Adoption of Product and Process Innovations in Differentiated

Pia Weiss ()

Industrial Organization from EconWPA

Abstract: The paper examines the effects of the degree of competition on the firms' decision to innovate in differentiated markets. We find that a low (high) degree of product differentiation (competition) weakly supports the introduction of new products. Firms' weakly favour a process innovation if the degree of product differentiation (competition) is high (low). In addition, assumptions on the strategic complementarity of product and process innovations and on the decreasing returns of a product innovation are found to be the critical assumptions in the sense of Milgrom and Roberts (1994).

Keywords: Product innovation; process innovation; differentiated markets; Bertrand competition, Cournot competition (search for similar items in EconPapers)
JEL-codes: L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-ind
Date: 2002-12-12
Note: Type of Document - Tex; prepared on UNIX; to print on HP;
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0212002

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