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Market competition and innovation in Luxembourg

  • Peroni, Chiara
  • Gomes Ferreira, Ivete

This paper studies the empirical relation between market competition and innovation using Luxembourg's Structural Business Statistics. The competitive pressure in Luxembourg's markets is assessed by computing a prot elasticity measure, based on the idea of cost-efficiency. From this, the paper analyses the relation between competition and innovation performance by estimating an equation for the determinants of R&D expenditure. The results show that Luxembourg's industries are characterised by low levels of competition intensity, especially in markets relevant to competition policy and regulation. The relation between competition and innovation is non-linear and depends crucially on the efficient use of inputs to production. The impact of the distribution of technological efficiency on innovation is assessed by measuring both average technology gap and technology spread. The innovation effort is increasing as industries are closer to the frontier, and decreasing in the technology spread.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38709.

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Date of creation: 16 Dec 2010
Date of revision:
Handle: RePEc:pra:mprapa:38709
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  1. Boone, Jan & van der Wiel, Henry & van Ours, Jan C, 2007. "How (not) to measure competition," CEPR Discussion Papers 6275, C.E.P.R. Discussion Papers.
  2. Czarnitzki, Dirk & Lopes Bento, Cindy, 2010. "Evaluation of public R&D policies: A cross-country comparison," ZEW Discussion Papers 10-073, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Jacques Mairesse & Pierre Mohnen, 2002. "Accounting for Innovation and Measuring Innovativeness: An Illustrative Framework and an Application," American Economic Review, American Economic Association, vol. 92(2), pages 226-230, May.
  4. 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.
  5. repec:oup:qjecon:v:120:y:2005:i:2:p:701-728 is not listed on IDEAS
  6. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-47, October.
  7. Jan Boone, 2008. "Competition: Theoretical Parameterizations and Empirical Measures," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(4), pages 587-611, December.
  8. Michael Polder & Erik Veldhuizen, 2012. "Innovation and Competition in the Netherlands: Testing the Inverted-U for Industries and Firms," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 67-91, March.
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