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Market competition and innovation in Luxembourg

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  • Peroni, Chiara
  • Gomes Ferreira, Ivete

Abstract

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.

Suggested Citation

  • Peroni, Chiara & Gomes Ferreira, Ivete, 2010. "Market competition and innovation in Luxembourg," MPRA Paper 38709, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:38709
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    competition; innovation; pro t elasticity; R&D;

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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