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The link between product market reform, innovation and EU macroeconomic performance

Author

Listed:
  • Rachel Griffith
  • Rupert Harrison
  • Helen Simpson

Abstract

This report analyses the impact of product market reforms, in the form of the EU Single Market Programme, on the extent of product market competition and the subsequent effects of competition on innovation activity and productivity growth.The report first summarises the main messages from the existing theoretical and empirical literature on the relationship between competition and innovation and uses this to inform the subsequent empirical analysis. The theoretical literature on competition and growth emphasises the importance of economic profits, or rents, in providing incentives for firms to innovate to compete for market position or in order to enter new markets. Increased competition may increase incentives for firms to increase efficiency or to innovate in order to protect or enhance their market position. However, competition may reduce the rewards to innovation or entry into a market and thus discourage these activities.

Suggested Citation

  • Rachel Griffith & Rupert Harrison & Helen Simpson, 2006. "The link between product market reform, innovation and EU macroeconomic performance," European Economy - Economic Papers 2008 - 2015 243, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  • Handle: RePEc:euf:ecopap:0243
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    Citations

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    Cited by:

    1. Rosina Moreno & Jordi Suriñach, 2014. "Innovation adoption and productivity growth: evidence for Europe," EKONOMIAZ. Revista vasca de Economía, Gobierno Vasco / Eusko Jaurlaritza / Basque Government, vol. 86(02), pages 62-87.
    2. Navas Antonio & Licandro Omar, 2011. "Trade Liberalization, Competition and Growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-28, May.
    3. Jacques Pelkmans & Lourdes Acedo Montoya & Alessandro Maravalle, 2008. "How product market reforms lubricate shock adjustment in the euro area," European Economy - Economic Papers 2008 - 2015 341, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    4. Francesco Daveri & Rémy Lecat & Maria Laura Parisi, 2016. "Service Deregulation, Competition, and the Performance of French and Italian Firms," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(3), pages 278-302, July.
    5. Navas, Antonio, 2010. "La Apertura al Comercio Exterior y sus Efectos sobre la Productividad en Presencia de Diferencias Intersectoriales," Working Papers in Economic Theory 2010/04, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    6. Verónica Fernández Gual & Agustí Segarra Blasco, 2013. "The Impact of Cooperation on R&D, Innovation andProductivity: an Analysis of Spanish Manufacturing and Services Firms," Working Papers XREAP2013-08, Xarxa de Referència en Economia Aplicada (XREAP), revised Nov 2013.
    7. Fernández Gual, Verónica & Segarra Blasco, Agustí, 1958-, 2013. "The Impact of Cooperation on R&D, Innovation and Productivity: an Analysis of Spanish Manufacturing and Services Firms," Working Papers 2072/220761, Universitat Rovira i Virgili, Department of Economics.
    8. Crafts, Nicholas, 2011. "British Relative Economic Decline Revisited," CEPR Discussion Papers 8384, C.E.P.R. Discussion Papers.
    9. Gaëtan Nicodème & Jacques-Bernard Sauner-Leroy, 2007. "Product Market Reforms and Productivity: A Review of the Theoretical and Empirical Literature on the Transmission Channels," Journal of Industry, Competition and Trade, Springer, vol. 7(1), pages 53-72, March.
    10. Anabel Zárate-Marco & Jaime Vallés-Giménez, 2012. "The cost of regulation in a decentralized context: the case of the Spanish regions," European Journal of Law and Economics, Springer, vol. 33(1), pages 185-203, February.
    11. Antonio Navas Ruiz, 2012. "Asymmetric trade liberalization, sector heterogeneity and industry productivity growth," Working Papers. Serie AD 2012-09, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    12. Ugur, Mehmet, 2012. "Market Power, Governance and Innovation: OECD Evidence," MPRA Paper 44141, University Library of Munich, Germany.
    13. Anabel Zárate-Marco & Jaime Vallés-Giménez, 2015. "Environmental tax and productivity in a decentralized context: new findings on the Porter hypothesis," European Journal of Law and Economics, Springer, vol. 40(2), pages 313-339, October.
    14. Navas, Antonio, 2012. "Asymmetric trade liberalization, sector heterogeneity and Innovation," Working Papers in Economic Theory 2012/05, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    15. Scopelliti, Alessandro Diego, 2009. "Competition and Economic Growth: an Empirical Analysis for a Panel of 20 OECD Countries," MPRA Paper 20127, University Library of Munich, Germany.
    16. Aldaba, Rafaelita M., 2012. "Trade Reforms, Competition, and Innovation in the Philippines," Discussion Papers DP 2012-06, Philippine Institute for Development Studies.
    17. Pammolli, Fabio & Cambini, Carlo & Giannaccari, Andrea, 2007. "Introduzione. Liberalizzazioni e concorrenza in Italia
      [Introduction. Liberalisation and competition in Italy]
      ," MPRA Paper 16125, University Library of Munich, Germany.
    18. Crafts, Nicholas, 2012. "British relative economic decline revisited: The role of competition," Explorations in Economic History, Elsevier, vol. 49(1), pages 17-29.
    19. Hans Pitlik & Margit Schratzenstaller, 2011. "Growth Implications of Structure and Size of Public Sectors," WIFO Working Papers 404, WIFO.
    20. Ugur, Mehmet & Guner, Umit, 2010. "Innovation and competition in EU15: Empirical evidence on the Lisbon Decade and beyond," MPRA Paper 25705, University Library of Munich, Germany, revised Oct 2010.

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