Competition favors the prepared firm: Firms' R&D responses to competitive market pressure

Chang-Yang Lee ()

Research Policy, 2009, vol. 38, issue 5, pages 861-870

Abstract: This paper aims to contribute to the literature on the long-debated relationship between market competition and firm research and development (R&D) by investigating the effect of competitive market pressure on firms' incentives to invest in R&D. The paper shows that a firm's R&D response to competitive market pressure depends primarily on its level of technological competence or R&D productivity: firms with high levels of technological competence tend to respond aggressively (i.e., exhibit a higher level of R&D efforts) to intensifying competitive market pressure, while firms with low levels of technological competence tend to respond submissively (i.e., exhibit a lower level of R&D efforts). The differential effect of competitive market pressure on firm R&D, conditioned primarily by the level of firms' technological competence, is empirically supported by unique firm-level data from the World Bank. Furthermore, the role of firm-specific technological competence in conditioning the R&D-competition relationship is more evident and statistically more significant for firms facing consumers whose utility is relatively more elastic to product quality than to price.

Keywords: Technological; competence; R&; D; response; to; competitive; market; pressure (search for similar items in EconPapers)
Date: 2009

Downloads: (external link)
http://www.sciencedirect.com/science/article/B6V77 ... 6202aa70da6ec1863b1c
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:eee:respol:v:38:y:2009:i:5:p:861-870

Access Statistics for this article

Research Policy is edited by M. Bell, B. Martin, W.E. Steinmueller, A. Arora, M. Callon, M. Kenney, S. Kuhlmann, Keun Lee and F. Murray

More articles in Research Policy from Elsevier
Series data maintained by Heidi Boesdal ().