The Effect of Entry on R&D Investment of Leaders: Theory and Empirical Evidence

Dirk Czarnitzki, Federico Etro (federico.etro@unifi.it) and Kornelius Kraft

No 08-078, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We develop a simple model of competition for the market that shows that, contrary to the Arrow view, 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 with a Tobit model based on a unique dataset and survey for the German manufacturing sector (the Mannheim Innovation Panel). We confirm the empirical validity of our predictions and perform a number of robustness test with instrumental variables.

Keywords: R&D; Entry; Endogenous market structures; Leadership (search for similar items in EconPapers)
JEL-codes: O31 O32 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-com, nep-cse, nep-ent, nep-ino, nep-mic and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Working Paper: The Effect of Entry on R&D Investment of Leaders: Theory and Empirical Evidence (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:7421

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