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How does competition affect the relationship between innovation and productivity? Estimation of a CDM model for Norway

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  • Castellacci, Fulvio

Abstract

The paper investigates the effects of industry-level competition on firm-level innovation and productivity. We propose a refined version of the CDM model that analyses the impacts of competition on four interrelated stages of the innovation process: the choice of a firm to engage in innovation, its R&D intensity, its innovation output and labour productivity. We test the model on a firm-level panel dataset based on the last three waves of the innovation survey for Norway (CIS3, CIS4 and CIS5). The econometric results provide empirical support for the refined version of the CDM model. They show that enterprises in oligopolistic sectors have on average a greater propensity to engage in innovative activities and tend to invest a greater amount of resources in R&D. On the other hand, firms in competitive industries are characterised by a stronger impact of innovation input on their technological and economic performance.

Suggested Citation

  • Castellacci, Fulvio, 2009. "How does competition affect the relationship between innovation and productivity? Estimation of a CDM model for Norway," MPRA Paper 27591, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:27591
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    More about this item

    Keywords

    Competition; innovation; productivity; CDM model; CIS data;
    All these keywords.

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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