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Competition and Innovation: An inverted-U relationship using Japanese industry data

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  • YAGI Michiyuki
  • MANAGI Shunsuke

Abstract

This study replicates a model of Aghion et al. ("Competition and Innovation: An inverted-u relationship," Quarterly Journal of Economics 2005; 120(2):701-728), which suggests that an inverted-U relationship exists between competition and innovation. We apply patent data and a competition measure based on Japanese firm-level and industry-average data from 1964 to 2006. In a constant slope model using a full dataset, we find the same inverted-U relationship as did Aghion-Bloom-Blundell-Griffith-Howitt (ABBGH). In decade and industry fixed-effects slope models, we find the inverted-U relationship to be fragile.

Suggested Citation

  • YAGI Michiyuki & MANAGI Shunsuke, 2013. "Competition and Innovation: An inverted-U relationship using Japanese industry data," Discussion papers 13062, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:13062
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    File URL: https://www.rieti.go.jp/jp/publications/dp/13e062.pdf
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    References listed on IDEAS

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    1. Juan A. Correa, 2012. "Innovation and competition: An unstable relationship," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(1), pages 160-166, January.
    2. Hall, B. & Jaffe, A. & Trajtenberg, M., 2001. "The NBER Patent Citations Data File: Lessons, Insights and Methodological Tools," Papers 2001-29, Tel Aviv.
    3. Jo Thori Lind & Halvor Mehlum, 2010. "With or Without U? The Appropriate Test for a U-Shaped Relationship," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(1), pages 109-118, February.
    4. Kamien, Morton I & Schwartz, Nancy L, 1975. "Market Structure and Innovation: A Survey," Journal of Economic Literature, American Economic Association, vol. 13(1), pages 1-37, March.
    5. Patrik Gustavsson Tingvall & Andreas Poldahl, 2006. "Is there really an inverted U-shaped relation between competition and R&D?," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(2), pages 101-118.
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    Cited by:

    1. AMBASHI Masahito, 2013. "Does Competition Improve Industrial Productivity? An analysis of Japanese industries on the basis of the industry-level panel data," Discussion papers 13098, Research Institute of Economy, Trade and Industry (RIETI).

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