young Joon
  • Shon, Janghoon

Abstract

This study investigates the relationship between product market competition and the market value of innovation using firm-level patent data of US firms over the period 1977–2005. We find that there is an inverted U-shaped relationship between competition and the value of innovation. Furthermore, we show that there is an “asymmetric” causal effect of intensifying product market competition on the market value of innovation, using a quasi-natural experiment based on tariff-cut events for US manufacturing firms between 1977 and 2006: a firm’s incentive to innovate tends to get stronger in response to a tariff cut when product market competition is very mild, while it tends to get weaker when very severe.

Suggested Citation

  • Im, Hyun Joong & Park, Young Joon & Shon, Janghoon, 2015. "Product market competition and the value of innovation: Evidence from US patent data," Economics Letters, Elsevier, vol. 137(C), pages 78-82.
  • Handle: RePEc:eee:ecolet:v:137:y:2015:i:c:p:78-82
    DOI: 10.1016/j.econlet.2015.10.017
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    References listed on IDEAS

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    Cited by:

    1. Daragh O'Leary & Justin Doran & Bernadette Power, 2022. "Intensity of competition and firm innovative behavior," Economics and Business Letters, Oviedo University Press, vol. 11(2), pages 53-69.
    2. Muhammad Qayyum & Yuyuan Yu & Tingting Tu & Mir Muhammad Nizamani & Afaq Ahmad & Minhaj Ali, 2022. "Relationship between economic liberalization and intellectual property protection with regional innovation in China. A case study of Chinese provinces," PLOS ONE, Public Library of Science, vol. 17(1), pages 1-17, January.
    3. Im, Hyun Joong, 2019. "Asymmetric peer effects in capital structure dynamics," Economics Letters, Elsevier, vol. 176(C), pages 17-22.
    4. Im, Hyun Joong & Shon, Janghoon, 2019. "The effect of technological imitation on corporate innovation: Evidence from US patent data," Research Policy, Elsevier, vol. 48(9), pages 1-1.
    5. Mulier, Klaas & Samarin, Ilia, 2021. "Sector heterogeneity and dynamic effects of innovation subsidies: Evidence from Horizon 2020," Research Policy, Elsevier, vol. 50(10).

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    More about this item

    Keywords

    Innovation; Product market competition; Value of innovation; Tariff cuts;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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