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Time Based Competition and Innovation

  • Thesmar, David
  • Thoenig, Mathias

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3293.

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Date of creation: Apr 2002
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Handle: RePEc:cpr:ceprdp:3293
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  8. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  9. Mathias Dewatripont & Patrick Bolton, 2004. "The firm as a communication network," ULB Institutional Repository 2013/9599, ULB -- Universite Libre de Bruxelles.
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