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How does competition affect the relationship between innovation and productivity? Estimation of a CDM model for Norway

  • Fulvio Castellacci

The paper investigates the effects of industry-level competition on firm-level innovation and productivity. We propose a refined version of the CDM (Crepon, Duguet, and Mairesse) model that analyses the impacts of competition on four interrelated stages of the innovation process: the choice of a firm to engage in innovation, its R&D intensity, its innovation output and labour productivity. We test the model on a firm-level panel data set based on the last three waves of the innovation survey for Norway (CIS3, CIS4 and CIS5). The econometric results provide empirical support for the refined version of the CDM model. They show that enterprises in oligopolistic sectors have, on average, a greater propensity to engage in innovative activities and tend to invest a greater amount of resources in R&D. On the other hand, firms in competitive industries are characterized by a stronger impact of innovation input on their technological and economic performance.

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Article provided by Taylor & Francis Journals in its journal Economics of Innovation and New Technology.

Volume (Year): 20 (2011)
Issue (Month): 7 (August)
Pages: 637-658

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Handle: RePEc:taf:ecinnt:v:20:y:2011:i:7:p:637-658
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  16. Castellacci, Fulvio, 2008. "Innovation and the competitiveness of industries: comparing the mainstream and the evolutionary approaches," MPRA Paper 27523, University Library of Munich, Germany.
  17. Zvi Griliches, 1979. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 92-116, Spring.
  18. Tang, Jianmin, 2006. "Competition and innovation behaviour," Research Policy, Elsevier, vol. 35(1), pages 68-82, February.
  19. Geroski, P A, 1990. "Innovation, Technological Opportunity, and Market Structure," Oxford Economic Papers, Oxford University Press, vol. 42(3), pages 586-602, July.
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