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Innovation and market concentration with asymmetric firms

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  • Escrihuela-Villar, Marc

Abstract

This paper considers a theoretical model of n asymmetric firms that reduce their initial unit costs by spending on R&D activities. In accordance with Schumpeterian hypotheses we obtain that more efficient (bigger) firms spend more in R&D and this leads to a more concentrated market structure. We also find a positive relationship between innovation and market concentration. This calls for a corrective tax on R&D activities to curtail strategic incentives to over-invest in R&D trying to achieve a higher market share.

Suggested Citation

  • Escrihuela-Villar, Marc, 2004. "Innovation and market concentration with asymmetric firms," CFS Working Paper Series 2004/03, Center for Financial Studies (CFS).
    • Handle: RePEc:zbw:cfswop:200403
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    References listed on IDEAS

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    Cited by:

    1. Massoud Khazabi & Nguyen Van Quyen, 2017. "Competition and innovation with horizontal R&D spillovers," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 44(3), pages 475-488, August.
    2. Antonio Ruiz-Porras & Celina López-Mateo, 2010. "Market Concentration Measures And Investment Decisions In Mexican Manufacturing Firms," Accounting & Taxation, The Institute for Business and Finance Research, vol. 2(1), pages 59-69.
    3. Ela Glowicka, 2005. "Bailouts in a Common Market: A Strategic Approach," CIG Working Papers SP II 2005-20, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).

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    More about this item

    Keywords

    R&D; Asymmetries; Market Concentration; Optimal Industrial Policies;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • 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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