Competition and Growth in Neo-Schumpeterian Models
We study the effect of product market competition on the incentives to innovate and the economy’s rate of growth in an endogenous growth model. We extend previous works in industrial organization by assuming that innovation is sequential and cumulative, and early endogenous growth models by accounting for the possibility that in each period many asymmetric firms (i.e., an endogenously determined number of successive innovators) are simultaneously active. We identify the price effect, the front loading of profits, and the productive efficiency effect associated with an increase in competitive pressure. The price effect reduces the incentives to innovate, but both the front loading of profits and the productive efficiency effect raise the incentives to innovate. We demonstrate circumstances in which the productive efficiency effect dominates the price effect. In these circumstances, the front loading of profits and the fact that the productive efficiency effect dominates the price effect compound to make the equilibrium rate of growth increase with the intensity of competition.
|Date of creation:||Oct 2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 (0)116 252 2887
Fax: +44 (0)116 252 2908
Web page: http://www2.le.ac.uk/departments/economics
More information through EDIRC
|Order Information:|| Web: http://www2.le.ac.uk/departments/economics/research/discussion-papers Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael Raith, 2003. "Competition, Risk, and Managerial Incentives," American Economic Review, American Economic Association, vol. 93(4), pages 1425-1436, September.
When requesting a correction, please mention this item's handle: RePEc:lec:leecon:04/28. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mrs. Alexandra Mazzuoccolo)
If references are entirely missing, you can add them using this form.