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Innovation and firm-level persistent profitability: a Schumpeterian framework

  • Peter W Roberts

    (Columbia Business School, Columbia University, New York, NY, USA)

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    Studies of firm-level profit dynamics tend to attribute the variance in profit persistence to variability in the extent to which imitative pressures are resisted. This monopoly-based explanation of persistent profitability implicitly assumes a one-to-one correspondence between firm-level and product-level profit dynamics. Following Schumpeter, this paper begins to develop a framework for firm-level profit persistence that embraces product innovation, competitor imitation, and, more importantly, the prospect that several product innovations may be embodied within a single firm. Such an approach opens the door for an innovation-based explanation of profit persistence to accompany the monopoly-based arguments that are typically offered. Copyright © 2001 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/mde.1018
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    Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

    Volume (Year): 22 (2001)
    Issue (Month): 4-5 ()
    Pages: 239-250

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    Handle: RePEc:wly:mgtdec:v:22:y:2001:i:4-5:p:239-250
    Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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    1. Schohl, Frank, 1990. "Persistence of profits in the long run: A critical extension of some recent findings," International Journal of Industrial Organization, Elsevier, vol. 8(3), pages 385-404, September.
    2. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1987. "Appropriating the Returns from Industrial Research and Development," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 783-832.
    3. Mansfield, Edwin & Schwartz, Mark & Wagner, Samuel, 1981. "Imitation Costs and Patents: An Empirical Study," Economic Journal, Royal Economic Society, vol. 91(364), pages 907-18, December.
    4. Cubbin, John & Geroski, Paul A, 1987. "The Convergence of Profits in the Long Run: Inter-firm and Inter-industry Comparisons," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 427-42, June.
    5. Scherer, F M, 1992. "Schumpeter and Plausible Capitalism," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1416-33, September.
    6. Comanor, William S, 1986. "The Political Economy of the Pharmaceutical Industry," Journal of Economic Literature, American Economic Association, vol. 24(3), pages 1178-1217, September.
    7. Mueller, Dennis C, 1977. "The Persistence of Profits above the Norm," Economica, London School of Economics and Political Science, vol. 44(176), pages 369-80, November.
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