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R&D Competition with Radical and Incremental Innovation

Author

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  • Maria Rosa Battaggion

    () (Department of Economics, University of Bergamo)

  • Daniela Grieco

    () (Bocconi University)

Abstract

Recent empirical evidence about innovation shows that established firms rarely invest in radical innovation but incrementally improve the existing technology. Revolutionary breakthroughs are more likely to be introduced by new entrants. These stylized facts motivate a renewed attention of the debate on incentives to innovate. In this stream of the literature our paper emphasizes the importance of distinguishing between degrees of innovativeness when comparing an incumbent’s and an entrant’s incentives to invest in innovation. The model presented captures the peculiarity of a radical innovation with respect of an incremental one along three dimension: risk, impact on the existing market and capability of opening up a new market. The results reflect the empirical evidence and emphasize the role of substitutability between markets in determining the strength of this effect.

Suggested Citation

  • Maria Rosa Battaggion & Daniela Grieco, 2007. "R&D Competition with Radical and Incremental Innovation," Working Papers (-2012) 0701, University of Bergamo, Department of Economics.
  • Handle: RePEc:brg:wpaper:0701
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    Cited by:

    1. Julio Rosa & Pierre Mohnen, 2013. "Doing R&D in a Closed or Open Mode: Dynamics and Impacts on Productivity," CIRANO Working Papers 2013s-42, CIRANO.
    2. Carfì, David & Gambarelli, Gianfranco & Uristani, Angelo, 2011. "Balancing pairs of interfering elements," MPRA Paper 35335, University Library of Munich, Germany.

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