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A Minimum of Rivalry: Evidence from Transition Economies on the Importance of Competition for Innovation and Growth

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  • Wendy Carlin
  • Mark Schaffer
  • Paul Seabright

Abstract

This paper examines the importance of competition in the growth and development of firms. We make use of the large-scale natural experiment of the shift from an economic system without competition to a market economy to shed light on the factors that influence innovation by firms and their subsequent growth. Using a dataset from a survey of nearly 4,000 firms in 24 transition countries, we find evidence of the importance of a minimum of rivalry in both innovation and growth: the presence of at least a few competitors is effective both directly and through improving the efficiency with which the rents from market power in product markets are utilised to undertake innovation.

Suggested Citation

  • Wendy Carlin & Mark Schaffer & Paul Seabright, 2004. "A Minimum of Rivalry: Evidence from Transition Economies on the Importance of Competition for Innovation and Growth," William Davidson Institute Working Papers Series 2004-670, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2004-670
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    References listed on IDEAS

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    More about this item

    Keywords

    competition; productivity growth; innovation; rivalry; transition;
    All these keywords.

    JEL classification:

    • P0 - Economic Systems - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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