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The effect of market entry on innovation: evidence from UK university incubators

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  • Helmers, Christian

Abstract

This paper investigates the effect of market entry of new firms on incumbent firms' innovative activity measured as patent applications. The basic assumption is that the effect of entry varies by geographical distance between entrants and incumbents due to the presence of localized unobserved spillovers. In order to avoid endogeneity problems commonly associated with the timing of entry and entrants' location choice, I analyze entry induced by the establishment of university business incubators, which are usefully exogenous in time and space. The results show that entry has a statistically and economically significantly positive strategic effect on incumbent patenting which is attenuated by the geographical distance between entrant and incumbent.

Suggested Citation

  • Helmers, Christian, 2010. "The effect of market entry on innovation: evidence from UK university incubators," LSE Research Online Documents on Economics 121925, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:121925
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    File URL: https://researchonline.lse.ac.uk/id/eprint/121925/
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    References listed on IDEAS

    as
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    5. Reinganum, Jennifer F, 1983. "Uncertain Innovation and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 73(4), pages 741-748, September.
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    7. Victor Aguirregabiria & Pedro Mira, 2002. "Swapping the Nested Fixed Point Algorithm: A Class of Estimators for Discrete Markov Decision Models," Econometrica, Econometric Society, vol. 70(4), pages 1519-1543, July.
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    Keywords

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    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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