Innovation, Competition and Incentives for R&D

Spyros Arvanitis, Christian Rammer and Martin Woerter

No 10-259, KOF Working papers from KOF Swiss Economic Institute, ETH Zurich

Abstract: This paper analyses the relationship between past innovation output, competition, and future innovation input in a dynamic econometric setting. We distinguish two dimensions of competition that correspond to the concepts of product substitutability and entry barriers due to fixed costs. Based on firm-level panel data for Germany and Switzerland we obtain consistent results for both countries. Innovation output in t-1 as measured by the sales share of innovative products is positively related to the degree of product obsolescence in t, and negatively to the degree of substitutability in t in both countries. Further, we find that rapid product obsolescence provides positive incentives for higher - primarily product-oriented - R&D investments in t+1, while high substitutability exerts negative incentives for future R&D investment.

Keywords: Innovation; R&D; Competition (search for similar items in EconPapers)
Pages: 34 pages
Date: 2010-06
New Economics Papers: this item is included in nep-com, nep-cse, nep-ent, nep-ino, nep-ipr, nep-pr~, nep-mic and nep-tid
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Citations: View citations in EconPapers (8)

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http://dx.doi.org/10.3929/ethz-a-010705574 (application/pdf)

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Working Paper: Innovation, competition and incentives for R&D (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:kof:wpskof:10-259

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