The relation between competition and innovation -- Why is it such a mess?
Using a general two-stage framework, this paper gives sufficient conditions for increasing competition to have negative or positive effects on R&D-investment, respectively. Both possibilities arise in plausible situations, even if one uses relatively narrow definitions of increasing competition. The paper also shows that competition is more likely to increase the investments of leaders than those of laggards. When R&D-spillovers are strong, competition is less likely to increase investments. The paper also identifies conditions under which low initial levels of competition make a positive effects of competition on investment more likely. Extending the basic framework, the paper shows that separation of ownership and control, endogenous entry and cumulative investments make positive effects of competition on investment more likely. Imperfect upstream competition weakens the effects of competition on investment.
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- Vives, Xavier, 2004.
"Innovation and Competitive Pressure,"
CEPR Discussion Papers
4369, C.E.P.R. Discussion Papers.
- Vives, Xavier, 2005. "Innovation and Competitive Pressure," Department of Economics, Working Paper Series qt1s1059vr, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Vives, Xavier, 2006. "Innovation and competitive pressure," IESE Research Papers D/634, IESE Business School.
- Yongmin Chen & Marius Schwartz, 2013.
"Product Innovation Incentives: Monopoly vs. Competition,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 22(3), pages 513-528, 09.
- Yongmin Chen and Marius Schwartz, 2009. "Product Innovation Incentives: Monopoly vs. Competition," Working Papers gueconwpa~09-09-02, Georgetown University, Department of Economics.
- Boone, J., 2000.
2000-104, Tilburg University, Center for Economic Research.
- Daniel Halbheer & Ernst Fehr & Lorenz Goette & Armin Schmutzler, 2007.
"Self-Reinforcing Market Dominance,"
SOI - Working Papers
0711, Socioeconomic Institute - University of Zurich.
- Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
- Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521816632, October.
- Harris, Christopher & Howitt, Peter & Vickers, John & Aghion, Philippe, 2001.
"Competition, Imitation and Growth with Step-by-Step Innovation,"
12375013, Harvard University Department of Economics.
- Philippe Aghion & Christopher Harris & Peter Howitt & John Vickers, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," Review of Economic Studies, Oxford University Press, vol. 68(3), pages 467-492.
- Michael Raith, 2003. "Competition, Risk, and Managerial Incentives," American Economic Review, American Economic Association, vol. 93(4), pages 1425-1436, September.
- Sacco, Dario & Schmutzler, Armin, 2011. "Is there a U-shaped relation between competition and investment?," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 65-73, January.
- Buehler Stefan & Schmutzler Armin, 2005.
"Asymmetric Vertical Integration,"
The B.E. Journal of Theoretical Economics,
De Gruyter, vol. 5(1), pages 1-27, January.
- Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, October.
- Athey, Susan & Schmutzler, Armin, 2001. "Investment and Market Dominance," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 1-26, Spring.
- Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-1277, November.
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