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Competition, Innovation and Distance to Frontier

  • Amable, Bruno
  • Demmou, Lila
  • Lezdema, Ivan

This paper tests the effect of competition and regulation on innovative activity measured by patenting. It uses a variety of indicators: the relative number of firms in an industry and various indicators of product market regulation. The sample consists of a panel of 15 industries for 17 OECD countries over the period 1979-2003. Results are that the positive effect of competition alledged to be at its maximum when an economy moves closer to the technological frontier is nowhere to be found. Two main configurations emerge. First, regulation has a positive effect whatever the distance to the frontier and the magnitude of its impact is higher the closer the industry is to the frontier. Second, the effect of regulation is negative far from the frontier and becomes positive (or non significant) when the technology gap decreases. These results contradict the belief in the innovation-boosting effect of increased competition such as taken into account in the Lisbon Strategy.

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Paper provided by CEPREMAP in its series CEPREMAP Working Papers (Docweb) with number 0706.

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Length: 45 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:cpm:docweb:0706
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