The Relation Between Competition and Investment â€“ Towards a Synthesis
Using a general two-stage framework, this paper gives sufficient conditions for increasing competition to have negative or positive effects on R&D-investment, respectively. Both possibilities arise in plausible situations, even if one uses relatively narrow definitions of increasing competition. The paper also shows that competition is more likely to increase the investments of leaders than those of laggards. When R&D-spillovers are strong, competition is less likely to increase investments. The paper also identifies conditions under which low initial levels of competition make positive effects of competition on investment more likely. Extending the basic framework, the paper shows that separation of ownership and control, endogenous entry and cumulative investments make positive effects of competition on investment more likely. Imperfect upstream competition weakens the effects of competition on investment. Keywords: competition, investment, cost reduction. JEL: L13, L20, L22.
|Date of creation:||21 Oct 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (510) 642-1922
Fax: (510) 642-5018
Web page: http://www.escholarship.org/repec/iber_econ/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Leahy, Dermot & Neary, J Peter, 1995.
"Public Policy Towards R&D in Oligopolistic Industries,"
CEPR Discussion Papers
1243, C.E.P.R. Discussion Papers.
- Leahy, Dermot & Neary, J Peter, 1997. "Public Policy towards R&D in Oligopolistic Industries," American Economic Review, American Economic Association, vol. 87(4), pages 642-62, September.
- D Leahy & J.P. Neary, 1995. "Public Policy Towards R&D in Oligopolistic Industries," CEP Discussion Papers dp0270, Centre for Economic Performance, LSE.
- Yongmin Chen and Marius Schwartz, 2009.
"Product Innovation Incentives: Monopoly vs. Competition,"
gueconwpa~09-09-02, Georgetown University, Department of Economics.
- Yongmin Chen & Marius Schwartz, 2013. "Product Innovation Incentives: Monopoly vs. Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(3), pages 513-528, 09.
- Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April.
- Daniel Halbheer & Ernst Fehr & Lorenz Goette & Armin Schmutzler, 2007.
"Self-Reinforcing Market Dominance,"
SOI - Working Papers
0711, Socioeconomic Institute - University of Zurich.
- Athey, Susan & Schmutzler, Armin, 2001. "Investment and Market Dominance," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 1-26, Spring.
- Jan Boone, 2008. "Competition: Theoretical Parameterizations and Empirical Measures," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(4), pages 587-611, December.
- Robert W. Staiger & Kyle Bagwell, 1990.
"The Sensitivity of Strategic and Corrective R&D Policy in Oligopolistic Industries,"
NBER Working Papers
3236, National Bureau of Economic Research, Inc.
- Bagwell, Kyle & Staiger, Robert W., 1994. "The sensitivity of strategic and corrective R&D policy in oligopolistic industries," Journal of International Economics, Elsevier, vol. 36(1-2), pages 133-150, February.
- Kyle Bagwell & Robert W. Staiger, 1989. "The Sensitivity of Strategic and Corrective R&D Policy in Oligopolistic Industries," Discussion Papers 869, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
- 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.
When requesting a correction, please mention this item's handle: RePEc:cdl:econwp:qt8tt4457m. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.