Product and Process Innovations in a Horizontally Differentiated Product Market

Pia Weiss ()

Industrial Organization from EconWPA

Abstract: For a market of horizontal product differentiation, the paper examines the effects of the level of competition on the firm’s decision between a product and process innovation. When firms have to choose between the two types of innovation, it is demonstrated that both firms undertake the product innovation when the competi-tion is intense. For intermediate levels of competition, the firms choose different investment projects, and for less intense competition, the firms pursue cost–reducing innovations. When firms may undertake both innovations, they decide to undertake a mixture of the innovations depending on the innovation cost structure. Again, the firms are willing to incur higher costs into product innovations, when the competition is initially intense.

Keywords: product innovation; process innovation; horiyontal product differentiation (search for similar items in EconPapers)
JEL-codes: L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent, nep-mic and nep-tid
Date: 2002-01-08
Note: Type of Document - Tex; prepared on IBM PC; pages: 16
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http://129.3.20.41/eps/io/papers/0201/0201005.pdf (application/pdf)

Related works:
Working Paper: Product and Process Innovations in a Horizontally Differentiated Product Market (2001)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0201005

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