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Competition, innovation, and the effect of R&D knowledge

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  • Alexander Steinmetz

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Abstract

This paper analyzes the effect of learning-by-doing in R&D on firms’ incentives to innovate. As a benchmark without learning it is shown that relaxing the usual assumption of imposed imitation yields additional strategic effects. Therefore, the leader’s R&D effort increases with the gap as she is trying to avoid competition in the future. When firms gain experience by performing R&D technological leaders rest on their laurels allowing followers to catch up. Contrary to the benchmark case, the leader’s innovation effort declines with the lead. This causes an equilibrium where the incentives to innovate are highest when competition is most intense. Copyright Springer-Verlag Wien 2015

Suggested Citation

  • Alexander Steinmetz, 2015. "Competition, innovation, and the effect of R&D knowledge," Journal of Economics, Springer, vol. 115(3), pages 199-230, July.
  • Handle: RePEc:kap:jeczfn:v:115:y:2015:i:3:p:199-230
    DOI: 10.1007/s00712-014-0415-3
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    References listed on IDEAS

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    More about this item

    Keywords

    Innovation; Market structure; Learning-by-doing R&D; Knowledge; L11; L13; O31; O41;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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