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Adoption of Product and Process Innovations in Differentiated


  • Pia Weiss

    (Chemnitz University of Technology)


The paper examines the effects of the degree of competition on the firms' decision to innovate in differentiated markets. We find that a low (high) degree of product differentiation (competition) weakly supports the introduction of new products. Firms' weakly favour a process innovation if the degree of product differentiation (competition) is high (low). In addition, assumptions on the strategic complementarity of product and process innovations and on the decreasing returns of a product innovation are found to be the critical assumptions in the sense of Milgrom and Roberts (1994).

Suggested Citation

  • Pia Weiss, 2002. "Adoption of Product and Process Innovations in Differentiated," Industrial Organization 0212002, EconWPA.
  • Handle: RePEc:wpa:wuwpio:0212002
    Note: Type of Document - Tex; prepared on UNIX; to print on HP;

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    References listed on IDEAS

    1. Rosenkranz, Stephanie, 1995. "Innovation and cooperation under vertical product differentiation," International Journal of Industrial Organization, Elsevier, vol. 13(1), pages 1-22, March.
    2. Bonanno, Giacomo & Haworth, Barry, 1998. "Intensity of competition and the choice between product and process innovation," International Journal of Industrial Organization, Elsevier, vol. 16(4), pages 495-510, July.
    3. Milgrom, Paul & Roberts, John, 1994. "Comparing Equilibria," American Economic Review, American Economic Association, vol. 84(3), pages 441-459, June.
    4. Greenstein, Shane & Ramey, Garey, 1998. "Market structure, innovation and vertical product differentiation," International Journal of Industrial Organization, Elsevier, vol. 16(3), pages 285-311, May.
    5. Rosenkranz, Stephanie, 1996. "Simultaneous Choice of Process and Product Innovation," CEPR Discussion Papers 1321, C.E.P.R. Discussion Papers.
    6. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, January.
    7. Boone, Jan, 2001. "Intensity of competition and the incentive to innovate," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 705-726, April.
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    Cited by:

    1. Andrea Mantovani, 2006. "Complementarity between product and process innovation in a monopoly setting," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(3), pages 219-234.
    2. Christopher Snyder, 2003. "Introduction to the 2003 International Industrial Organization Conference Special Issue," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 23(3), pages 175-177, December.

    More about this item


    Product innovation; process innovation; differentiated markets; Bertrand competition; Cournot competition;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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