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Strategic R&D investment, competitive toughness and growth

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  • D'ASPREMONT, Claude
  • DOS SANTOS FERREIRA, Rodolphe
  • GERARD-VARET, Louis-André

Abstract

We develop an overlapping generations model, where firms (as consumers) have a two-period life, investing in R&D during the first period and competing in the product market in the second period. The number of firms is endogenously determined and the set of successful firms by a Bernoullian random process. We show the possibility of an inverted-U relationship between innovation and product market competition for an individual industry, based on the possibility for non-successful firms to remain productive. When the relative cost advantage of successful firms is large (large innovation step or small spillovers) this possibility results from the probabilistic nature of the model.

Suggested Citation

  • D'ASPREMONT, Claude & DOS SANTOS FERREIRA, Rodolphe & GERARD-VARET, Louis-André, 2004. "Strategic R&D investment, competitive toughness and growth," CORE Discussion Papers 2004014, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2004014
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Reis, Ana Balcão & Traca, Daniel A., 2008. "Spillovers and the competitive pressure for long-run innovation," European Economic Review, Elsevier, vol. 52(4), pages 589-610, May.
    2. Daria Onori, 2015. "Competition and Growth: Reinterpreting their Relationship," Manchester School, University of Manchester, vol. 83(4), pages 398-422, July.
    3. Yassine Lefouili, 2011. "Compte rendu d'ouvrage - Le low cost," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 92(3), pages 331-335.
    4. d'Aspremont, Claude & Dos Santos Ferreira, Rodolphe, 2009. "Price-quantity competition with varying toughness," Games and Economic Behavior, Elsevier, vol. 65(1), pages 62-82, January.
    5. Antonio Minniti, 2009. "Growth, Inter-Industry And Intra-Industry Competition And Welfare," The Japanese Economic Review, Japanese Economic Association, vol. 60(1), pages 110-132.

    More about this item

    Keywords

    competitive toughness; R&D incentives; strategic investment; endogenous growth;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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