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Degree of innovativeness and market structure: A model

Author

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  • Daniela Grieco

    (CESPRI, Bocconi University, Milano,Italy.)

Abstract

A limited number of business firms engage in disruptive innovative activity. When firms decide among alternative innovative patterns, inertial forces may bias their choices in favour of incremental innovations. This paper proposes a model that compares firms’ value when firms can invest in strategies implying different degrees of innovativeness. The model shows that incremental strategies emerge as a dominant strategy for oligopolists when imitation of incremental innovation is sufficiently slow and firms are not too asymmetric in their access to knowledge. If these conditions are not respected, the model exhibits an additional symmetric Nash equilibrium where firms select radical innovations.

Suggested Citation

  • Daniela Grieco, 2006. "Degree of innovativeness and market structure: A model," KITeS Working Papers 178, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised May 2006.
  • Handle: RePEc:cri:cespri:wp178
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Radical innovation; Incremental Innovation; Imperfect competition; Patent race.;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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