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Price Competition, Innovation and Profitability: Theory and UK Evidence

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  • Symeonidis, George

Abstract

This Paper examines the effect of price competition on innovation, market structure and profitability in R&D-intensive industries. The theoretical predictions are tested using UK data on the evolution of competition, concentration, innovation counts and profitability over 1952-77. The econometric results suggest that the introduction of restrictive practices legislation in the UK had no significant effect on the number of innovations commercialized in previously cartelized R&D-intensive manufacturing industries, while it caused a significant rise in concentration in these industries. In the short run profitability decreased, but in the long run it was restored through the rise in concentration.

Suggested Citation

  • Symeonidis, George, 2001. "Price Competition, Innovation and Profitability: Theory and UK Evidence," CEPR Discussion Papers 2816, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2816
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    References listed on IDEAS

    as
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    Cited by:

    1. Andy Cosh & Xiaolan Fu & Alan Hughes, 2005. "Management characteristics, collaboration and innovative efficiency: evidence from UK survey data," Working Papers wp311, Centre for Business Research, University of Cambridge.
    2. Bettina Becker & Nigel Pain, 2008. "What Determines Industrial R&D Expenditure In The Uk?," Manchester School, University of Manchester, vol. 76(1), pages 66-87, January.
    3. Wilfred Dolfsma & Gerben Velde, 2014. "Industry innovativeness, firm size, and entrepreneurship: Schumpeter Mark III?," Journal of Evolutionary Economics, Springer, vol. 24(4), pages 713-736, September.
    4. Brouwer, E. & van der Wiel, H.P., 2010. "Competition and Innovation : Pushing Productivity Up or Down?," Discussion Paper 2010-52, Tilburg University, Center for Economic Research.
    5. Mark Rogers, 2004. "Competition, agency and productivity," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 11(3), pages 349-367.
    6. Choi Kyeong-Seop, 2019. "Technological Innovation and Product Market Conditions: R&D Rivalry, Market Competition, and Customer Satisfaction," Entrepreneurship Research Journal, De Gruyter, vol. 9(2), pages 1-16, April.
    7. Brouwer, E. & van der Wiel, H.P., 2010. "Competition and Innovation : Pushing Productivity Up or Down?," Other publications TiSEM 9efe62df-d940-4471-8bc7-e, Tilburg University, School of Economics and Management.

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    More about this item

    Keywords

    Cartels; Innovation; Manufacturing; Market Structure; Price Competition; Profitability; UK;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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