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Competition and Innovation

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  • Gilbert, Richard J

Abstract

The Department of Justice and the Federal Trade Commission have frequently raised innovation concerns as reasons to challenge mergers. This chapter surveys the economic theories of innovation incentives and considers how the theory may inform antitrust analysis for merger investigations and other conduct that involve innovation. Competition can promote innovation by reducing the value of failing to invest in research and development. However, with non-exclusive intellectual property rights, competition can reduce innovation incentives by lowering post-innovation profits. There is some empirical support for these economic theories. The chapter concludes that economics can inform antitrust analysis for mergers and other conduct that could affect innovation, although it is important that antitrust analysis carefully consider the key factors that drive innovation incentives.

Suggested Citation

  • Gilbert, Richard J, 2007. "Competition and Innovation," Competition Policy Center, Working Paper Series qt9xh5p5p9, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  • Handle: RePEc:cdl:compol:qt9xh5p5p9
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    Cited by:

    1. Donja Darai & Dario Sacco & Armin Schmutzler, 2010. "Competition and innovation: an experimental investigation," Experimental Economics, Springer;Economic Science Association, vol. 13(4), pages 439-460, December.
    2. Zanchettin, Piercarlo & Mukherjee, Arijit, 2017. "Vertical integration and product differentiation," International Journal of Industrial Organization, Elsevier, vol. 55(C), pages 25-57.
    3. Atal, Vidya & Bar, Talia & Gordon, Sidartha, 2016. "Project selection: Commitment and competition," Games and Economic Behavior, Elsevier, vol. 96(C), pages 30-48.
    4. Lin, Ping & Zhou, Wen, 2013. "The effects of competition on the R&D portfolios of multiproduct firms," International Journal of Industrial Organization, Elsevier, vol. 31(1), pages 83-91.
    5. Arijit Mukherjee & Prabal Roy chowdhury, 2013. "Innovation and social desirability of merger," Economics Bulletin, AccessEcon, vol. 33(1), pages 348-360.
    6. Paolo Giorgio GARELLA, 2010. "Monopoly incentives to cost-reducing R&D," Departmental Working Papers 2010-06, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano, revised 27 Mar 2012.
    7. Mamman, Aminu & Bawole, Justice & Agbebi, Motolani & Alhassan, Abdul-Razak, 2019. "SME policy formulation and implementation in Africa: Unpacking assumptions as opportunity for research direction," Journal of Business Research, Elsevier, vol. 97(C), pages 304-315.
    8. Philipp Weinscheink, 2010. "Entry and Incumbent Innovation," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2010_17, Max Planck Institute for Research on Collective Goods.
    9. François Lévêque & Michelle Hallack, 2013. "The new Brazilian oil regulation: an ex ante economic assessment," RSCAS Working Papers 2013/48, European University Institute.
    10. Syeda Tamkeen Fatima, 2017. "Globalization and technology adoption: evidence from emerging economies," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 26(6), pages 724-758, August.
    11. Ottoz Elisabetta & Cugno Franco, 2009. "Hybrid Licensing of Product Innovations," Review of Law & Economics, De Gruyter, vol. 5(1), pages 579-594, October.
    12. Ping Lin & Tianle Zhang & Wen Zhou, 2020. "Vertical integration and disruptive cross‐market R&D," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(1), pages 51-73, January.
    13. N. Lacetera & L. Zirulia, 2008. "Knowledge Spillovers, Competition, and R&D Incentive Contracts," Working Papers 624, Dipartimento Scienze Economiche, Universita' di Bologna.
    14. Garella, Paolo G., 2012. "Monopoly incentives for cost-reducing R&D," Economics Letters, Elsevier, vol. 117(1), pages 21-24.
    15. Liu, Chih-Chen & Mukherjee, Arijit & Wang, Leonard F.S., 2016. "Product market cooperation, entry and consumer welfare," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 277-280.
    16. Asieh Fathali, 2016. "Examining the Impact of Competitive Strategies on Corporate Innovation: An Empirical Study in Automobile Industry," International Journal of Asian Social Science, Asian Economic and Social Society, vol. 6(2), pages 135-145, February.
    17. Sacco, Dario & Schmutzler, Armin, 2011. "Is there a U-shaped relation between competition and investment?," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 65-73, January.

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