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Time Based Competition and Innovation

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Abstract

By choosing their organizations, firms trade-off productive efficiency and time spent in implementing innovation. We embed such a productivity/reactivity trade-off in a growth model with creative destruction. We first highlight the specific impact of time in firm competition: in addition to weighing costs and benefits of late adoption, firms use time as a strategic variable through the possibility of overtaking their competitors. Due to this very specificity of time competition, multiple equilibria may emerge: when firms adopt quickly, their stock market valuation is larger, and they innovate more and produce less. Moreover, the IT revolution is shown to favour quick implementation via a general equilibrium feedback on organizational choice.

Suggested Citation

  • Thesmar, David, 2002. "Time Based Competition and Innovation," CEPR Discussion Papers 3293, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3293
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    Cited by:

    1. Elisa Rancati, 2005. "Global Markets and Time-Based Competition," Symphonya. Emerging Issues in Management, Niccolò Cusano University, issue 2 Over-Su.
    2. David Fairris & Philippe Askenazy, 2010. "Works Councils and Firm Productivity in France," Journal of Labor Research, Springer, vol. 31(3), pages 209-229, September.

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    Keywords

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    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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