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Endogenous Market Structures and Innovation by Leaders: an Empirical Test

Author

Listed:
  • Federico Etro

    (Department of Economics, University Of Venice C� Foscari)

  • Dirk Czarnitzki

    (K.U. Leuven)

  • Kornelius Kraft

    (Technical University of Dortmund)

Abstract

Simple models of competition for the market with endogenous entry show that, contrary to the Arrow view, an endogenous entry threat in a market induces the average firm to invest less in R&D and the incumbent leader to invest more. We test these predictions based on a unique dataset and survey for the German manufacturing sector (the Mannheim Innovation Panel). In line with our predictions, endogenous entry threats as perceived by the firms reduce R&D intensity for the average firm, but they increase it for an incumbent leader. These results hold after a number of robustness tests with instrumental variable regressions.

Suggested Citation

  • Federico Etro & Dirk Czarnitzki & Kornelius Kraft, 2011. "Endogenous Market Structures and Innovation by Leaders: an Empirical Test," Working Papers 2011_04, Department of Economics, University of Venice "Ca' Foscari".
    • Handle: RePEc:ven:wpaper:2011_04
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    More about this item

    Keywords

    Endogenous market structures; innovation; leadership;
    All these keywords.

    JEL classification:

    • 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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