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Innovative Activities of an Incumbent and a Potential Entrant: An Empirical Exploration of the Role of Uncertainty in Product and Process Innovations

Author

Listed:
  • Hyunbae Chun

    () (Department of Economics, Sogang University, Seoul)

  • Sung-Bae Mun

    ()

Abstract

By distinguishing between product and process innovations, we empirically examine how uncertainty affects the innovation activities of incumbents and potential entrants. We find that potential entrants are more innovative than are incumbents in both process and product innovations, which supports the patent race model. Further, we find that uncertainty plays a crucial role in hindering an incumbent¡¯s incentive for product innovation, but has little impact on the innovation activities of both incumbents and entrants with respect to process innovation. The results suggest that a higher uncertainty in product innovation can raise the incentive for incumbent firms to seek for cooperation with new entrants.

Suggested Citation

  • Hyunbae Chun & Sung-Bae Mun, 2014. "Innovative Activities of an Incumbent and a Potential Entrant: An Empirical Exploration of the Role of Uncertainty in Product and Process Innovations," Working Papers 1406, Research Institute for Market Economy, Sogang University.
  • Handle: RePEc:sgo:wpaper:1406
    as

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    References listed on IDEAS

    as
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    6. Doraszelski, Ulrich, 2003. " An R&D Race with Knowledge Accumulation," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 20-42, Spring.
    7. Lee, Jeongsik & Kim, Byung-Cheol & Lim, Young-Mo, 2011. "Dynamic competition in technological investments: An empirical examination of the LCD panel industry," International Journal of Industrial Organization, Elsevier, vol. 29(6), pages 718-728.
    8. Czarnitzki, Dirk & Kraft, Kornelius, 2004. "An empirical test of the asymmetric models on innovative activity: who invests more into R&D, the incumbent or the challenger?," Journal of Economic Behavior & Organization, Elsevier, vol. 54(2), pages 153-173, June.
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    More about this item

    Keywords

    Attendance; habit-formation; panel data; structural change; baseball;

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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