Competition, R&D and the cost of innovation

Philippe Askenazy, Christophe Cahn () and Delphine Irac

PSE Working Papers from PSE (Ecole normale supérieure)

Abstract: This paper proposes a model in the spirit of Aghion and al. (2005) that relates the magnitude of the impact of competition on R&D to the cost of innovation. The effect of competition on R&D is an inverted U-shape. However, the shape is flatter and competition policy is therefore less relevant for innovation when innovations are relatively costly. Intuitively, if innovations are costly for a firm, competitive shocks have to be significant to alter its innovation decisions. Empirical investigations using a unique panel dataset from the Banque de France show that an inverted U-shaped relationship can be clearly evidenced for the largest firms, but the curve becomes flatter when the relative cost of R&D increases. For large costs, the relationship even vanishes.

New Economics Papers: this item is included in nep-com, nep-cse, nep-ind, nep-ino, nep-ipr, nep-knm, nep-mic and nep-tid
Date: 2008

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Persistent link: http://EconPapers.repec.org/RePEc:pse:psecon:2008-32

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