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Innovation and competition in EU15: Empirical evidence on the Lisbon Decade and beyond

  • Ugur, Mehmet
  • Guner, Umit

In March 2000, the Lisbon Summit set the European Union the goal of becoming ‘the most dynamic and competitive knowledge-based economy in the world’ by 2010. This paper aims to ascertain the extent to which various indicators of innovation in EU15 have improved and whether such improvement has been driven by higher levels of competition in EU15 economies. To this end, we provide a descriptive account of the competition and innovation indicators from 1980-2008. Then, we discuss the relationship between market structure (level of competition) and innovation; and estimate the impact of the former on the latter. We report that aggregate innovation measures for EU15 have been increasing over the 1980-2008 period and there does not seem to be a significant change in the trend during the Lisbon decade (200-2008). Furthermore, increasing levels of innovation have been associated with increasing economic rents – i.e., with further departures from the perfect-competition baseline. Fixed-effect panel-data regression results point out a positive and statistically significant relationship between economic rents and various measures of innovations.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25705.

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Date of creation: Sep 2010
Date of revision: Oct 2010
Handle: RePEc:pra:mprapa:25705
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  1. Grossman, G.M. & Helpman, E., 1989. "Quality Ledders In The Theory Of Growth," Papers 148, Princeton, Woodrow Wilson School - Public and International Affairs.
  2. Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and innovation: an inverted U relationship," IFS Working Papers W02/04, Institute for Fiscal Studies.
  3. Rachel Griffith & Rupert Harrison & Helen Simpson, 2010. "Product Market Reform and Innovation in the EU," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 389-415, 06.
  4. Rachel Griffith & Rupert Harrison & Helen Simpson, 2006. "The link between product market reform, innovation and EU macroeconomic performance," European Economy - Economic Papers 243, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  5. Blackorby, C., 1990. "Economic Policy In A Second-Best Environment," G.R.E.Q.A.M. 90c01, Universite Aix-Marseille III.
  6. Khalid Sekkat & Adriaan Dierx & Fabienne Ilzkovitz, 2004. "European integration and the functioning of product markets," ULB Institutional Repository 2013/7310, ULB -- Universite Libre de Bruxelles.
  7. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  8. Gelauff, George & Lejour, Arjan, 2006. "The new Lisbon Strategy: An estiamtion of the impact of reaching 5 Lisbon targets," MPRA Paper 16168, University Library of Munich, Germany.
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